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Honeywell’s earnings, reported Friday morning, beat Wall Street estimates for the pandemic-hit second quarter. That’s good news for Honeywell, but the company is a huge and distant industrial conglomerate. Your earnings are a useful read for many companies in many industries.
This is what the Honeywell (ticker: HON) numbers mean for the rest of the U.S. industrial economy.
Aerospace
Commercial air travel has been decimated by the pandemic. Honeywell’s aerospace sales fell 27% yoy in the second quarter. About 25 million people flew commercials in the US during the second quarter, compared to 221 million people in 2019. That’s a drop of almost 90% year-over-year.
Looking horizontally across the aerospace sector, Honeywell’s cost reductions helped keep its aerospace unit’s operating profit margins above 20%.
No, or low, Boeing (BA) 737 MAX volumes hurt Honeywell’s original equipment business. MAX is expected to return to commercial service in late 2020 or early 2021. Initial production will be small because Boeing has more than 400 aircraft already built and parked to deliver.
Commercial real estate
Honeywell’s construction technology sales fell 17% because most people worked from home in the second quarter. Margins increased, demonstrating the resilience of the Honeywell franchise.
The environment Honeywell experienced will affect many others, including Carrier (CARR), Trane Technologies (TT), and Johnson Controls (JCI).
There are still opportunities, and Honeywell noted that they are making progress on “healthy building solutions” as well as thermal imaging. The workplace will look a little different when people return.
Retail
Honeywell’s retail sales grew 1%. The pandemic is accelerating many trends, such as ordering online and picking up on the sidewalk, benefiting this business. That’s also good news for companies like Zebra Technologies (ZBRA).
Retail technologies are included in Honeywell’s security and productivity solutions segment. Safety, which includes manufacturing Honeywell personal protective equipment, is also on the rise.
Energy
This was a difficult quarter for energy related companies. Honeywell’s sales fell 17% and profit margins fell nearly 5 percentage points year-over-year in this segment.
The positive thing highlighted by the company is that it saw “minimum project cancellations” in the quarter. That is good news for the rest of the energy services sector.
And don’t forget Honeywell
Honeywell earned $ 1.26 per share of $ 7.5 billion in sales. Analysts were looking for $ 1.21 a share and $ 7.3 billion in sales. Still, profits and sales decreased 40% and 18% year-over-year, respectively.
The fall will not surprise investors. Covid-19 has impacted everything. Additionally, the company generated $ 1.3 billion in free cash flow, also better than Wall Street expected. That is another positive aspect of the quarter.
The company also highlighted its partnership with software giant SAP (SAP), further driving software solutions for industrial clients.
Honeywell shares rose 0.9% in premarket trading on Friday. Shares to date have fallen 13%, worse than comparable falls by the Dow Jones Industrial Average and S&P 500.
Management will organize a conference call at 8:30 am EST for investors and analysts to discuss the results.
Write to Al Root at [email protected]
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