Earnings Previews: Has Restructuring Paid Off Yet For GE And Honeywell?

By Benzinga | July 17, 2014 AAA

The earnings crunch is well underway, and industrials General Electric (NYSE: JCI) will be taking their turns in the earnings spotlight Friday, July 18, before the markets open.

GE is one to watch, as it often considered an economic barometer. Both GE and Honeywell have been restructuring and shedding businesses as of late.

Barron's talked up Johnson Controls last weekend, particularly praising a joint venture. Investors will be looking for evidence that these efforts are paying off.

See also: Barron's Recap: Retail On Sale

General Electric

Analysts on average predict that this Dow and S&P 500 component will report that its revenue for the second quarter rose more than three percent year-over-year to $36.30 billion. Earnings of $0.39 per share are also in the consensus forecast. That would be up from a reported profit of $0.36 per share in the comparable period of last year.

Note that the consensus earnings per share (EPS) estimate has remained unchanged in the past 60 days, and the estimates range only from $0.38 to $0.40. Furthermore, the company has not fallen short of analysts' EPS expectations in at least four quarters. The beat in the previous period was by just a penny.

During the three months that ended in June, GE's acquisition of Alstom's Power and Grid business proceeded. GE has a market cap of nearly $271 billion and a dividend yield near 3.3 percent. The operating margin is greater than the industry average, but the return on equity is less than 10 percent.

Shares have traded mostly between $26 and $27 since mid-April. They are actually down marginally from the beginning of year, when they were trading near a 52-week high. Over the past six months, the stock has underperformed the broader markets and the other stocks featured here.

Honeywell International

Per-share earnings from this diversified technology and manufacturing company are expected to have grown less than six percent year-over-year to $1.35. Second-quarter revenue will total $10.19 billion, if analysts are correct. That would be a gain of about five percent from a year ago.

Honeywell's EPS have not fallen short of consensus estimates in the past four quarters. The positive surprise in the first quarter was by less than two percent. The consensus forecast for the most recent quarter has not changed in the past 60 days, and individual estimates only range from $1.34 to $1.37.

During its second quarter, Honeywell announced the retirement of its CFO and other leadership changes. It has a market cap of more than $75 billion and a dividend yield of about 1.9%. The long-term EPS growth forecast is more than 10 percent. The price-to-earnings (P/E) ratio is less than the industry average.

The share price hit a new multiyear high on Wednesday. However, it is only around three percent higher than 90 days ago, as well as up almost seven percent year to date. The stock has outperformed not only the Down Jones Industrial Average over the past six months, but also all of the other stocks featured here as well.

See also: Honeywell Divests Friction Materials, Reorganizes

Johnson Controls

Per-share earnings of $0.83 and revenue of $10.83 billion are anticipated from this Milwaukee-based maker of building control systems, vehicle components and other products. That would be up from $0.78 per share and $10.83 billion in sales in the fiscal third quarter of last year.

The consensus EPS is the same as it was 60 days ago, but the individual estimates range from $0.78 to $0.86. The company has only topped expectations in one of the previous four quarters. The miss in the second quarter was by just a penny per share.

During the three months that ended in June, Johnson Controls completed its acquisition of Air Distribution Technologies and said it would spin off its auto interiors business. It has a market cap of more than $33 billion and a dividend yield near 1.7 percent. The long-term EPS growth forecast is more than 15 percent.

The share price is up about eight percent in the past 90 days and well above the 50-day and 200-day moving averages. While the stock has outperformed General Electric over the past six months, it also has underperformed Honeywell, the Dow Jones Industrial Average and the S&P 500.

At the time of this writing, the author had no position in the mentioned equities.

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