Tomahawk, WI 10/22/2013 (BasicsMedia) – Honeywell International Inc. (NYSE:HON) may not be as well known around the world as its more erstwhile competitors such as The Boeing Company, General Electric, and others. With a market cap of $66.37 billion, the company has a worldwide client base that it serves through a wide range of products. Its four business segments include Performance Materials and Technologies, Aerospace, Transportation Systems, Automation and Control Solutions. When it announced its quarterly financial results last week, it emerged that this were lower than expected.

Reasons Why HON’s Quarterly Financials for Q3 of 2013 Are Discouraging

The main reason why HON’s third quarter financial results are now what were expected is the fact that certain its defense unit has reported a number of faults, which have proven to be quite costly. This reduction in revenue, which is neither what the industry nor HON was looking forward to, has forced the company to adjust its full-year sales forecast. After the release of the latest quarterly financial result, HON shares did not fare any better in the stock market. They fell by close to 3% on the same day in which the latest quarterly financial results were released.

More importantly is the fact that the company’s Defense and Space Division saw its sales plummet by close to 11% during the last three months prior to the release of the financial results. This is the department tasked with the supply of equipment and parts to the military and other government projects. Investors seek answers on what happened during this quarter to see an 11% drop in sales. I think that the recent U.S government shutdown played a role in this since it was impossible to finish projects that needed supervision on time, thus causing delays in payments.

HON Has Not Lost Sales, Its Revenue Has Only Been Delayed

The U.S government recently undertook a series of spending cuts, done under its sequestration program. A number of supply chain problems occurred, which ended up messing the revenue HON hoped to earn from its Defense and Space Division.  However, the supply problems HON faced during the third quarter of 2013, have now been resolved and they should not affect the next quarterly financial results. The company has said that it has not lost sales since it accounts the problems brought about this quarter as having been responsible for delaying revenue.

HON will still earn revenue once it makes the parts ordered by clients. The orders placed by clients have not been cancelled. HON has worked very hard in the last one year to cut down on costs and increase productivity and this will go on, thus helping it to see growth in terms of revenue and profits. HON has doubled its productivity in some instances across certain parts of its business. This will continue into 2014, thus helping HON to improve its quarterly revenue, sales and profits.

I do not doubt that HON has posted poor financial results for third quarter of 2013, but this is only a temporary setback. HON has a number of orders it needs to service, and since it has increased or doubled its productivity, the next financial results will be much better than this quarter.

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