Industrial giant Honeywell International is set to release its third-quarter earnings report on Thursday morning. This highly anticipated update will provide valuable insights into the global economy as well as Honeywell's progress towards its long-term goals.
Investors' Hopes for a Post-Earnings Boost
After a somewhat underwhelming performance this year, investors are eagerly anticipating a potential post-earnings boost for Honeywell's stock.
Expectations for the Third Quarter
According to Wall Street analysts, the market is expecting Honeywell to report earnings of $2.23 per share, with sales totaling $9.2 billion. In the third quarter of 2022, Honeywell reported earnings of $2.25 per share from sales just below $9 billion.
In addition to the quarterly results, the company is likely to provide updated guidance. Honeywell previously stated that it expects full-year earnings to be approximately $9.15 per share, marking a 4.5% increase compared to 2022. Moreover, full-year sales are projected to be around $37 billion, also indicating a 4.5% increase.
Focus on Long-Term Growth
Honeywell's long-term objective is to achieve a consistent annual sales growth rate of 4% to 7%. It is important to note that this year's growth rate is expected to fall below that range due to the current weakness in the global industrial economy.
Furthermore, Honeywell aims to achieve segment operating profit margins of 25%. However, for this year, the company's average profit margin is anticipated to be approximately 22.5%.
In conclusion, Honeywell International's upcoming third-quarter earnings report will shed light on crucial aspects such as the state of the global economy and the company's progress towards its long-term goals. Investors will be looking for signs of improvement in Honeywell's performance and clarity on its future prospects.
Honeywell's New Reporting Structure
In the third quarter, Honeywell implemented a new reporting structure, which marks the beginning of a significant change for the company. The company's four operating segments now consist of Aerospace Technologies, Industrial Automation, Building Automation, and Energy and Sustainability Solutions.
While these segments share similarities with Honeywell's previous business units, there has been a slight adjustment as part of the energy business has been moved to Industrial Automation. As a result, comparability may be somewhat challenging for the next couple of quarters.
Despite the recent underperformance of Honeywell stock, it would be unfair to solely attribute this to the company itself. Over the past 12 months, Honeywell's stock has experienced a decline of approximately 6%, whereas the S&P 500 and Dow Jones Industrial Average have seen increases of about 9% and 4%, respectively.
However, it is worth noting that Honeywell has exceeded Street estimates in both the first and second quarters of this year and has even raised its guidance twice.
RBC analyst Deane Dray highlighted in a preview report that Honeywell's shares have slightly underperformed its peers by a few percentage points in recent weeks. In addition, the stock is currently trading towards the lower end of its historic valuation range.
Although Honeywell's performance may have been lackluster, this situation presents a potential opportunity for investors. Based on options markets, it is projected that the stock will make a move of approximately 3% following the earnings report, which aligns with recent reactions to the company's announcements.
For those interested, Honeywell's management will be hosting a conference call at 8:30 a.m. ET on Thursday to discuss further details and provide insights.