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BOSTON, July 17 Honeywell International Inc. (HON) on Wednesday said cost cutting boosted quarterly net income, but lowered its full-year profit forecast as demand for its airplane electronics, brakes, and tires has not come back as fast as expected in the wake of the Sept. 11 attacks.
The Morris Township, New Jersey-based maker of Fram filters, thermostats, and airplane parts also said it plans to cut 2,000 jobs in the second half and look for a new chief financial officer as incumbent Richard Wallman plans his retirement.
Honeywell shares rose in early-morning trade as investors cheered the company's aggressive cost cuts and cash generation. But the stock, a Dow Jones industrial average (26099400) component, slipped 2.8 percent and closed at $31.10, a decline of 90 cents on the day after Honeywell Chief Executive David Cote cut the full-year forecast.
Before Wednesday, the stock was off 5 percent this year, outperforming the 22 decline on the Standard & Poor's 500 Index.
Honeywell forecast 2002 earnings between $2.25 and $2.30 a share, below its previous expectation of about $2.36 a share from ongoing operations. Analysts had been looking for a consensus estimate of $2.34 a share.
"Each sector has its own weakness," Cote told reporters on a conference call.
The company's automation and control business, for example, is "a little more weak than expected," Cote explained, because industrial customers in Europe and the United States have pared spending.
Honeywell reported net income of $459 million, or 56 cents a share, compared with $50 million, or 6 cents a share, in the year-ago quarter.
Earnings from ongoing operations rose $4 million, to $454 million, or 55 cents a share. Those results excluded a $98 million after-tax gain on the sale of a business and a $93 million net charge related to severance costs, plant shutdowns and asset impairments.
Cost cutting and performance initiatives saved about $350 million in the quarter, Honeywell said.
"Cost cutting is forever," Cote said. But he also vowed to renew Honeywell's organic growth.
Net sales in the quarter dropped 7 percent, to $5.65 billion. The sharpest decline came at Honeywell's aerospace division, where net sales skidded 13 percent.
Aerospace profits tumbled 28 percent, to $364 million from $504 million in the year-ago period.
But, once airline carriers resume normal flight traffic, Honeywell is expected to snap up lucrative business through maintenance work and equipment replacement, said Anthony Forcione, a portfolio manager at State Street Research & Management Co.
"It's just a matter of time," Forcione said. "Airlines are still having a very difficult time. I like to think we're at the bottom there with their results."
Forcione said Honeywell's second-quarter cash generation of $583 million -- more than 120 percent over net income -- indicates strong productivity gains.
Honeywell expects to end the year with 108,000 employees, down from 130,000 at the end of 2000.
