- Honeywell shares fall more than 2% as the company lowers its fourth-quarter guidance.
- Adjusted EPS in the fourth quarter could fall to $0.47.
- Revenue is also expected to fall by $400 million compared to the previous projection.
- Honeywell has completed a new deal with Bombardier that will require heavy investment.
Honeywell Stock (HON) led the Dow Jones Industrial Average (DJIA) lower on Tuesday after cutting their profit outlook following a partnership with Bombardier. HON shares lost 2% to 3% as the industrial company continues to retreat from its all-time high in November.
The broader market has traded lower despite good news on the U.S. employment front. The October Job Openings and Labor Turnover (JOLTS) report showed an increase in openings to 7.744 million, up 250,000 above Wall Street expectations. The resignation rate also increased from 1.9% to 2.1%, something that typically only happens in a strong labor market.
South Korea’s president suddenly calling for “martial law” has shaken US stocks a bit, especially those with exposure to the Asian economy.
Honeywell Stock News
Honeywell’s new partnership with Canadian aircraft manufacturer Bombardier has not been received well by the market. Normally, new deals drive shares higher, but this partnership will require more investment from Honeywell.
Honeywell’s statement late Monday said it had agreed to supply Bombardier with advanced technology used in “avionics, propulsion and satellite communications” systems in current and future models of Bombardier aircraft.
The industrial giant said the partnership would require extensive capex that would impact fourth-quarter results. It estimated this would represent a $0.47 reduction in adjusted earnings per share (EPS) in the fourth quarter and a reduction in sales of $400 million compared to previous projections.
Honeywell now projects fourth-quarter adjusted EPS between $2.26 and $2.36, down from a previous median line of $2.78. Fourth-quarter revenue fell to a range of $9.8 billion to $10 billion from a median estimate of $10.3 billion.
For the full year, adjusted EPS is now projected in a range of $9.68 to $9.78, down from a previous midpoint of $10.20.
Previous litigation in which Bombardier had alleged that Honeywell was selling powertrain components to Bombardier’s competitors at lower prices has ended due to this new agreement.
Honeywell Stock Forecast
Honeywell is coming off the all-time high it hit on Nov. 12 when hedge fund Elliot Management announced its intention to push for a split of the company into multiple units. That volatile session saw a high of $242.77. Since then, the stock has declined.
HON stock has now returned to trading within the 18-month ascending resistance range (highlighted in green on the daily chart below) that the stock only broke on November 11.
Whenever management cuts the outlook, a sell-off should be expected. This one probably isn’t even over yet. Expect a full range entry into the previous resistance and possibly a full pullback to the lows of $210. The 100-day Simple Moving Average (SMA) looks like a worthy support point. However, Honeywell will remain in an uptrend until it breaks below the late October support near $203.
HON Stock Daily Chart
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
