Honeywell Earnings: an Early Look

With hundreds of companies having already reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Honeywell (HON 0.68%). The maker of components and systems for the aerospace, transportation, and energy industries has seen its stock perform extremely well in recent months as prospects for its core businesses have improved. Let's take an early look at what's been happening with Honeywell over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on Honeywell

Source: Yahoo Finance.

Will Honeywell keep flying higher?
Honeywell has done a good job of topping analyst expectations in the past. Moreover, over the past three months, analysts have reined in their estimates by about $0.04 per share, giving Honeywell an easier hurdle to overcome. Shareholders seem optimistic, as the stock has risen more than 10% since mid-October.

As a maker of systems and components, Honeywell has greatly benefited from the boom in the commercial aerospace industry. With Boeing (BA 0.39%) seeing huge increases in orders despite recent concerns about its new 787 Dreamliner, Honeywell stands to gain from heavy demand for many of the systems that go into Boeing aircraft for years to come. Moreover, just three months ago, Honeywell expanded its relationship with Textron's (TXT 0.50%) Cessna division to provide systems handling environmental, communications, and navigation services for its aircraft.

Honeywell has made a number of smart moves to take advantage of favorable industry conditions. With timely purchases of supply chain management company Intermec (NYSE: IN) as well as a 70% stake in natural-gas processing equipment maker Thomas Russell, Honeywell is seeking new ways to grow.

Of course, the downside of benefiting from strength in aerospace is that Honeywell is vulnerable to a turnaround. In particular, if the review of Boeing's 787 goes badly, then it could be devastating for Honeywell. Yet with its successful efforts at diversification, Honeywell would be able to get past even news of that level of difficulty.

In Honeywell's report, investors should focus on how the company plans to integrate its new acquisitions and deliver on its commitments. Good guidance combined with positive results could send the shares even higher from their already lofty levels.

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