Honeywell (HON) to Post Q4 Earnings: What's in the Cards?

Zacks Equity Research
·4-min read

Honeywell International Inc. HON is scheduled to report fourth-quarter 2020 results on Jan 29, before the opening bell.

The company delivered a positive earnings surprise of 6.72%, on average, in the trailing four quarters, beating estimates on all occasions. Honeywell’s third-quarter 2020 adjusted earnings of $1.56 per share surpassed the Zacks Consensus Estimate of $1.49 by 4.70%.

In the past three months, shares of the company have gained 24.7% compared with the industry’s 17.1% growth.

Key Factors to Influence Q4 Results

Honeywell is anticipated to have benefited from its efforts to maximize productivity and operational excellence in the fourth quarter. Also, some of the company’s actions, including the reduction of discretionary expenses, a hiring freeze as well as repositioning actions, are likely to have aided it in maintaining a solid margin performance.

Coming to operating segments, Honeywell’s Aerospace segment is expected to have gained from strength across its defense and space business and recovery in business aviation aftermarket. However, headwinds across its commercial original equipment business due to slowdown in original equipment build rates and lower business jet demand are likely to have affected its top-line performance. The Zacks Consensus Estimate for the Aerospace segment’s revenues is currently pegged at $2,787 million, indicating growth of 4.7% from the previous quarter’s reported number.

For the Performance Materials and Technologies segment, strength across the company’s process solutions business, supported by strong recovery in the automotive end market, is likely to have boosted its revenues. However, soft oil and gas capital expenditure and weakness in its UOP business are expected to have marred its performance. Also, demand recovery for security and building management products, supported by stability in the non-residential construction end market, is likely to have positively impacted the Building Technologies segment in the fourth quarter. The consensus estimate for Performance Materials and Technology’s fourth-quarter revenues is pegged at $2,510 million, suggesting 11.5% growth from the third quarter’s reported figure while the same for Building Technologies stands at $1,382 million, implying improvement of 5.9%.

In addition, a surge in demand for personal protective equipment, along with strong backlog conversion rate, might have acted as tailwinds for its Safety and Productivity Solutions segment. Notably, the consensus mark for the Safety and Productivity Solutions segment’s revenues stands at $1,686 million, implying a 6.8% year-over-year increase.

It’s worth mentioning here that the company incurred repositioning charges of $124 million in the third quarter for executing cost savings actions for 2020 and 2021. Notably, this adversely impacted earnings in the third quarter — a trend which is likely to have continued in the fourth quarter as well.

Amid this backdrop, the Zack Consensus Estimate for the company’s fourth-quarter revenues is currently pegged at $8,358 million, suggesting 7.2% increase from the previous quarter’s reported number. The consensus estimate for earnings of $2.00 suggests an improvement of 28.2% on a sequential basis.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Honeywell has an Earnings ESP of 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.00.

Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. Price and EPS Surprise
Honeywell International Inc. Price and EPS Surprise

Honeywell International Inc. price-eps-surprise | Honeywell International Inc. Quote

Zacks Rank: The company carries a Zacks Rank #3.

Key Picks

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

AGCO Corporation AGCO has an Earnings ESP of +3.34% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

A. O. Smith Corporation AOS has an Earnings ESP of +5.29% and a Zacks Rank of 3, at present.

Danaher Corporation DHR has an Earnings ESP of +5.87% and a Zacks Rank of 2.

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