With three of its four business units experiencing double-digit growth and overall sales up 10%, Honeywell International Inc. sailed through its third quarter and raised its sales guidance for the year.
For the third quarter ended Sept. 30, Honeywell reported net income of $618 million on sales of $8.7 billion, up from net income of $541 million on sales of $7.9 billion in the same period last year. While a strong foreign currency exchange helped the company, key drivers of the revenue increase included a multi-year contract in the Aerospace division and the global growth of Honeywell's Automation and Control Solutions (ACS) business, company officials said.
ACS has had 10 consecutive quarters of double-digit growth. The division reported sales of $3.19 billion, a 12% increase over the year-ago quarter, and a 13% rise in segment profit to $373 million.
Last week, Honeywell announced the acquisition of Hand Held Products Inc., marking its entrance into the mobile computing market and strengthening its wireless product portfolio. Hand Held will be managed under ACS, the group that houses the Process Solutions unit responsible for Honeywell's new OneWireless mesh network initiative, as well as the Experion PKS, a process automation system. In the quarter, the Process Solution business won a $7 million contract with an oil refinery in the United Kingdom. ACS, meanwhile, benefited from an $11.6 million energy efficiency contract in its Building Solutions business.
"The macro trends in the key markets of safety, security, energy efficiency, and transportation continue to drive growth and demand for [Honeywell's] different technologies," said CFO David Anderson in a briefing with analysts late last week. "ACS should see continued global opportunity for growth [based on] favorable non-residential construction spend and more demand for advanced products and services."
The Aerospace division also provides a boost to the company's overall outlook. The division makes engine controls, landing systems, avionics, electronics, and more, all of which are selling into a very healthy market. Last month, Honeywell forecast the delivery of approximately 14,000 new business aircraft from 2007 through 2017. This quarter, for example, Honeywell won a multi-year, multi-product contract with Airbus that has the potential to reach $16 billion, officials said.
Meanwhile, Honeywell reported steady growth in its Transportation and Specialty Materials groups, with each reporting sales of $1.2 billion.
As a result of the upbeat results, and despite warnings from some financial analysts on the conference call that the macro fundamentals that Anderson cited are not as bright as the company suggests, Honeywell raised its full-year sales guidance by $300 million to $34.2 billion, which would represent an increase of approximately 9% from 2006.
The company said its earnings per share and free cash flow would come in at the high end of previously stated ranges. Honeywell forecasts 2007 earnings per share of $3.14 to 3.16, which would be an increase of approximately 25% over the prior year, and 2007 free cash flow guidance of $3.0 billion (cash flow from operations of $3.8 billion), more than 20% over 2006.