Conglomerates Bracing For GE & Honeywell Earnings... Higher Expectations (GE, HON, MMM, UTX, TYC)

Conglomerates are soft so far on Wednesday but they have turned up ahead of the wave of earnings this week.  A screen at Finviz showed that the conglomerate sector is leading the pack of sectors with a 5.1% gain just in the last week ahead of the gains industrial goods, services, and the financial sectors.  Does this aim to imply that both General Electric Co. (NYSE: GE) as the king of utilities and then Honeywell International Inc (NYSE: HON) will be turning in solid earnings reports this Friday morning?

What investors seem to be banking on is that General Electric is going to not just meet and guide in-line, and they may be hoping for the same from Honeywell.  It is too soon to expect more dividend hikes from either company, so it may be a puzzle as to what investors really think they are going to hear this Friday.

General Electric Co. (NYSE: GE) closed out last Friday at $18.88 but Tuesday’s 2.3% to $19.34 gain seems to have created some new excitement. What investors are hoping for in specifics is a focus not on Europe and a continued improvement at GE Capital.  The year high is $21.00 and the consensus is $22.29, implying upside of 15%.  That is more expected upside than in most analyst targets to most DJIA components.  Thomson Reuters has estimates of $0.33 EPS and $34.66 billion in revenue.  Shares are indicated softer on Wednesday and everyone should be paying very close attention that 50-day moving average which is at $19.34 today.

Honeywell International Inc (NYSE: HON) is trading at $58.93 and is also close to its 50-day moving average up at $59.55.  Suddenly the charts matter here.  The Thomson Reuters consensus targets are $0.99 EPS and $9.16 billlion in revenue.  Te $58.93 compares to a 52-week range of $41.22 to $62.28 and the consensus price target from Thomson Reuters is $67.95.

3M Co. (NYSE: MMM) and United Technologies Corporation (NYSE: UTX) are both set to turn in their respective conglomerate earnings reports next week on April 24.  For 3M the pre-GE and pre-Honeywell report is $1.49 EPS from Thomson Reuters.  The price this morning of $87.45 compares to a consensus price target of $95.17 and it is worth noting that 3M is trading under its 52-week high of $98.19.

United Tech is expected to report earnings of $1.20 EPS on sales of $12.76 billion. Its $81.00 share price compares to a 52-week high of $91.83 and compares to the Thomson Reuters consensus price target of $94.70.  As it stands, this actually implies almost 17% upside expected in shares of United Tech and that makes it the most anticipated earnings report of the large-cap conglomerate stocks.

Tyco International Ltd. (NYSE: TYC) also reports next week on April 26.  This is turning into more of a “deglomerate” and because of the restructuring and break-up with the ADT spin-off we are not sure how to rank this one other than what the ticker-tape has told you.  At $54.57, the 52-week range is $37.39 to $56.66 and Thomson Reuters has a consensus price target of $60.00.  Because of the restructuring here we are just going

If GE and Honeywell both manage to please Wall Street on Friday, investors are likely going to ratchet their expectations a tad higher for 3M and United Tech ahead of earnings next week.

Stay tuned.

JON C. OGG