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Honeywell International (HON) is set to release its 1st quarter 2013 earnings this Friday, April 19th at 9:30 am ET. Below I have provided an update of the quarter as well as an overview of earnings expectations.

Profile and Estimates

Honeywell has a market cap of $57.26 billion and currently trades for $71.95 per share. Shares are up 15.97% YTD and trade 40.48% above their 52 week low of $51.21. Analysts have a mean target price of $78.57 and a median price target of $79.00 on the shares. Twenty three analysts have an average first quarter earnings per share estimate of $1.14 on estimated revenues of $9.44 billion. Honeywell has beat earnings estimates in all of the last four quarters.

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Fundamentals and Highlights

Positives

  • ROE of 24.6 is well above the industry averages 15.4.
  • D/E of 0.5 is below the industry averages 1.1.
  • Average 3 year EPS growth rate of 21.6%.
  • ROIC increased to 13.7% last year, up from 9.87%.
  • Book value has increased in all of the last four years, stood at $16.58 per share in December.
  • 2.14% dividend yield.
  • Recent announcement to supply mechanical systems for Airbus A350.
  • Acquisition of UOP should boost margins and revenues in specialty chemicals provided to energy sector.

Negatives

  • P/B of 4.4 and P/S of 1.5 are both above the industry averages 2.5 and 1.4 respectively.
  • Operating margins of 11.2% and net margins of 7.8% are below the industry averages 16.3% and 8.8% respectively.
  • Negative net tangible book value, goodwill takes up approximately 25% of the balance sheet.
  • Declining margins and growth in transportation sector.
  • Operates in highly cyclical industries tied to the global economy.
  • Environmental and asbestos liabilities of approximately $400 million.

Take Away

Honeywell's revenue is highly dependent on the economy and this quarters earnings will shed light on how fast the economy is healing as well as where Honeywell is targeting future growth. I think the UOP acquisition is a step in the right direction and will provide more consistent returns. Knowing that shares are near their 52 week high and that Honeywell operates in cyclical industries, I personally would wait for a significant pullback before purchasing any shares.

Source: Honeywell International's 1st Quarter 2013 Earning Preview