Honeywell’s 3Q Sales Drop 14% As Covid-19 Hurts Aircraft Demand

Honeywell International’s 3Q revenues fell 14% to $7.8 billion, reflecting weak demand across its multiple end markets due to the COVID-19 pandemic. Lower sales weighed on its bottom line as the diversified technology and manufacturing company’s adjusted EPS fell 25% to $1.56 year-on-year.

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Nonetheless, the company’s revenues and adjusted earnings per share managed to surpass Street estimates of $7.65 billion and $1.49 per share, respectively. Moreover, the company recorded sequential “improvements in sales growth, margin expansion and adjusted earnings per share.” (See HON stock analysis on TipRanks).

Honeywell’s (HON) aerospace division recorded the highest revenue decline of 25% due to lower commercial aircraft demand. Delays in building solutions projects and lower demand for building products led to a 8% decline in the company’s building technologies segment’s sales. Revenues at its performance materials and technologies unit declined 16% due to reduced demand.

Meanwhile, the company saw an 8% improvement in safety and productivity solutions’ revenues mainly “driven by double-digit Intelligrated and personal protective equipment growth as well as a return to growth in productivity solutions and services, partially offset by lower gas sensing volumes.”

For 4Q, Honeywell expects revenues to land between $8.2 billion and $8.5 billion, reflecting a year-over-year decline of 11%-14%. Adjusted EPS is forecasted to be in the range of $1.97-$2.02, down 2%-4% from the year-ago quarter. For the full year, sales are anticipated to fall 12%-13% and generate between $31.9 billion and $32.2 billion. The comany’s adjusted EPS guidance range of $7-$7.05 implies a decline of 14%.

Following its earnings release, Cowen & Co. analyst Gautam Khanna reiterated a Buy rating and a price target of $160 (3% downside potential). In a note to investors, Khanna wrote, “Adj. Q3 sales/EPS beat expectations as HON managed costs aggressively, and initial Q4 EPS is above Street on stronger cost controls. Aero A/M drop was 47% vs. Q2’s 54%, & initial C21 color (sales growth at all segments; “strong” incrementals; balance sheet deployment potential) is fairly bullish.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys and 3 Holds. With shares down nearly 7% year-to-date, the average price target of $179.86 implies upside potential of 9% to current levels.