Honeywell Delivers 1Q Earnings Beat; Raises Guidance

Honeywell reported 1Q adjusted EPS of $1.92, coming in above analysts’ estimates of $1.80 per share and exceeding the high-end of the company’s prior guidance range by $0.09.

Meanwhile, Honeywell’s (HON) revenues in 1Q remained flat year-on-year but still came in ahead of consensus estimates of $8.08 billion. The aerospace and building technologies conglomerate reported revenues of $8.45 billion.

Honeywell’s Chairman and CEO, Darius Adamczyk said, “Honeywell delivered a strong start to 2021 with first-quarter results that exceeded our expectations. We are seeing promising signs of a rapid recovery in some of our markets, and we are poised to capitalize on new business opportunities as they arise…”

“As we look to the rest of 2021 and beyond, we are well positioned for the recovery to come. Our new offerings in growing markets like life sciences are gaining traction and the industries that were hardest hit by the pandemic are expected to improve throughout the year,” Adamczyk added.

Revenues from HON’s aerospace segment fell 22% year-on-year on an organic basis to $2.63 billion but segment margin was up 110 basis points to 29% as a result of effective cost-management and one-time benefits.

The company’s building technologies segment returned a 2% year-on-year organic growth in sales to $1.4 billion, “driven by strong bookings for services and security products”.

The safety and productivity solutions business saw a 49% year-on-year rise in revenues to $2.1 billion fueled by double digit orders growth driven by rising demand for personal protective equipment (PPE) and other productivity solutions. (See Honeywell stock analysis on TipRanks)

The company also raised its guidance for FY21 and expects growth in organic sales to be in the 3% to 5% range. HON has forecasted adjusted EPS to be between $7.75 and $8.00, an increase of $0.15 from the low end of the earlier guidance range. The company expects free cash flow of between $5.2 billion and $5.5 billion.

Following the earnings, Oppenheimer analyst Christopher Glynn assigned a Hold on the stock. Glynn said in a note to investors, “Aero OM [operating margin] was exceptional at 29.0%, or ~28% excl. one-time/$30M benefit with the latter metric still strikingly high and flattish vs. record 1Q20 Aero OM. Robust operations seem accounted for in valuation.”

Overall, consensus on the Street is a Moderate Buy based on 6 Buys and 4 Holds. The average analyst price target of $230.22 implies that the stock has upside potential of 2.5% to current levels.

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