Honeywell International Inc (HON) is scheduled to report third-quarter 2014 results before the opening bell on Oct 17. In the last reported quarter, Honeywell’s earnings beat the Zacks Consensus Estimate by a couple of cents. Let’s see how things are shaping up for this announcement.
Factors to Consider
Honeywell aims to continue investing in new products and technologies, and increase its footprint in high-growth markets. The company is also realigning its business segments to rationalize its operations. Effective third-quarter 2014, Honeywell will report the results of its Transportation Systems segment together with the Aerospace segment to capitalize on their engineering and technological similarities. Overall, Honeywell will report its financial performance under three business segments: Aerospace, Automation and Control Solutions and Performance Materials and Technologies.
However, a change in the U.S. government’s defense and aerospace funding could adversely impact sales of Aerospace’s defense and space-related products and services. The high costs could also be drag on the Aerospace segment margin and affect its profitability. Any future slowdown in the global economy or the manufacturing industry as a whole will have an adverse impact on its business, and hamper its growth potential.
Earnings Whispers
Our proven model conclusively shows that Honeywell is likely to miss earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 to have a likely earnings beat. This is not the case here as you will see below.
Negative Zacks ESP: This is because the Most Accurate estimate stands at $1.39 while the Zacks Consensus Estimate is higher at $1.41. This equates to a negative ESP of -1.4%, implying an earnings miss.
Zacks Rank #4 (Sell). We caution against stocks with a Zack Ranks #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the future.
Arch Capital Group Ltd. (ACGL) earnings ESP of +4.17% and Zacks Rank #2 (Buy).
ACE Limited . (ACE) earnings ESP of +5.15% and Zacks Rank #2 (Buy).
Abaxis, Inc. (ABAX) earnings ESP of +4.55% and Zacks Rank #2 (Buy).
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