Analyst Sees Delayed Gains From Lower Oil At Honeywell International Inc.

Honeywell International Inc.

will see a delayed benefit from lower oil prices that could drive future earnings higher than expectations, an analyst said Monday. The Morristown, New Jersey based diversified technology and manufacturing company on Friday posted a 5 percent decline in first-quarter revenue and offered a lower-than expected outlook. Since posting results, Honeywell shares are off more than 2 percent and closed Monday at $102.58, up $0.88 cents. Gabelli's James Fong said Honeywell will benefit from lower crude prices in the long and medium term, although the drop had a larger-than expected negative impact on its recent first quarter. Only about 15 percent of Honeywell's business is directly tied to the market for oil, and Fong said lower prices have hurt upstream segments of Honeywell's market. But the middle and downstream segments are driven by economic activity rather than oil prices, and account for two-thirds of Honeywell's oil dependent business, Fong said. Fong maintained a Buy rating on Honeywell and said its "private market value" will reach $188 by 2019. But Cowen's Gautam Khanna said the company "has yet to see a demand lift from areas that intuitively could see a bounce from lower oil." "It's unclear" whether lower crude will be neutral to Honeywell's results as the company has previously forecast, according to Khanna, who nonetheless maintained an Outperform rating and $112 target. Honeywell has said it wants to boost earnings by $1 a share by 2018 through acquisitions and if suitable targets fail to emerge, it will "backfill" toward the goal using share repurchases. Khanna said Honeywell's near-term acquisition pipeline looks "less promising," but the analyst still believes Honeywell will post 2016 earnings of $6.60 a share, up about 9 percent from 2015 estimates. Oppenheimer's Christopher Glynn maintained an Outpeform rating and $117 target but said foreign exchange translations will cut profits from its European operations by $0.14 cents a share into 2016. revenue slipped 5 percent while its outlook missed the Wall Street consensus but at least three analysts maintained a positive view of the company's prospects.