Honeywell Sees 2013 Profit Growth Similar to 2012 Amid Slowdown

Oct. 19 (Bloomberg) -- Honeywell International Inc., the maker of plane parts and thermostats, said it can maintain the same earnings growth in 2013 as this year''s even as the Chinese and U.S. economies slow, with costs cuts and new products.

The Morris Township, New Jersey-based manufacturer posted a 10 percent gain in third-quarter profit today, beating analysts'' estimates as aerospace sales increased. General Electric Co., by contrast, reported weaker third-quarter demand for some industrial equipment.

"They''ve got the business running extraordinarily well," Jeffrey Sprague, an analyst and co-founder of Vertical Research Partners, in Stamford, Connecticut, said about Honeywell. "It was a very solid result this quarter, probably one of the best results we''ve seen so far."

Honeywell shares gained 1.7 percent to $62.49 at the close, while the S&P 500 Index dropped 1.7 percent. General Electric declined 3.4 percent after cutting its sales forecast. Parker Hannifin Corp., another manufacturer, also slumped after reducing its estimates.

Last quarter''s net income at Honeywell rose to $950 million, or $1.20 a share. It was boosted by lower taxes and compared with $862 million, or $1.10, a year earlier, when Honeywell recorded a 23-cent gain from a unit sale. Earnings beat the $1.14 average of analysts'' estimates compiled by Bloomberg.

Earnings per share, excluding some items, will increase 11 percent this year if company meets the high end of its forecast range. Even with sales growth from existing businesses at "low single digits," Honeywell expects earnings growth in 2013 to match this year''s, Chief Financial Officer Dave Anderson said during a conference call with analysts. Cost reductions will add $150 million to operating profit, he said.

Outperforming Peers

Honeywell, which makes turbochargers and cockpit controls, narrowed its full-year target for earnings per share to $4.45 to $4.50 from a previous range of $4.40 to $4.55.

"The company was expressing a high level of confidence in the ability to drive earnings growth in a really tough macro- economic environment," Sprague said. "They''re in a position to outperform their peers next year."

Honeywell expects economies in China and the U.S. to slow next year and for the euro area to remain in recession, Anderson said in a telephone interview.

"We''re not counting on positive macro-economic condition supporting our growth in 2013," Anderson said. "Our expectation is that there''s going to be relatively muted growth overall in 2013."

Sales Miss

Third-quarter sales advanced 0.5 percent to $9.34 billion, missing the $9.5 billion average prediction. The company reduced its 2012 sales to as much as $37.7 billion, down from a range of $37.8 billion to $38.4 billion. Honeywell expects lower aerospace defense spending and a drop in sales of as much as 12 percent at the transportation unit this quarter.

Honeywell forecast fourth-quarter adjusted earnings per share of $1.13 to $1.18, according to a slide presentation on its website. That''s lower than the $1.19 average of estimates.

"The outlook for the fourth quarter and into 2013 is pretty cautious," Robert Stallard, an analyst with RBC Capital Markets in New York, said in a note today about Honeywell. "Given the limited visibility in shorter cycle areas like Transportation we view this conservatism as warranted."

A boom in U.S. natural gas drilling of shale rock formations and global demand for petrochemicals spurred profit at the UOP unit, which provides technology that helps convert coal to plastics and produce high-octane gasoline.

"We continue to be encouraged by the commercial aerospace outlook, increasing infrastructure spending, and oil and gas investments," Chief Executive Officer Dave Cote said in a statement.

To tap more into the natural-gas surge, Honeywell said on Oct. 1 it agreed to pay $525 million for a 70 percent stake in Thomas Russell Co., a Tulsa, Oklahoma company that recovers natural gas liquids, including ethane, propane and butane.

--Editors: Cecile Daurat, Niamh Ring