Industrial conglomerate-cum-defense contractor Honeywell (NYSE: HON) reports its Q4 and full-year 2007 earnings Friday morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts follow Honeywell. Nine say to buy it, seven to hold it, and one to sell it.
  • Revenue. On average, they're looking for 8% quarterly sales growth, to $8.94 billion.
  • Earnings. Profits should do quite a bit better. Analysts predict 26% growth to $0.91 per share.

What management says:
Citing "strong organic sales growth in each of [its] businesses in the third quarter" (read David Lee Smith's Foolish rundown for all the details), Honeywell CEO Dave Cote described his company as "well positioned for continued growth" back in October. Even as the U.S. economy began showing signs of slowing, Honeywell was still winning "important new multi-year contracts." The company named Airbus, Whirlpool (NYSE: WHR), General Dynamics (NYSE: GD) subsidiary Gulfstream, and French oil major Total (NYSE: TOT) as just a few of the customers contributing to Honeywell's success.

What management does:
Yet margins took a bit of a dip during the quarter. The slight rise in the net you see below is deceptive; for the first time in a long while, Honeywell didn't take a hit from any restructuring charges. Higher up the income statement, you'll notice that the firm's rolling gross and operating numbers both slipped, after previously having risen for three straight quarters.

Even so, Honeywell doesn't lag rivals Goodrich (NYSE: GR) or United Technologies (NYSE: UTX) by much in the operating-margin department, and it retains a significant lead over automotive industry-shackled Johnson Controls (NYSE: JCI).

Margins

6/06

9/06

12/06

3/07

6/07

9/07

Gross

24.3%

23.9%

24.7%

24.9%

25.0%

24.5%

Operating

10.8%

10.5%

11.3%

11.7%

11.9%

11.3%

Net

6.6%

6.6%

6.6%

6.8%

6.9%

7.0%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Last quarter, with just weeks to go before closing the books on fiscal 2007, Honeywell felt confident enough in its performance to raise guidance for the year. As my Foolish colleague already advised in his write-up, Honeywell's guidance of $3.14 to $3.16 in earnings per share means the firm probably grew its profits by 25% in 2007. But with Honeywell buying back shares hand over fist, it's hard to say how much those per-share figures work out to in net profit terms.

Free cash flow is another matter. In addition to giving sales and earnings guidance last quarter, Honeywell also told us how much free cash flow it expected to generate through year's end: $3 billion. Admittedly, with the stock currently changing hands at more than 13 times free cash flow, and expected growth of just 11% annually over the next half-decade, Honeywell doesn't yet look like an out-and-out buy. But it's a darned sight cheaper than the firm's multiple of 18 times trailing earnings might suggest. And if Honeywell surprises us to the upside once again come Friday, it just might be cheaper still.

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Fool contributor Rich Smith does not own shares of any company named above. Total SA is a Motley Fool Income Investor selection. The Motley Fool has a disclosure policy.