Honeywell International Inc reported a first-quarter profit above analysts' expectations and raised the lower end of its full-year earnings forecast as margins improved in a slow-growth economy, sending its shares up 4 percent.
Margin expansion was driven by raw material and general cost cuts, Chief Executive David Cote said on a post-earnings conference call. Honeywell, which makes cockpit electronics and systems to manage the security of large buildings, has been trying to boost productivity across its four divisions and consolidate its businesses.
Gross margins rose to 16.2 percent in the first quarter ended March from 15.2 a year earlier. Honeywell has set a target of expanding gross margins to as much as 18 percent by 2014. The company also funded over $30 million of new restructuring projects in the first quarter, Cote said. Cote has been one of the loudest voices in corporate America calling on policy leaders in Washington to address the nation's debt load.
While sales in Europe and the United States remain subdued, Honeywell said it expected its business in China to pick up after a weak start to the year. "Inventory levels (in China) are returning to normal and order rates are improving, particularly in our long cycle businesses, signalling a modest recovery over the remainder of the year," Cote said.
Honeywell now expects to earn at least $4.80 per share in 2013, above its prior forecast of at least $4.75. It maintained the top end of its forecast at $4.95. First-quarter revenue was flat at $9.33 billion. Gross margins, however, rose to 16.2 percent from 15.2 a year earlier. Net income attributable to the company rose to $966 million, or $1.21 per share, in the quarter ended March, from $823 million, or $1.04 per share, a year earlier.
Analysts on average expected earnings of $1.14 per share on revenue of $9.44 billion, according to Thomson Reuters I/B/E/S. The company's shares were up 3 percent at $73.41 in early Friday trading on the New York Stock Exchange. They have gained more than 20 percent in the last 12 months and have outperformed the wider S&P 500 index, which has risen about 11 percent.