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Pension Costs to Bite Honeywell in 2004

The conglomerate takes down full-year guidance.
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Improving performance across its business lines won't be enough to offset a major jump in pension costs at


(HON) - Get Honeywell International Inc. Report

next year, and the conglomerate will miss analyst earnings estimates.

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Honeywell expects 2004 earnings of $1.40 to $1.55 a share, reflecting a 30-cent, year-over-year rise in its pension expense. Analysts surveyed by Thomson First Call were forecasting earnings of $1.59 a share.

"The 2004 outlook anticipates that improved performance in all four of Honeywell's operating segments will be more than offset by a 30 cents per share increase in pension expense and other postemployment benefits," it said.

Honeywell also said earnings in its current fourth quarter will be 47 cents a share, matching the consensus. For all of 2003, cash flow will be about $2.1 billion and free cash flow will be $1.5 billion, including an expected pension contribution of $500 million in the fourth quarter.

Honeywell's shares closed Monday at $30.83, about 60 cents off its 52-week high.

"The company continues to perform well, delivering solid earnings and cash flow while also investing in growth initiatives. We have good momentum going into 2004 and while there are some limited signs of improvement in our end markets, we are not dependent on significant economic improvement to meet our guidance," the company said.