April 20, 2018 / 10:40 AM / 8 months ago

Honeywell raises full-year forecast as aerospace business soars

(Reuters) - Honeywell International Inc (HON.N) reported a higher-than-expected quarterly profit on Friday and lifted its full-year earnings forecast for the second time this year, citing higher sales in its aerospace business.

FILE PHOTO: Honeywell thermostats are displayed for sale at Waban Hardware in Waban, Massachusetts, U.S., July 18, 2017. REUTERS/Brian Snyder/File Photo

Shares of the company, which makes everything from jet engines to thermostats, rose as much as up 2.16 percent to $151.33 in morning trading.

Honeywell’s aerospace business, its biggest, benefited from a rise in global travel as it sold more aircraft parts and services to the commercial airline sector, while also seeing robust demand from defense and business jet customers.

Sales in the division, which makes auxiliary power units, braking systems and other parts for Boeing and Airbus single-aisle planes, rose about 12 percent to $3.98 billion, while margins expanded by 10 basis points to 22.5 percent.

“Growth in both air transport and business aviation was nearly double-digit, driven by robust deliveries on key platforms, including the Airbus A320, Boeing 737 and Bombardier Challenger 350,” Chief Financial Officer Thomas Szlosek said.

Honeywell, which also makes engines for business jets produced by Bombardier (BBDb.TO) and Textron (TXT.N), said it was beginning to see the market recover as President Donald Trump’s tax cuts encourage corporate America to spend more on business jets.

Vertical Research Partners analyst Robert Stallard said Honeywell has a higher share of parts on new business jets such as Gulfstream G500 and G600, which will benefit the company when these planes get certified for sale later this year.

The company said it anticipates continued double-digit growth in its defense business, as rising global defense spending boosts demand for spares, sensors and guidance systems.

Honeywell now expects 2018 profit of $7.85 to $8.05 per share, compared with previous forecast of $7.75-$8.00. The company also raised its full-year sales forecast range to $42.7 billion-$43.5 billion, from $41.8 billion-$42.5 billion.

“Given Honeywell’s historical ‘under promise, over deliver’ mantra, the new range is likely to still be viewed as conservative,” RBC Capital Markets analyst Deane Dray said.

Sales in the company’s other businesses also rose. The performance materials and technologies unit, which makes catalysts and adsorbents used in petroleum refining, posted an 8 percent increase in sales amid rising oil prices.

A boom in ecommerce provided a lift Honeywell’s supply chain and warehouse automation equipment and software business.

On an adjusted basis, Honeywell earned $1.95 per share, beating analysts’ average estimate of $1.90 per share.

Revenue rose to $10.39 billion, topping the estimate of $10.02 billion.

Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty

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