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Honeywell lowers financial expectations despite higher earnings, splits a division

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Dave Cote, chairman and CEO of Honeywell: “This new structure will also help us better serve our customers.”
Dave Cote, chairman and CEO of Honeywell: “This new structure will also help us better serve our customers.” - ()

Honeywell's earnings per share rose 10 percent for the second quarter of 2016, it said Friday, beating analysts' expectations, but it lowered sales expectations for the year despite quarterly growth.

Honeywell said EPS came to $1.66, up 10 percent from the $1.51 registered in the second quarter of 2015. That topped the $1.64 average estimate reported by Yahoo! Finance.

Sales rose to $9.99 billion, up 2 percent from $9.78 billion in Q2 2015.

“Honeywell grew earnings 10 percent in the second quarter, capping off a strong first half of 2016,” Chairman and CEO Dave Cote said in a prepared statement. “Sales in the quarter of $10 billion were in line with our expectations, driven by contributions from each of our business groups.”

The Morris Plains-based conglomerate raised its full-year earnings guidance from a range of $6.55 to $6.70 per share to $6.60 to $6.70 per share, it said. However, it lowered its sales guidance from a range of $40.3 billion to $40.9 billion to a range of $40 billion to $40.6 billion.

“We will continue to support growth, focusing on winning in high growth regions, advancing our superior software capabilities and effectively using HOS Gold (operating system) to drive breakthrough initiatives and delivery high-quality products to our customers globally,” Cote said.

The company announced that it is realigning its automation and control solutions business segment into two units: home and building technologies, and safety and productivity solutions. It says, if the business were divided in 2015, HBT would have had revenue of approximately $9.4 billion and SPS would have had revenue of approximately $4.7 billion.

“We have removed layers from our organizational structure and are well-positioned to implement a more focused segment reporting alignment that fits our HOS Gold approach to drive breakthrough strategies and speed up new product introduction,” Cote said. “This new structure will also help us better serve our customers.”

The HBT segment will be led by Terrence Hahn, previously head of Honeywell’s transportation systems unit. The SPS unit will be led by John Waldron, who had been president of the sensing and productivity solutions business unit. Hahn will be succeeded as CEO and president of transportation systems by Olivier Rabiller.

“Our new business group leaders demonstrate the depth and talent of our leadership bench, and they will drive continued outperformance in their respective businesses,” Cote said.

Meanwhile, Alex Ismail, CEO and president of automation and control solutions, is leaving the company, Honeywell said.

Honeywell said the realignment has no impact on its financial position, results or cash flows.

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