What’s happening: Shares of Honeywell International fell on Friday, although the company reported upbeat earnings for its third quarter.
What happened: Honeywell was able to expand its profit margins, despite facing several issues during the quarter.
Investor grew concerned, however, after the Charlotte, North Carolina-based company updated its outlook for the full year reflecting continuing effects of macroeconomic challenges.
How were the results: The company reported growth in sales and earnings for the third quarter, although its top-line lagged market views.
- Quarterly sales surged 9% year-over-year to $8.47 billion but missed the Street estimates of $8.65 billion.
- Adjusted earnings climbed to $2.02 per share, from $1.56 per share in the same quarter last year, surpassing market expectations of $1.99 per share.
Why it matters: Honeywell continued to face supply chain disruptions during the quarter, which resulted in component shortages and curtailed production at its largest unit, the aerospace division. Shortage of electronic components also impacted the company’s safety and productivity solutions division.
Honeywell’s aerospace sales rose 3% year-over-year to $2.73 billion, while sales at building technologies climbed 5% to $1.37 billion. Performance materials and technologies sales surged 11% year-over-year to $2.51 billion, while safety and productivity solutions sales rose 18% to $1.86 billion.
The company’s operating profit margins widened to 18.6%, from 18.1% in the prior quarter.
"Our disciplined approach to productivity and pricing helped deliver a strong third quarter despite an uncertain global environment marked by supply chain constraints, increasing raw material inflation, and labor market challenges," CEO Darius Adamczyk said during the earnings call.
The company generated operating cash flows of $1.12 billion, up from $1.01 billion in the year-earlier period.
Management lowered the sales projection for fiscal 2021 to between $34.2 billion and $34.6 billion, from its previous estimate of $34.6 billion to $35.2 billion. The company also guided to organic sales growth of 4% to 5%, versus its previous forecast of 4% to 6%.
Honeywell said it expects adjusted earnings to come in between $8.00 to $8.10 per share, compared to its previous view of $7.95 to $8.10 per share.
How shares responded: Honeywell’s shares fell 3.2% to close at $217.40 on Friday, following the release of quarterly results. The stock declined by another 0.2% in after-hours trading. The company’s shares have gained around 5% year-to-date.
What to watch: Investors will keep an eye on the covid-19 pandemic, as Honeywell is a large supplier of aerospace components, and a resurgence in infections will negatively impact the pace of recovery in global air travel.