HON Earnings: Honeywell Stock (HON) Sours as Automation Slump Overshadows Earnings Beat
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Aerospace Flies
Shares were down over 3% in pre-market trading despite its adjusted earnings coming in at $2.75 a share, up 10% from a year ago and ahead of forecasts of $2.66 a share.
Revenue rose 8% to $10.4 billion, also topping forecasts of $10.06 billion.
The company's building automation segment was the main performer, with organic sales up 8% and segment profit up 21%, driven by strong demand in fire, security, and building management systems.
Aerospace also posted 6% organic growth, driven by double-digit gains in defense, aided by geopolitical concerns and increased spending by governments.
The company, which supplies avionics and flight control systems to Boeing (BA) and Airbus (EADSF), has also benefited from rising demand as planemakers ramp up production.
Industrial Blues
However, its industrial automation segment was flat organically, with warehouse and workflow solutions down 4% and productivity solutions and services off 7% due to weak European demand.
This is important as Industrial Automation, as can be seen below, is the company's second largest revenue segment.
Investors are also likely to be concerned about operating margin, which narrowed by 30 basis points to 20.4%. That has raised questions about cost control and pricing power amid continued inflation. The company is also spending on acquisitions and digital improvements.
After pressure from activist investor Elliott Management, the company in February announced plans to separate its businesses. The company will spin off its aerospace business and retain the automation segment, which will be led by Kapur.
Honeywell is reviewing alternatives for its productivity solutions and services unit and the warehouse and workflow solutions division.
The company raised its full-year adjusted earnings guidance to $10.45 to $10.65 a share from $10.20 to $10.50 a share, and now expects organic growth of 4% to 5%, up from 2% to 5%.
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