Honeywell Earnings Preview: Here’s What To Watch For


Honeywell (HON) is scheduled to report its second-quarter earnings on July 16, 2021. Shares of the diversified technology and manufacturing company are up around 4.1% year-to-date, closing at $221.32 on July 2. A strong Q2 earnings report might be the catalyst to steer the stock back to its 52-week high of $234.02. Let’s take a closer look at what the Street expects when the company reports Q2 earnings.

Wall Street analysts expect Honeywell to report Q2 earnings per share of $1.96. Meanwhile, the company has guided for EPS of between $1.86 and $1.96. Analysts expect revenues of $8.61 billion against the company’s guidance of between $8.4 and $8.7 billion.

In the first quarter, Honeywell delivered double-digit sales growth in Safety and Productivity Solutions as it returned to growth in its Building Technologies segment. Earnings per share came in at $1.92, above analyst estimates of $1.79 a share. Revenue also topped consensus estimates, coming in at $8.45 billion versus $8.06 billion expected. (See Honeywell stock analysis on TipRanks)

Factors To Look For

Following a first-quarter report that exceeded expectations, investors are waiting to see whether the company was able to sustain growth across its business segments. The Warehouse and Workflow Solutions segments grew by double-digit in Q1, while the Personal Protective Equipment (PPE) business, Advanced Materials, and Connected Software segments also performed well.

It will also be interesting to see whether segment margin expansion in Aerospace and Honeywell Building Technologies continue in Q2, as was the case in Q1. Cost actions taken in 2020 allowed Honeywell to post margin expansion on Safety And Productivity Solutions in Q1, and investors are waiting to see if the momentum continued in Q2.

While delivering the Q1 results CEO, Darius Adamczyk reiterated that Honeywell’s offerings in growing markets, like life sciences, are gaining traction while the hardest hit industries are on a recovery trajectory. The executive also affirmed a Research and Development investment directed towards products that improve environmental and social outcomes for customers. It will be interesting to see the progress made on this front in Q2.

Recent Developments

Late last month, Honeywell confirmed plans to partner with Trane Technologies. The two are joining forces to accelerate the transition to a next-generation environmental-friendly refrigerant. Part of the plan involves testing Honeywell’s Solstice N41 (R-466A), a non-flammable alternative to R-410A.

Vice president and General Manager of Honeywell Fluorine Products, Ken West, stated, “Solstice N41 is a great option for both commercial and residential end users. This next step with Trane solidifies our confidence in moving toward industry adoption of R-466A.”

The continuous testing, research, and development of Solstice (R-466A) support Trane Technologies’ and Honeywell’s push to improve the carbon footprint. As the two seek to replace R-410A, they should balance the environmental impact, safety, efficiency, and affordability.

Additionally, Honeywell has launched a battery energy storage system to help users forecast and optimize energy costs. Honeywell’s Battery Energy Storage System (BESS) Platform is the new system that will allow organizations to forecast and optimize energy used while leveraging supervisory control and analytics.

The BESS Platform is ideal for a wide range of commercial and industrial companies as well as independent power producers and utilities. It also leverages the best practices, including energy arbitrage and demand management.

In May, the Peruvian Navy selected HON as its strategic partner for enhancing search and rescue capabilities. The Navy will use Honeywell’s next-generation satellite tracking technology to monitor and perform rescue operations and locate important assets.

“Our global tracking solutions help governments and emergency response teams save hundreds of lives around the globe each year, and our MEOSAR system can help the Peruvian Navy save lives by quickly identifying aircraft, ships and people in distress regardless of how remote their location is,” stated Kenneth Deville, GM of Honeywell’s Global Tracking business.

Honeywell is to provide the Peruvian army with its Middle Earth Orbit Search and Rescue ground station system. The system includes satellite antennas, rescue control systems, and computer equipment.

In June, Wolfe Research analyst Nigel Coe reiterated a Buy rating on Honeywell but raised the price target to $239 from $235, implying 8% upside potential to current levels.

Overall, the stock has a Moderate Buy consensus rating based on 8 Buys and 5 Holds. The average Honeywell price target of $238.18 implies 7.62% upside potential from current levels.

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