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Honeywell (HON) Drops Despite Positive Earnings

Stocks in this article: HON

NEW YORK (TheStreet) -- Honeywell (HON) dropped 1.5% to $88.50 Friday despite an earnings report that beat Wall Street earnings estimates.

In its fourth-quarter earnings report Honeywell posted earnings of $1.24 a share, beating the Capital IQ Consensus Estimate of $1.22 a share by 2 cents. Revenue rose 8.4% year over year to $10.39 billion, compared to the consensus estimate of $10.2 billion.

Honeywell said sales increased by 3% during the fourth quarter of 2013 compared to the fourth quarter of 2012. The sales increases were thanks to 3% Commercial growth and a 2% increase in Defense and Space.

Along with the earnings report Honeywell reaffirmed its guidance for 2014. The guidance estimates earnings of between $5.35 and $5.55 a share. Capital IQ Consensus estimates earnings of $5.54 a share for the year. The company expects revenue of between $40.3 billion and $40.7 billion in 2014, compared to consensus estimates of $40.78 billion.

TheStreet Ratings team rates HONEYWELL INTERNATIONAL INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate HONEYWELL INTERNATIONAL INC (HON) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 3.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HONEYWELL INTERNATIONAL INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HONEYWELL INTERNATIONAL INC increased its bottom line by earning $3.70 versus $2.33 in the prior year. This year, the market expects an improvement in earnings ($4.95 versus $3.70).
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.94% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • Net operating cash flow has slightly increased to $1,070.00 million or 7.10% when compared to the same quarter last year. Despite an increase in cash flow, HONEYWELL INTERNATIONAL INC's cash flow growth rate is still lower than the industry average growth rate of 19.24%.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: HON Ratings Report

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