Honeywell announced solid second-quarter growth on Thursday, buoyed by its Aerospace and Automation and Control Solutions groups. The automation conglomerate reported sales of $8.5 billion, up 8% from the year-ago quarter. Earnings totaled $611 million, a 17% improvement over the $521 million Honeywell reported in the second quarter of 2006. Diluted earnings per share leapt 24% year over year to $0.78.
The company, on a bit of a financial roll after a similarly strong first quarter, and with free cash flow of $820 million (less capital expenditures), announced an expanded stock repurchase plan — it repurchased more than 40 million shares of stock this past quarter — and raised its guidance for the year.
"We had a great first half of 2007, with sales increasing 10%, EPS up 25%, and free cash flow up 42%," said Honeywell CEO David Cote in a statement. "As a result of this performance, our share repurchases, and confident outlook for the second half, we are raising full-year sales, EPS, and free cash flow guidance," he said.
Honeywell increased previously stated 2007 sales guidance to $33.9 billion and earnings per share to $3.10 - $3.16. This compares with its first-quarter report, when Honeywell raised its sales guidance by $700 million to $33.5 billion and earnings per share by 15 cents to $3.00 - $3.10.
While the company continues to make point acquisitions, including Honeywell Process Solutions' definitive agreement to acquire Enraf Holding B.V., which caters to the oil and gas industry, the underlying growth engine at Honeywell is organic sales, the company said.
The Automation and Control Solutions (ACS) Group, under which Process Solutions falls, reported quarterly sales of $3 billion, up 10% over the year-ago quarter.
"ACS benefits from a number of things, first by what they are doing internally," said Honeywell CFO Dave Anderson during a conference call with investors yesterday. "There's been a real change in that business. If you go back three or four years ago, the business played the game on their heels. Now they play the game on the balls of their feet. They are more aggressive in the new product pipeline," he said.
For example, last month Honeywell Process Solutions group announced availability of its OneWireless mesh networking infrastructure, technology that officials expect will spur more sales. And yet, while customers benefit from ACS' solutions-driven business, "people still just want products," Jack Bolick, Honeywell Process Solutions president, said in an interview with Managing Automation last month. "We [then] become their technology partner for buying a complete solution."
ACS also is investing in green initiatives to help customers create more energy-efficient buildings and plants, officials said.
Honeywell's Aerospace division also experienced strong sales in the second quarter, up 13% to $3 billion. The Transportation group reported $1.2 billion for the quarter, a 5% increase year-over-year, while Specialty Materials — the only division to experience some market softness — saw a 3% drop in sales to $1.21 billion.
Overall, however, Cote said he is confident in the overall business outlook. The most obvious indicator is Honeywell's investment in its own stock. Aside from the 40 million shares purchased in the second quarter, Honeywell's board of directors has authorized the repurchase of up to an additional $3 billion of Honeywell common stock. "So buy now while supplies last," Cote joked in his closing remarks to investors and analysts.