Underestimating the Economy Hurts Honeywell (HON)

Honeywell (HON) is a diversified industrial goods maker that reported earnings today that were in line with expectations at 54 cents per share. Revenue slightly beat the streets view at $7.57 billion. Shares are trading down today as the company lowered its range for guidance, although analysts estimates are still in the middle of that range. Importantly, the company has been hit hardest in some of the areas most effected by the crisis thus far including aerospace and supplies for automakers. The transportation division saw sales drop a painful 41%, as auto sales remain weak in the U.S. and Europe.

HoneywellHoneywell’s CEO Dave Cote said that, “it pains me significantly and I am embarrassed by the EPS outlook reduction and its not going to happen again.” Furthermore, Cote said that he expects any improvement in earnings in the next few quarters to be driven by the cost cutting measures that the company has undergone in the last 5 quarters, rather than an improvement in performance.

It is interesting to note the bearish tone of the Honeywell CEO, is in contrast to another economic bellwether who also reported today, 3M (MMM). Basing performance on analyst expectations 3M actually had the worse quarter of the two, missing analysts expectations in both sales and earnings and lowering guidance. Honeywell met EPS expectations, exceeded sales projections, although they did lower guidance it was less severe than 3M’s. Honeywell is trading down about 4% on the news, while 3M is up by about 4%. The biggest difference appears to be the tone of 3M’s management team (3M’s CEO Predicts the Bottom), which rightly or wrongly gave an opinion that a bottom could be reached in the economy in the next few months. In comparison to 3M’s declaration, Honeywell’s CEO came off looking like a dog with its tail between its legs and that more than the quarterly results is pressuring shares today.

Underestimating the Economy Hurts Honeywell

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