RPT-UPDATE 5-Honeywell sets low quarterly forecast, shares fall

(Fixes Update number)

* Sees Q1 EPS 35-40 cents, below Wall Street’s 47 cents

* Holds 2010 outlook steady

* Q4 EPS 91 cents, ahead of 90-cent average estimate

* Revenue falls 7 pct

* Shares down more than 2 pct

(Adds details on forecast first-quarter charges, quote)

By Scott Malone

BOSTON, Jan 29 (BestGrowthStock) – Diversified U.S. 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 U.S. 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. [ID:nN28246399]

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.

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For related graphic, click: http://link.reuters.com/tuk66h

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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 Analysis

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

RPT-UPDATE 5-Honeywell sets low quarterly forecast, shares fall