Honeywell Pares Sales Outlook as Third-Quarter 2015 Results Withstand Rough Markets

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading diversified technology company Honeywell International (NYSE:HON) (Morris Township, New Jersey) saw a steady gain in profits in the third quarter of 2015, despite lower commercial vehicle volumes, particularly in North America and China, and negative foreign currency translation effects that hit all major business segments. Industrial Info is tracking $8.05 billion in active projects involving Honeywell.

Among the projects tracked is the $300 million expansion of a fluoropolymers plant in Carville, Louisiana, which involves building and installing process units that will produce a hydroflurocarbon refrigerant for customers in the automotive industry. Turner Industries Group LLC (Baton Rouge, Louisiana) is serving as a piping and mechanical contractor for the project, which is expected to be completed in the second quarter of 2017.

Net income was reported to be $1.26 billion for the quarter, an 8.31% increase from third-quarter 2014, despite net sales of $9.61 billion, which were a 4.92% drop. In addition to the problems posed by currency translation, each of the major segments faced its own obstacles: the Performance Materials & Technologies segment was hit by lower raw materials pass-through pricing; the Aerospace segment saw a drop in revenues after selling off its Friction Materials business to Federal-Mogul last year; and the Automation & Control Solutions segment saw slower backlog conversion. The company also incurred $34 million in net restructuring charges in the quarter.

Among the factors that kept Honeywell's profits on the up-and-up were strong engine shipments in Aerospace's Business & General Aviation business; new platform launches and higher gas-turbo sales in the segment's Transportation Systems business; and improved sales in Automation & Control Solutions' Building Solutions & Distribution business.

Capital expenditures for the quarter were reported to be $277 million, compared with $259 million in the same period last year.

Honeywell expects to spend $10 billion on the acquisition of new businesses by the end of 2018. In July, the company signed a definitive agreement to acquire the Elster Division of Melrose Industries plc (London, England), a provider of thermal gas solutions, for $5.1 billion. The acquisition, which is expected in first-quarter 2016, "increases our growth profile globally" and "creates a new platform for acquisition targets," according to a July press release from Honeywell.

"Infrastructure investments and increasing gas consumption in high growth regions like India or in China, will continue to drive demand for Elster's gas-heating assets, strengthening our existing gas combustion portfolio to create a full solution offering," said Dave Cote, the chairman and chief executive officer of Honeywell, in a conference call. "Elster's metering portfolio consists of basic and smart meters which measure volumes consumed by commercial, industrial and residential users. The growth here will continue as the adoption of smart meters and data analytics increases and as the legislative mandates in Europe, China or in other major regions take shape."

Honeywell executives expect full-year sales to reach about $38.7 billion, a notch lower than the previous expectation of between $39 billion and $39.6 billion. "[In 2016], similar to 2015, we expect to see moderate headwinds from lower commercial-vehicle sales, but also anticipate that this steep declines in commercial-vehicle sales will moderate," Cote said. "Overall turbo penetration continues to growth as OEM [original equipment manufacturers] develop global engine platforms, which can fill needs in multiple markets and we believe, we've well positioned to meet those OEM demand and win a significant portion of all new platforms."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.