Honeywell updates Q3 view to reflect certain corporate developments
Honeywell announced it has updated its previous guidance for the third quarter of 2016 to reflect the separation of the former Automation and Control Solutions reporting segment into two new reporting segments; the acquisition of Intelligrated, which closed on August 29, 2016; the sale of the Honeywell Technology Solutions HTSI, government services business, which closed on September 16, 2016; the spin-off of Resins and Chemicals as AdvanSix Inc., which became effective on October 1, 2016; and lower outlooks in certain business segments. The company also announced it has elected to adopt the Financial Accounting Standards Board's Accounting Standards Update 2016-09 for stock compensation in the third quarter, which is in advance of the mandatory 2017 effective date. As a result of the early adoption, the company is required to report the impacts as though the accounting standard update had been adopted on January 1, 2016. Accordingly, the first- and second-quarter results have been recast to reflect a $0.03 and $0.04 tax benefit, respectively. Benefits from the accounting change and sale of HTSI will be deployed to fund restructuring and other charges in the third quarter. Third-quarter EPS is now expected to be approximately $1.60. Excluding restructuring associated with the $0.07 of first-half benefits related to stock compensation adoption, third-quarter EPS is expected to be approximately $1.67, in-line with the prior guidance range. This guidance also reflects the impact of lower shipments to Business and General Aviation OEMs, continued program delays and completions in the domestic and international businesses within Defense & Space, and lower volumes in Productivity Solutions (part of Safety and Productivity Solutions).In addition, the company initiated fourth-quarter EPS guidance of $1.74-$1.78, up 10%-13% year-over-year, which excludes any pension mark-to-market adjustment and the impact of a potential fourth-quarter debt refinancing that would lower interest expense in 2017 and beyond, but result in a fourth-quarter pre-tax charge of approximately $140 million. The refinancing transaction is dependent on continued favorable interest rate and credit market conditions. Full-year EPS guidance, excluding those same items, is updated to $6.60-$6.64, up 8%-9% year-over-year. Core organic sales* are now expected to be down 1-2 percent for the full year.