Honeywell sets low quarterly forecast, shares fall

By Scott Malone

BOSTON (BestGrowthStock) – Diversified manufacturer Honeywell International Inc (HON.N: ) set a first-quarter profit (Read more your timing to make a profit.) target that fell short of analysts’ forecasts, sending its shares down more than 2 percent.

The forecast overshadowed fourth-quarter results that were slightly stronger than Wall Street had looked for and raised concerns among some investors about the full-year prospects for the company, the world’s largest maker of cockpit electronics.

“We should all be cautious about the year ahead of us, particularly the first half,” Chief Executive Dave Cote told investors on a conference call on Friday. “We are, as usual, planning conservatively in 2010, with modest organic sales growth.”

The Morris Township, New Jersey-based company stood by its full-year profit forecast, saying that the low first-quarter figure reflected seasonal patterns and a potential one-time charge the company said could result from the health insurance reform bills wending their way through Congress.

The economy is showing signs of recovering from its worst downturn since the Great Depression. Government data on Friday showed a 5.7 percent rise in fourth-quarter gross domestic product.

But many on Wall Street remain wary and this week have punished companies whose outlooks disappointed. For instance, shares of Caterpillar Inc (CAT.N: ) and Textron Inc (TXT.N: ) sold off earlier in the week after their full-year profit forecasts came in short of investors’ expectations.

Honeywell, which also makes thermostats and other systems for managing large buildings, expects first-quarter profit (Read more your timing to make a profit.) of 35 cents to 40 cents per share on revenue of $7.2 billion to $7.6 billion. Analysts, on average, had looked for profit of 47 cents per share on $7.63 billion in revenue, according to Thomson Reuters I/B/E/S.

In a filing with the U.S. Securities and Exchange Commission after its investor call, Honeywell said the first-quarter forecast included 4 cents to 5 cents per share of potential costs related to pending U.S. legislation that could prevent the company from deducting some employee health care expenses from its taxes.

‘BACK-END LOADED’

The company reiterated its 2010 profit forecast of $2.20 to $2.40 per share, including 80 cents of noncash charges related to pension accounting.

“People are sort of scratching their heads and saying, ‘This is all back-end loaded, so we have to step back until we get clarity,'” said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland. “Management is being conservative, like Caterpillar was when it announced.”

Honeywell’s aerospace and automation businesses count on orders placed well in advance of the goods being shipped, which could make it slower to feel the effects of a nascent economic recovery, investors said.

“They will be a little bit slower to recover than an Illinois Tool Works or a Dover Corp,” said Matt Collins, capital goods analyst at Edward Jones in St. Louis. “Without an economic recovery, that would leave them more vulnerable.”

Honeywell shares fell 90 cents to $38.92 on the New York Stock Exchange.

Fourth-quarter sales declined across the company’s aerospace and automation and control systems divisions, as airlines trimmed maintenance budgets and commercial construction activity stayed slow in the United States and Europe.

Earnings eased 1 percent to $698 million, or 91 cents per share, from a profit of $707 million, or 97 cents per share, a year earlier.

The results came in a penny ahead of analysts’ average forecast of 90 cents per share.

Revenue fell 7 percent to $8.07 billion.

Honeywell, which also makes automotive turbochargers and specialty chemicals, has forecast a rebound in demand, though pension accounting costs will weigh on its bottom line.

Prior to Friday’s action, Honeywell shares were up about 15 percent over the past year, lagging the 26 percent rise of the Standard & Poor’s capital goods industry index (.GSPIC: ).

Honeywell’s competitors include United Technologies Corp (UTX.N: ) in aerospace and building control systems, Goodrich Corp (GR.N: ) in aviation and DuPont Co (DD.N: ) in specialty materials.

Stock Market Research

(Editing by Derek Caney and Steve Orlofsky, Phil Berlowitz)

Honeywell sets low quarterly forecast, shares fall