Updated from 9:21 a.m. EDT


(HON) - Get Report

reported Thursday that its earnings rose 15% in the first quarter, helping the industrial conglomerate to beat Wall Street's expectations by a penny.

Honeywell said net income rose to $506 million, or 63 cents a diluted share, from $440 million, or 55 cents a diluted share, in the year-earlier period.

Wall Street had expected the company, based in Morris Township, N.J., to post earnings of 62 cents a share, according to a survey of analysts conducted by

First Call/Thomson Financial


The company attributed the earnings increase to an 8% jump in revenues, to $6.04 billion from $5.58 billion. Growing demand for the company's turbochargers, business and regional aviation products, electronic materials and sensing and control products helped drive the revenue increase, the company said. Excluding the effects of foreign exchange, divestitures and acquisitions, sales for the quarter increased a smaller 4%.

Honeywell's shares rose 3/4, or 1%, to 53 5/8 in Thursday morning trading. (Honeywell finished up 2 9/16, or 4.9%, at 55 7/16.)

Paul Nisbet, an analyst with

JSA Research

, said the results indicated that the company was able to gracefully overcome some of the challenges it faced, namely a downturn in the aerospace market and a run-up in costs in its chemical products division after oil prices surged to nine-year highs.

"Higher oil prices detracted somewhat from performance, but they are managing themselves quite well," said Nisbet, whose firm rates Honeywell a buy and has not done any underwriting for the company. "Honeywell had 3% growth in its aerospace business -- it's low, but it's still growth."

Lower revenues in chemicals and aerospace were partially offset by stellar performance in such divisions as automation and control, which saw revenues surge 22%.

Earnings were also bolstered by better cost controls. The company said its operating margin expanded to 13.8% from 12.4% as cost reductions and other programs helped increase productivity by 6%.

Free cash flow before dividends grew 56%, to $265 million.

"The majority of our businesses experienced solid top-line growth this quarter," Michael Bonsignore, Honeywell's chairman and chief executive, said in a statement. "And our strong focus on productivity improvements -- through Six Sigma Plus, aggressive cost reductions and web-enabled processes -- helped expand margins and earnings."

Bonsignore said the company was "well poised" to meet earnings and revenue expectations for the year. Nisbet echoed the sentiment, saying he thought the company could achieve its goal of 20% earnings growth and 8% to 10% revenue growth for the year.

Nisbet said he expect the Honeywell's share price to reach 69 by the end of the year and 82 by the end of 2001.