Filed Under:
Tickers in this Article: HON, DHR, DOV, UTX, ETN, MMM
Industrial conglomerate Honeywell International Inc. (NYSE:HON) posted strong 2011 first quarter results as it cashed in on rising global industrial spending. The technology and manufacturing company benefited from a resurgence in capital investments and a weaker dollar overseas. (To read more on conglomerates, see Conglomerates: Risky Proposition?)

TUTORIAL: Stock-Picking Strategies

Global Demand Plus Execution
Honeywell has a pronounced global presence, as do many of the large industrial companies. With the continued growth of China and India, the need for farming, construction and other capital equipment contributed to higher sales. The company also benefited with the rise in the energy sector and increased spending on equipment and services. Honeywell increased sales in India by 50% and in China by 40% during the quarter. Honeywell's expert management took advantage of the improving macroeconomic conditions. Other beneficiaries besides Honeywell include Danaher (NYSE:DHR) and Dover Corp (NYSE:DOV). (For more on China and India, read Introduction To Asian Financial Markets.)

All Segments Strong
Sales in all segments increased for the quarter. The automation and control division was particularly strong with industrial demand high as sales increased from $3.1 billion in the year ago quarter to $3.7 billion in 2011's first quarter. Total revenue increased to $8.9 billion from $7.8 billion in the previous year's quarter. Net income attributable to shareholders rose to $705 million from $489 million, while EPS climbed to 88 cents from 63 cents.

Industrial Rebound's Effects
Honeywell's specialty materials segment increased sales by 19% and profit by 67% due to the high margins in oil and gas industry projects. There was also notable growth in commercial aerospace as well as both commercial and residential retrofit business. Honeywell's order backlog for its long-cycle businesses reached record highs, while its short-cycle orders have increased for eight consecutive quarters. The company also pointed out the growth in urbanization and infrastructure. (For more about releasing results, check out The Importance Of Corporate Transparency.)

Outlooks Rising
Not only are many of the industrial companies enjoying the multi-faceted global economic resurgence, but many raised outlooks. United Technologies (NYSE:UTX) and Eaton Corp. (NYSE:ETN) both reported stronger-than-expected quarterly results and Danaher raised outlooks along with Honeywell. Honeywell boosted its view on 2011 full year sales to a range of $36 billion to $36.6 billion, an increase of 8% to 10%. It also expects to produce free cash flow of $3.5 to $3.7 billion, excluding pension contributions. Profit expectations rose to as much as $3.95 per share, an increase from the $3.60 to $3.80 outlook back in March.

Quality Companies And Fundamentals
When looking at large industrial companies, investors can look to leaders like Honeywell. While there are other excellent names in the space, the scale, size and solidity of a Honeywell, United Technologies or a 3M (NYSE:MMM) stand out. Honeywell fought well through the recession and, if it meets its forecast for revenue this year, would equal its pre-recession revenue reached in 2008 - its projected EPS would exceed those levels. This is a strong performance, though not quite as impressive as 3M. 3M did even better during the recession, maintaining and increasing its revenues and income during those tough times. It does illustrate, however, what real fundamental strength is in a business, and Honeywell has it. (To learn more about companies who innovate, read Which Is Better: Dominance Or Innovation?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center