Honeywell Shares Up on Strong Profits, Improved 2007 Forecast

Citing strong growth in Europe and the Middle East, Honeywell International reported a 20% rise in income, cruising past Wall Street estimates and raising its 2007 profit forecast.

Shares of the diversified manufacturer, which is also the world's largest maker of cockpit electronics, climbed 3.1% to their highest point in almost six years after profit came in at 66 cents a share, four cents above expectations.

"International growth was really an important element for us in the quarter," said Senior Vice President and Chief Financial Officer David Anderson, in an interview. "Our forward guidance basically assumes that we'll continue to have softening in the U.S. economy."

That's been offset by stronger demand in Germany and the United Kingdom, Anderson said.

"Those economies are starting to show a little more life," Anderson said.

Honeywell aims to generate about half its revenue outside the United States this year.

The strongest growth came at its Automation and Control Systems unit, which sells thermostats, security systems and other automation products for large commercial buildings. At that unit, profit rose 24% on 18% revenue growth.

"It kind of flies in the face of the thesis that capital spending is missing from this part of the economic cycle," said Peter Sorrentino, portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Honeywell shares. "If it adds to productivity, people are willing to spend on it."

While residential building activity has been softening in the United States as a result of the cooling housing market, commercial construction at home and abroad has kept a steadier pace.

By The Numbers

The Morris Township, New Jersey,-based company reported profit of $526 million, or 66 cents a share in the first quarter, compared with $436 million, or 52 cents a share a year earlier.
Analysts, on average, had expected profit of 62 cents a share, according to Reuters Estimates.

Revenue came in at $8.04 billion, up 11% from $7.24 billion a year earlier. The weakening of the dollar versus the euro accounted for about 2% of revenue growth.

Analysts, on average, had expected revenue of $7.71 billion, according to Reuters Estimates.

The company also raised its profit forecast for the year by 15 cents a share to a range of $3.00 to $3.10 a share, saying that sales would come in about $700 million above previous
expectations, at about $33.5 billion.

Analysts, on average, had expected full-year profit of $2.94 a share, according to Reuters Estimates.

Aviation A Lift

Strong investment in aviation, which boosted the quarterly results of jet engine makers General Electric and United Technologies , also provided a lift to Honeywell in the quarter. Profit at its aerospace unit, the company's largest business by revenue, was up 13.6%.

GE is also the parent company of

Honeywell shares last traded that at this level in May 2001, before European regulators knocked down an effort by GE to buy Honeywell.

Honeywell shares are up about 11.8% so far this year, outpacing the 3.7% rise in the blue-chip Dow Jones industrial average, of which it is a member. Honeywell shares trade at about 16.6 times forecast 2007 earnings, ahead of the Dow's 14.9 price-to-earnings ratio.