UTX United Technologies Corporation

By Ted Mann 

Slack demand for business jets and mobile scanners is weighing on Honeywell International Inc., which on Friday tempered its 2017 outlook and said fourth-quarter profits would come in at the low end of its prior forecast.

Like other industrial conglomerates, including General Electric Co. and United Technologies Corp., Honeywell is coping with sluggish global growth, the hangover of a two-year-long collapse in crude oil prices, and ripples of uncertainty in China. In October, the company cut its 2016 sales forecast.

Despite lowering their 2017 sales and profit targets, executives on Friday promised investors they would cut costs and that they expected demand to rebound in some markets, like hand-held scanners and worker safety equipment, that suffered this year.

"It will come as no surprise that my top priority is to enhance organic growth and that will become an important part of our culture," said Chief Operating Officer Darius Adamczyk who is set to succeed CEO Dave Cote in March.

Mr. Adamczyk said the company could benefit next year if oil prices continue to recover -- a boon to the company's petroleum-linked business lines, which include equipment and catalysts used in oil refining.

Honeywell shares, which fell in early Friday trading on the company's muted outlook, recovered after executives held their conference call. The shares, which tumbled in October when the company lowered its sales forecast, have gained about 12% on the year.

Like its peers, Honeywell is trying to bolster profit margins by tightening its belt. The company will "continue to simplify our footprint," Chief Financial Officer Tom Szlosek said -- a sign that Honeywell could join GE and others in consolidating factories, and possibly laying off workers. It employed 129,000 people at the start of 2015, including 49,000 in the U.S.

On Thursday, GE said it would sell one of its smallest business units, the $3 billion Industrial Solutions business, as part of a plan to cut costs and redirect some capital to share buyback and acquisitions. The company had previously announced it would sell its water business.

Mr. Adamczyk emphasized his push deeper into software, a priority across many industrial companies, where executives increasingly say that software can drive improvements in the efficiency, life cycles and profitability of heavy machinery.

"This is not a revolution," Mr. Adamczyk said, noting that the company already employs large numbers of software developers, but is quieter about advertising its efforts than GE. "I've asked all of Honeywell leaders, no matter what business during to think about how to disrupt the markets by developing software."

Mr. Adamczyk also said the company has a "very robust pipeline" of potential deals, though the company said it is leaning toward bolt-on acquisitions, rather than a major deal.

Honeywell's division selling mobile scanners and other equipment for shippers and logistics companies struggled in 2016, thanks in part to lower than expected demand from logistics companies that left the company with high inventory, Mr. Adamczyk said. The company has seen an increase in orders for that equipment "in the last couple weeks," he said.

Other headwinds will be behind the company, Mr. Szlosek said, including aerospace incentives the company shoulders to get its equipment included in new aircraft. As the incentives are paid off, the profits from being included on those aircraft will rise substantially, the company says. Capital expenditures will decline in 2017 and 2018, helping to boost profit margins.

The company is also "very supportive" of proposed corporate tax changes being debated in Congress, Mr. Szlosek said, especially the opportunity to repatriate at lower tax rates some of the roughly $8 billion in cash Honeywell has built up overseas. "We do think it's going to provide some opportunities for us, certainly on the cash mobility side and the capital allocation side."

Honeywell forecast 2017 earnings of $6.85 to $7.10 a share, mostly below analysts' expectations of $7.08, according to Thomson Reuters. The company said it expected sales for the year to range from down 1% to up 2%, while analysts expect a rise of 0.9%. Organic sales, which exclude acquisitions and divestments, are expected to increase 1% to 3%.

For the fourth quarter, Honeywell said it would post earnings of about $1.74 a share, compared with a prior view of $1.74 to $1.78 a share.

Write to Ted Mann at ted.mann@wsj.com

(END) Dow Jones Newswires

December 17, 2016 02:47 ET (07:47 GMT)

United Technologies (NYSE:UTX)
Gráfica de Acción Histórica
De Jun 2024 a Jul 2024

United Technologies (NYSE:UTX)
Gráfica de Acción Histórica
De Jul 2023 a Jul 2024