Bernstein Analysts Have Six Takeaways From Honeywell's Q2

Honeywell International Inc. HON reported a revenue miss, while beating expectations on margins. Bernstein’s Steven E. Winoker maintained an Outperform rating on the company, with a price target of $135. The analyst mentioned six takeaways from the earnings release.

Takeaway 1

Honeywell delivered a headline beat, while revenue missed expectations. The company reported its EPS at $1.66, head of consensus expectations by $0.02. The revenue miss resulted in an operational miss of about $0.01.

Takeaway 2

The company raised the low end of its annual EPS guidance range from $6.55-$6.70 to $6.60-$6.70, reflecting the quarterly beat. The core growth projected was lowered from 1-2 percent to about 1 percent, on slower BGA and D&S. Honeywell forecasted its 3Q EPS at $1.67-$1.72, versus the consensus expectation of $1.72.

Takeaway 3

There was conviction in a revenue inflection in 2H to low-single-digit growth, and an acceleration to 4-5 percent in 2017, analyst Steven Winoker noted.

Takeaway 4

Honeywell seems to be back on track on margins. The margin expansion in 2Q was significant, following a margin contraction in 1Q, which was the company’s first reported margin contraction in more than 5 years. “Getting back to expansion should allay concerns that HON was in danger of running out of margin expansion runway,” Winoker wrote.

Takeaway 5

Honeywell announced plans of splitting ACS into two segments - Home & Building Technologies and Safety & Productivity Solutions. “While we are supportive of the re-segmentation and the greater focus the changes are likely to bring, in our view Mr. Ismail's departure from the company is a loss,” the analyst commented.

Takeaway 6

Management continues to make investments to purchase higher-tech and more connected businesses, Winoker mentioned, while adding that Honeywell is actively repurchasing shares beyond offsetting dilution.

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