Honeywell profits bolstered by strength in aerospace division
Honeywell on Thursday reported better than expected second-quarter profits driven by strength in its aerospace business and delivered a slightly rosier full-year outlook, despite what its chief executive called an “uncertain” global economy.
The New Jersey-based industrial giant said organic sales — which strip out the impact of foreign exchange and the spin off of its home and transportation systems businesses — rose 5 per cent, shy of analysts’ expectations for a 6.3 per cent increase, according to a Refinitiv survey of analysts.
“We are continuing to plan cautiously for the second half of the year given the uncertain macro environment in which we operate,” said chief executive Darius Adamczyk.
“We’ve seen some slowing in certain short-cycle businesses. We think it is prudent to plan conservatively in the event of a broader slowdown . . . geopolitical and the economic movements are pretty volatile right now.”
The company’s shares were up close to 2 per cent by lunchtime trading in New York, when the market benchmark S&P 500 was slightly lower.
Net income climbed to $1.5bn, or $2.10 a share, in the three months ended in June, compared with $1.27bn, or $1.68 a share, in the year-ago quarter. That exceeded analysts’ expected earnings of $2.08 per share.
Sales in the Honeywell’s aerospace business, its largest division, rose 11 per cent on an organic basis, driven by strength in business aviation original equipment and in the US and international defence and space business.
Overall net sales fell 15 per cent from the second quarter of last year, to $9.2bn. That was just shy of analysts’ estimates for $9.35bn.
“We are making significant progress in transforming Honeywell into a premier software-industrial company, with connected software sales continuing to grow at a double-digit rate organically,” said Mr Adamczyk.
The chief executive’s caution comes amid a slowdown in the industrial economy and uncertainty generated by the ongoing trade war between the US and China, a spat that has weighed on businesses’ spending plans.
On an earnings call with analysts, Mr Adamczyk repeatedly referred to uncertainties over the short term economic environment.
But the company boosted the lower end of its full-year earnings forecast and now expects between $7.95 and $8.15 a share, from $7.90 to $8.15 previously. It cited its strong first half performance and “confidence in our ability to continue to deliver for our shareowners even in an uncertain environment”.
Honeywell said the longer than expected grounding of the Boeing 737 Max aircraft, after two fatal crashes in which 346 people died, continued to have little impact on the company’s business as a supplier to Boeing.
“We do not anticipate a significant impact to Honeywell’s operational results in 2019,” Mr Adamczyk said. The aircraft may not return to global skies until the end of this year or possibly later.
Honeywell shares are up 27 per cent year-to-date.