Honeywell Sales Growth Bucks Trade Tensions, Economy Worries

(Bloomberg) -- Honeywell International Inc. rose after posting solid second-quarter sales growth amid a tariff war and global economic slowdown, though it flagged weaker sales ahead.

• Organic sales, which strip out effects from portfolio changes and foreign currency fluctuations, rose 5% in the second quarter, Honeywell said in a statement, marking the eighth quarter of 5% growth or better. The company now expects 2019 earnings per share of $7.95 to $8.15, raising the forecast at the low end by 5 cents.

Key Insights

• Honeywell forecast organic sales growth of 2% to 4% for the third quarter, much lower than a peak of 8% in the first quarter. Robust aerospace demand is being offset by weaker orders for warehouse automation equipment, which should begin to ease in the fourth quarter, the company said in a conference call with analysts.
• The manufacturer is benefiting from strong demand for commercial airliners, business jets and defense systems, as well as an e-commerce boom that’s stoked sales of warehouse automation equipment. Those trends have helped offset higher tariffs on products sold to China amid signs of a cooling world economy.
• While investors have applauded Chief Executive Officer Darius Adamczyk’s move to shed two slow-growing businesses last year, the company hasn’t yet parlayed the proceeds into buying companies to accelerate growth. Honeywell spent about $600 million on acquisitions in the last two years compared with $2.6 billion in 2016.
• One consolation for investors: share buybacks jumped to $4 billion last year from $2.1 billion in 2016. The company said in May it will have as much as $19 billion available over the next three years -- after outlays on capital expenses and dividends -- for acquisitions or buybacks.

Market Reaction

• Honeywell rose 2.1% to $172.18 at 10:03 a.m. in New York. The shares had climbed 28% this year through Wednesday, outpacing a 19% gain for the S&P 500 Index.

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• Second-quarter earnings per share were $2.10, while analysts had predicted $2.08.
• Company statement
• Additional details

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren

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