Honeywell (HON) Issues Updated Q3 Outlook; Will Adopt FASB ASU Update on Stock Compensation
- Top 10 News for 12/2: Crude Rips on OPEC Cut; Starbucks' Schultz Steps Down; Nonfarm Payrolls Flat in Nov.
- Unemployment Rate Drops to 4.6%
- Bond yields slip on U.S. jobs data, euro steady before Italy vote
- Alibaba (BABA) Founder Jack Ma Discuss Plans to Retire; 'I Don't Want to Die at the Office'
- Starbucks Coffee (SBUX) CEO Howard Schultz to Step Down, Appointed Executive Chairman; Kevin Johnson New CEO
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
Honeywell (NYSE: HON) announced it has updated its previous guidance for the third quarter of 2016 to reflect the separation of the former Automation and Control Solutions reporting segment into two new reporting segments; the acquisition of Intelligrated, which closed on August 29, 2016; the sale of the Honeywell Technology Solutions (HTSI) government services business, which closed on September 16, 2016; the spin-off of Resins and Chemicals as AdvanSix Inc., which became effective on October 1, 2016; and lower outlooks in certain business segments.
The company also announced it has elected to adopt the Financial Accounting Standards Board's (FASB) Accounting Standards Update 2016-09 for stock compensation in the third quarter, which is in advance of the mandatory 2017 effective date. As a result of the early adoption, the company is required to report the impacts as though the accounting standard update had been adopted on January 1, 2016. Accordingly, the first- and second-quarter results have been recast to reflect a $0.03 and $0.04 tax benefit, respectively. Benefits from the accounting change and sale of HTSI will be deployed to fund restructuring and other charges in the third quarter.
Third-quarter EPS is now expected to be approximately $1.60. Excluding restructuring associated with the $0.07 of first-half benefits related to stock compensation adoption, third-quarter EPS is expected to be approximately $1.67, in-line with the prior guidance range. This guidance also reflects the impact of lower shipments to Business and General Aviation OEMs, continued program delays and completions in the domestic and international businesses within Defense & Space, and lower volumes in Productivity Solutions (part of Safety and Productivity Solutions).
In addition, the company initiated fourth-quarter EPS guidance of $1.74-$1.78, up 10%-13% year-over-year, which excludes any pension mark-to-market (MTM) adjustment and the impact of a potential fourth-quarter debt refinancing that would lower interest expense in 2017 and beyond, but result in a fourth-quarter pre-tax charge of approximately $140 million. The refinancing transaction is dependent on continued favorable interest rate and credit market conditions. Full-year EPS guidance, excluding those same items, is updated to $6.60-$6.64, up 8%-9% year-over-year. Core organic sales* are now expected to be down 1-2 percent for the full year.
The company now expects the following for the third quarter and fourth quarter 2016:
3Q 2016 Guidance
Change vs. 2015
$10.0 - $10.2B
Core Organic Growth
Flat - 1%
18.7% - 18.9%
17.3% - 17.5%
(180) - (200) bps(1)
Earnings Per Share
$1.67 - $1.72
EPS Ex-$0.07 From 1H Accounting Change Deployed To 3Q Restructuring
4Q 2016 Guidance
Complete 4Q 2016 guidance will be provided with Honeywell's third-quarter earnings release on October 21, 2016
Change vs. 2015
$10.1 - $10.3B
1% - 3%
Earnings Per Share (Ex-Pension MTM)(2)
$1.74 - $1.78
10% - 13%
(1) Segment Margin Down (80) - (100) bps ex-M&A And Recognition of Aerospace OEM Incentives Associated With 3Q Deployment
(2) Excludes Impact From Contemplated Q4 Debt Refinancing
Honeywell will discuss its new reporting segments, portfolio enhancements, adoption of stock compensation accounting standard, contemplated fourth-quarter debt refinancing, and updated outlook during an investor conference call on October 7, 2016, starting at 8 a.m. EDT. To participate, please dial (866) 564-7439 (domestic) or (719) 325-4756 (international) approximately ten minutes before the 8 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's update call or provide the conference code HON3QUPDATE. The live webcast of the investor call, as well as related presentation materials, will be available through the Investor Relations section of the company's Website (www.honeywell.com/investor). Investors can hear a replay of the conference call from 11 a.m. EDT, October 7, until 11 a.m. EDT, October 14, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 1859067.
Honeywell International Inc
Reconciliation of Segment Profit to Operating Income and
Calculation of Segment Profit and Operating Income Margins (Unaudited)
(Dollars in millions)
Three Months Ended
Stock compensation expense (A)
Repositioning and other (A, B)
Pension ongoing income (A)
Other postretirement expense (A)
Segment Profit Margin %
Operating Income Margin %
(A) Included in cost of products and services sold and selling, general and administrative expenses. (B) Includes repositioning, asbestos, environmental expenses and equity income adjustment
We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends
Honeywell International Inc
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension Mark-to-Market and Debt Refinancing Expenses (Unaudited)
Three Months Ended
Twelve Months Ended
Earnings per share of common stock - assuming dilution
Pension mark-to-market expense
Debt refinancing expense
Earnings per share of common stock - assuming dilution,
excluding pension mark-to-market and debt refinancing expenses
(1) Utilizes weighted average shares of 780.8 million. Mark-to-market uses a blended tax rate of 36.1%
(2) Utilizes weighted average shares of 789.3 million. Mark-to-market uses a blended tax rate of 36.1%
We believe EPS, excluding pension mark-to-market and debt refinancing expenses, is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends
(1) Excludes Impact From Contemplated Q4 Debt Refinancing
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Sonoco (SON) Affirms FY16 Outlook; Guides FY17 EPS Below Views
- Jefferies Cuts Price Target on Dollar General (DG) Following 3Q
- Jefferies Cuts Price Target on Kroger (KR) to $30 Following 3Q and Guidance
Create E-mail Alert Related CategoriesCorporate News, Guidance, Hot Corp. News
Related EntitiesEarnings, Definitive Agreement
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!