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Honeywell (HON) to Report Q1 Earnings: Is a Beat in the Cards?

Honeywell International Inc. HON is scheduled to report first-quarter 2021 results on Apr 23, before the opening bell.

The company delivered a positive earnings surprise of 7.35%, on average, in the trailing four quarters, beating estimates on all occasions. Honeywell’s fourth-quarter 2020 adjusted earnings of $2.07 per share surpassed the Zacks Consensus Estimate of $2.00 by 3.50%.

In the past three months, shares of the company have gained 12.4% compared with the industry’s 10.7% growth.

Key Factors 

Honeywell is expected to have gained from its commercial and operational excellence initiatives along with its efforts of maximizing productivity in the first quarter. Also, the company’s three transformation initiatives — the Connected Enterprise, Integrated Supply Chain and Honeywell Digital — along with its efforts of reducing discretionary expenses and repositioning actions are likely to have boosted margin performance.

Honeywell’s Aerospace segment is anticipated to have benefited from strong momentum in its defense and space business, recovery in business aviation aftermarket and growing opportunities within unmanned aerial systems and urban air mobility markets. However, weakness across its commercial original equipment business, owing to slowdown in original equipment build rates, is likely to have hurt its top-line performance. Also, headwinds across its commercial aftermarket business due to low global air transport flight hours, due to the coronavirus outbreak-led issues, might have affected its performance. The Zacks Consensus Estimate for the Aerospace segment’s revenues is currently pegged at $2,747 million, indicating a decline of 7.8% on a sequential basis.

The Performance Materials and Technologies segment is likely to have gained from new product introductions and strength across the company’s process solutions business. However, soft oil and gas capital expenditure, persistent weakness in its UOP business and automation project delays in process solutions business are expected to have hurt its top line.

Also, demand recovery for building solutions and safety products is likely to have supported the Building Technologies segment in the first quarter. The consensus estimate for Performance Materials and Technology’s first-quarter revenues is pegged at $2,311 million, suggesting 9.6% decline from the fourth quarter’s reported figure while the same for Building Technologies stands at $1,328 million, implying fall of 6.9%.

In addition, solid demand for personal protective equipment and growth in productivity solutions and services might have acted as tailwinds for its Safety and Productivity Solutions segment. The consensus mark for the Safety and Productivity Solutions segment’s revenues stands at $1,758 million, implying a 9.4% sequential decrease.

Notably, the company also expects to have incurred repositioning and other charges of $100-$140 million in the first quarter for executing restructuring programs. This is likely to have adversely impacted earnings in the to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

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 given below:

Earnings ESP: Honeywell has an Earnings ESP of +2.31%, as the Most Accurate Estimate is pegged at $1.85, higher than the Zacks Consensus Estimate of $1.80.

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 too have the right combination of elements to post an earnings beat this quarter:

General Electric Company GE has an Earnings ESP of +33.33% and it currently carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Danaher Corporation DHR has an Earnings ESP of +4.11% and a Zacks Rank #3.

ITT Inc. ITT has an Earnings ESP of +2.39% and Zacks Rank #3.

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Honeywell International Inc. (HON): Free Stock Analysis Report
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