Strong results would be expected to trigger a stock price jump, but Honeywell shares are down in premarket trading. The reasons have to do with analyst and investors’ expectations.
Honeywell (ticker: HON) reported $1.92 a share from $8.5 billion in sales for the first quarter. Wall Street was looking for $1.80 in per-share earnings from $8.1 billion in sales. The company also raised its full-year sales and earnings guidance. Honeywell expects total sales in 2021 to rise about 4%, up from prior guidance of about 2.5%. The midpoint of per-share earnings guidance is now $7.88, up from $7.80.
It’s a solid earnings print, especially after a brutal 2020. Honeywell stock, however, fell about 1.5% in recent premarket trading.
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futures are up, by about 0.2% and 0.3%, respectively.
The issue for the stock is Honeywell always beats earnings estimates. Beating estimates is never truly a surprise for this company. Over the past 10 years, the company has missed estimates twice, both times by less than a penny.
Wall Street analysts know that beats are coming too. Analyst are already modeling about 5% sales growth for 2021, more than the 4% Honeywell is predicting. What’s more, the Street is projecting $7.95 in per-share earnings, seven cents more than current guidance.
Honeywell stock was up about 7% year to date coming into Friday trading, and is off 1% from its 52-week high set on April 16. So a dip after a positive earnings surprise isn’t actually all that surprising.
Drilling down into Honeywell’s segment results, aerospace sales dropped 22% year over year. The segment’s sales were down 18% in the fourth quarter of 2020. Things are still tough in that end market.
Sales in safety and productivity markets, however, are humming, up about 49% year over year. That segment sells personal protective equipment, such as N95 masks. Commercial building-related sales grew 2% in the first quarter, returning to growth after they dropped 9% year over year in the fourth quarter. Finally, sales in the company’s materials segment dropped 2% year over year.
Overall, it’s clear things are getting better. The last piece of the puzzle for Honeywell business to perform even better will be a broader aerospace recovery. Management hosts a conference call at 8:30 a.m. ET to discuss results. Investors and analysts will be eager to hear about aerospace trends, as well as how the rest of the global economy is doing.
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