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Honeywell (HON) to Post Q4 Earnings: Another Beat in Store?

Zacks Equity Research

Honeywell International Inc. HON is scheduled to report fourth-quarter 2019 results on Jan 31, before the opening bell.

The company delivered positive earnings surprise of 2.74%, on average, in the trailing four quarters, surpassing estimates all through. Honeywell’s third-quarter adjusted earnings of $2.08 per share surpassed the Zacks Consensus Estimate of $2.01 by 3.48%.

Over the past year, the company’s shares have returned 23.8% compared with the industry’s rise of 21.5%.

Factors at Play

Robust demand environment in the business aviation and the U.S. defense markets, supported by solid orders growth and firm backlogs, and strength in the company’s commercial aftermarket business is likely to have boosted Aerospace segment’s revenues in the fourth quarter. The Zacks Consensus Estimate for the Aerospace’s revenues is currently pegged at $3,662 million, indicating a rise of 3.3% from the previous quarter’s reported number.

Also, strong demand for commercial fire products, particularly in the Americas, coupled with strength in software and increased project growth is likely to have supported revenues of the Building Technologies segment. The consensus mark for Building Technologies revenues is pegged at $1,516 million, implying a 7.1% rise sequentially.

For Performance Materials and Technology segment, strength in process solutions business driven by growth in automation portfolio coupled with strong demand for UOP is likely to have boosted revenues. Solid orders for Intelligrated service, partially offset by unfavorable timing of major system rollouts, are likely to have driven Safety and Productivity Solutions’ revenues. The consensus estimate for Performance Materials and Technology’s fourth-quarter revenues is pegged at $2,874 million, up 7.6% from the third-quarter reported figure while the same for Safety and Productivity Solutions is $1,586 million, implying sequantial growth of 8.9%.

Honeywell expects to generate organic sales growth within the range of 2-4% in the fourth quarter. The company’s performance is likely to have led to margin expansion of 20-50 basis points. In addition, its operational excellence initiative, along with its three transformation initiatives — the Connected Enterprise, Integrated Supply Chain and Honeywell Digital — might have aided in driving profitability and margins.

However, Honeywell’ssignificant international presence exposes it to unfavorable movements in foreign currencies, which might have affected its revenues in the to-be-reported quarter.

What Our Model Unveils

Our proven model shows that Honeywell has the right combination of the two key ingredients to beat earnings. A stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is the case here as you will see below:

Earnings ESP: Honeywell has an Earnings ESP of +0.49% as the Most Accurate Estimate is pegged at $2.05, higher than the Zacks Consensus Estimate of $2.04.

Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. price-eps-surprise | Honeywell International Inc. Quote

Zacks Rank: The company carries a Zacks Rank #3.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this time around: Holdings, Inc. ALRM carries a Zacks Rank #1 and has an Earnings ESP of +1.15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant Company TNC has an Earnings ESP of +4.20% and a Zacks Rank #2.

Kadant Inc KAI carries a Zacks Rank #3 and has an Earnings ESP of +0.59%.

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