Honeywell's honey pot:

Bet you never thought I'd get around to following up on a comment

here about a month ago when a source mentioned that maybe people ought to start taking a look at

Honeywell International

(HON) - Get Report

instead of

Newell Rubbermaid

(NWL) - Get Report

, which buried itself in restructuring costs.

Honeywell, after all, reported $1.3 billion in charges last year -- mostly tied to its merger with

Allied Signal

. But the company also told Wall Street that it would have no more restructuring charges. Of course, those were Newell's famous last words before


took more charges.

But the real story with Honeywell boils down to earnings growth: Honeywell claims that per share earnings this year will grow by 20%. Twenty percent! That would certainly be an earnings gain worth watching for a company that so badly whiffed its fourth quarter that investors couldn't flee the stock fast enough. (The stock dropped 10% on the news.)

But the question you might ask is, "Greenbum, why do you make a big deal out of 20% this year when last year's EPS grew by 15%?"

Because last year's earnings didn't really grow by 15% -- at least not operating earnings.

Eagle-eyed investors who read down into the bowels of the company's 10-K, which came out a few weeks after the earnings were announced, would've noticed that a big chunk of the gain came from an unexpected gain in the company's pension plan. (Pension income is a controversial area, and it's not something Honeywell mentioned in its earnings report.) Without that gain, which was $129 million more than the previous year, annual earnings would've grown by just 10%.

What makes Honeywell think it can double its


earnings growth rate? Does that include pension income? Does it include the positive comparisons the company is likely to have as a result of taking no more restructuring charges? (The lack of restructuring charges would make it easier to show positive comps.) Or does it merely assume cost savings as a result of merger-related layoffs and other cost savings? (These are some of the questions you need to ask to determine the quality of the company's earnings. For example, if Honeywell is factoring in merger-related cost savings, the company would be hard-pressed to repeat those cost savings the following year. Ditto for the lack of restructuring charges.)

Honeywell's response: The 20% does not include pension income or the positive impact of not having restructuring charges. It'll come, in part, from 4% to 5% revenue growth and a 7% productivity gain, which the company attributes to smarter execution and an increased use of the Internet -- particularly in back-office functions. (Ah, but will it be able to repeat that gain year after year?) The company also says it expects to see $2 billion in revs, in the not-too-distant future, from its three new B2B sites.

As they say, sounds good on paper. But Wall Street is counting on it to be good in practice, which is why it'll pay to pay special attention not to what the company says in its earnings releases or on its conference calls, but what it actually reports to the


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P.S.: My hunch, in markets like these, is that stories about companies such as Honeywell are yawners. But, then again, my

first piece on


(FMO) - Get Report

probably was an eye-glazer. And that was


FedMog ran into an earnings problem, and back when its stock was 74% higher. If Honeywell performs, of course, its stock, which closed yesterday at 49 3/4, is headed higher; if it doesn't, according to one former fan who is trying to determine whether to buy more or sell the rest he has, it could fall into the 30s.

Market mania:

They scoffed two weeks ago on our


show when I predicted that the Nasdaq would fall to 4450. Unfortunately, I said it would fall to 4450


it hit 5000. So much for my job as a market timer. But it did fall and you don't have to be a

Gary B. Smith


Jim Cramer

to realize why: The spring was simply wound too tight. And now it has come unwound so fast that, well, we'll leave the rest to physics or anybody who follows the chaos theory of market magic.

Maybe the moral of this market game (especially with the




doing their wild thangs) is that until it all comes crashing down, anything that swings too far too fast to one side can't help swinging the other way just as fast as the other. (Got that from the "Dummies Guide to Becoming a Market Guru." OK, the book doesn't really exist, but you get the picture.)

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.