Key Takeaways:
Honeywell Technologies Inc. is expected to report second-quarter earnings of $1.80 per share on revenue of $4.98 billion when it releases results July 23 before the market open, with the numbers reflecting the company's first full quarter as a standalone industrial automation firm following the June 29 spin-off of its Aerospace Technologies business.
"The separation of the aerospace business will provide Honeywell Technologies with improved operational focus on industrial automation, but the near-term comparison is distorted by the divestiture," said a Zacks Investment Research analyst. The consensus estimate for revenue implies a 51.9% decline from the year-ago quarter, while EPS is forecast to fall 67.3%.
Earnings estimates for the quarter have dropped 60.9% over the past 60 days, according to Zacks data. The company carries a Zacks Rank of No. 5 (Strong Sell), and its Earnings ESP — which measures the gap between the Most Accurate Estimate and the consensus — stands at 0%, suggesting limited visibility for a beat.
Honeywell Technologies' Process Automation and Technology segment faces headwinds from lower refining catalyst shipments, project delays and reduced customer demand in the Middle East, where geopolitical tensions are expected to cut sales by 1% in the quarter. The Industrial Automation unit is seeing a recovery driven by favorable project timing, though the divestiture of the Personal Protective Equipment business will weigh on results. Building Automation is benefiting from rising construction activity in North America, particularly data center and health care projects.
Higher direct and indirect material costs, along with investments in digital infrastructure and restructuring, are expected to pressure margins. A stronger U.S. dollar is also likely to have hurt overseas revenue given the company's global footprint.
Honeywell Technologies has beaten consensus EPS estimates in each of the past four quarters, with an average surprise of 5.7%. In the most recent reported quarter, it delivered a surprise of 6.1%.
Since the spin-off, shares have edged down 1.2%, compared with a 3.1% decline for the Zacks Diversified Operations industry and a 0.1% gain for the S&P 500. The stock trades at a forward price-to-earnings multiple of 25 times, a premium to the industry average of 15.1 times. Rival Emerson Electric Co. trades at 19.9 times, while Rockwell Automation Inc. commands 32.2 times.
The persistence of near-term challenges — weakness in automation units, rising costs and foreign exchange headwinds — limits the stock's near-term catalysts. Investors will watch the July 23 earnings call for management's outlook on segment margins and any signs of demand recovery in the Process Automation business.
This article is for informational purposes only and does not constitute investment advice.
