Honeywell International (HON) reported fourth Quarter earnings of $707 million, or $0.97 per share, up 2.6% from the company’s $698 million, or $0.91 in the fourth quarter of 2007 and in line with the company’s previous guidance and analysts’ expectations.
Honeywell is a highly diversified technology and manufacturing company providing a wide range of products worldwide to the aerospace industry.
The company also provides technology solutions to office, residential and industrial buildings, manufacturing everything from airplane parts to fire safety equipment.
Higher Earnings on Lower Sales
Honeywell’s positive earnings report obscured an 8.4% decline in sales. Particularly hard hit were sales in the automation equipment unit which declined by 16%.
The company was able to generate an increase in earnings in spite of the drop in sales due particularly to the company’s effective cost management actions and the decline in the price of aluminum and steel.
In a statement accompanying the earnings release, Honeywell reaffirmed its guidance for 2009. The company expects to earn $3.20 to $3.50 per share, in line with analysts’ consensus.
Honeywell CEO Dave Cote expressed the company’s expectation of a difficult period which could last through 2010, but also expressed confidence that the company had taken the necessary steps to reduce costs while delivering products to the company’s customers.
In a market where even the hint of bad news overshadows what might in different markets give impetus to a semblance of a rally, market participants initially focused their attention on the sales decline reported by Honeywell.
The most astounding news in the release, however, was the report of earnings in excess of expectations in spite of the sales decline. This is an indication of effective decision making on the part of management and efficient operation of the company’s business.
The news should have been greeted with some enthusiasm. Instead, market reaction was at best trepid. Immediately following the announcement the stock spiked to $33.90, only to quickly surrender to selling pressure and trading in a range of $32.45 to $32.90 for the rest of the day.
Is Honeywell Recession-Proof?
Fortune magazine at one time in the past characterized Honeywell as being recession-proof due to their serving the technology needs of a wide range of customers. As recently as the end of the company’s second quarter 2008 period, some were still suggesting that Honeywell was unaffected by the slowing economy.
Since the end of the second quarter, Honeywell’s sales and earnings clearly have reflected the condition of the economy. Nonetheless, the company has demonstrated surprising agility for a behemoth and should outperform the market in the coming year.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.
