Cost cuts help Honeywell beat slow economy

Fri Apr 19, 2013 1:57pm EDT

A view of the corporate sign outside the Honeywell International Automation and Control Solutions manufacturing plant in Golden Valley, Minnesota, January 28, 2010. EUTERS/ Eric Miller

Credit: Reuters

(Reuters) - Honeywell International Inc (HON.N) posted a bigger-than-expected rise in quarterly profit on cost cuts and raised the lower end of its 2013 earnings forecast, putting its stock on pace for its biggest single-day rise in nine months.

The company, whose products include cockpit electronics, building security systems and turbochargers, reported a 17 percent rise in profit as cost cuts more than made up for flat revenue.

Shares of Honeywell were up 4 percent at $74.10 in early afternoon trading on the New York Stock Exchange on Friday.

General Electric Co (GE.N), in contrast, warned on Friday of slowing profit growth in its industrial businesses due to weakness in Europe and sliding turbine sales, pushing down its stock.

"Despite macro headwinds, Honeywell's guidance still demonstrates an outperformance versus peers," Sterne, Agee & Leach analyst Peter Arment wrote in a note to clients.

Declining industrial activity in the United States and Europe has hurt large conglomerates in the past year. Factory activity grew at the slowest rate in three months in March, the Institute for Supply Management said.

Honeywell has been trying to improve productivity across its four divisions and consolidate its businesses to boost profit.

Chief Executive David Cote said a decline in raw material costs and general cost cuts pushed up margins.

Gross margins rose to 16.2 percent in the quarter ended March from 15.2 percent a year earlier. The company has set a target of expanding gross margins to as much as 18 percent by 2014.

GROWTH FROM CHINA

While sales in Europe and the United States remain subdued, Honeywell expects its business in China to pick up after a weak start to the year.

"Inventory levels (in China) are returning to normal and order rates are improving, particularly in our long cycle businesses, signaling a modest recovery over the remainder of the year," Cote said on a post-earnings conference call.

Honeywell said it expected to earn at least $4.80 per share in 2013, above its prior forecast of at least $4.75. It maintained the top end of its forecast at $4.95 per share.

Cote, who has been one of the loudest voices in corporate America to call on policy leaders in Washington to address the nation's debt load, also said Honeywell had funded more than $30 million of new restructuring projects in the first quarter.

Net income attributable to the company rose to $966 million, or $1.21 per share, in the quarter from $823 million, or $1.04 per share, a year earlier. Revenue was flat at $9.33 billion.

Analysts on average expected earnings of $1.14 per share on revenue of $9.44 billion, according to Thomson Reuters I/B/E/S.

(Editing by Roshni Menon, Supriya Kurane, Sreejiraj Eluvangal)

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Comments (1)
cammanchee wrote:
Very nice. Good to a see another company boost their profits by simple cost-cutting controls, most usually made by cutting your workforce or simply not hiring people to work when business does pick-up and force your remaining workers to pick-up the slack.

I thought I remembered awhile back the analysts and investors were going to quite rewarding these companies for boosting their bottom line by simply cost-cutting. At some point, these corporations and businesses have so start improving their numbers by increasing products and services sold, rather than just cut, cut, cut, oh hell we’ll just cut some more, to make our bottom line look good. At some point this will not work and there will be so many people or areas struggling, no one will be able to have the expendable income to support these companies.

Apr 19, 2013 2:33pm EDT  --  Report as abuse
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