Earnings Release

• Sales of $9.1 Billion, Reported and Organic¹ Sales Up 3%
• Operating Margin Up 130 Basis Points to 20.4%; Segment Margin¹ Up 20 Basis Points to 22.2%
• Earnings Per Share of $2.23 and Adjusted Earnings Per Share¹ of $2.25, Above High End of Previous Guidance
• Backlog Up 6% Year Over Year to $32.0 Billion on $10.2 Billion in Orders
• Deployed $1.6 Billion of Capital to Dividends, Share Repurchases, and Capital Expenditures

CHARLOTTE, N.C., April 25, 2024 /PRNewswire/ -- Honeywell (NASDAQ: HON) today announced results for the first quarter that met or exceeded the company's guidance. The company also reiterated its full-year sales, segment margin², adjusted earnings per share^2,3, and cash flow guidance ranges.

Honeywell reported first-quarter year-over-year reported and organic¹ sales growth of 3%, led by another quarter of strong growth in Aerospace Technologies, which was up 18% on an organic¹ basis, and Energy and Sustainability Solutions, which was up 5% organically¹. Additionally, Honeywell Connected Enterprise offerings once again generated sales growth of more than 20% across the portfolio, led by cyber and buildings offerings. Operating margin expanded 130 basis points to 20.4% and segment margin¹ expanded by 20 basis points to 22.2%, driven by expansion in Aerospace Technologies. Earnings per share for the first quarter was $2.23, up 8% year over year, and adjusted earnings per share¹ was $2.25, up 9% year over year. Operating cash flow was $0.4 billion and free cash flow¹ was $0.2 billion.

"Honeywell delivered a strong start to 2024. Organic¹ growth was led by double-digit growth in both our commercial aviation and defense and space businesses," said Vimal Kapur, chief executive officer of Honeywell. "As long-cycle customer demand remained strong, our robust backlog increased 6% year over year and was up sequentially, ending the quarter at a record level of $32.0 billion. We also experienced pockets of recovery in short cycle, and expect broader participation as the year unfolds and channels normalize further. Improving business mix, continued focus on commercial excellence, and productivity actions enabled us to expand margins in line with the high end of our guidance range and overdeliver on our adjusted earnings per share^2,3 guidance.

"Concurrently, we executed on our capital deployment strategy, putting our robust balance sheet to work through $1.6 billion in dividends, share repurchases, and high-return capital expenditures. In addition, we announced our intention to acquire Civitanavi Systems, which will further strengthen our navigation offerings in Aerospace and expand our footprint in Europe."

Kapur continued, "Building on this quarter's momentum, we are poised for another year of significant transformation at Honeywell as we remain well-positioned to deliver on our commitments and accelerate growth in 2024. Our portfolio is aligned to three powerful megatrends - automation, the future of aviation, and energy transition, all underpinned by digitalization. Looking ahead, I remain confident in our ability to create value as we continue to execute on our M&A playbook and leverage our differentiated Accelerator operating system to unlock the full value of our latest acquisitions, as well as in our core businesses."

As a result of the company's first-quarter performance and management's outlook for the remainder of the year, Honeywell maintained its full-year sales, segment margin², adjusted earnings per share^2,3, and cash flow guidance. Full-year sales are expected to be $38.1 billion to $38.9 billion, with organic¹ sales growth in the range of 4% to 6%. Segment margin² is expected to be in the range of 23.0% to 23.3%, with segment margin expansion² of 30 to 60 basis points. Adjusted earnings per share^2,3 is expected to be in the range of $9.80 to $10.10, up 7% to 10%. Operating cash flow is expected to be in the range of $6.7 billion to $7.1 billion, with free cash flow¹ of $5.6 billion to $6.0 billion. A summary of the company's full-year guidance can be found in Table 1.

First-Quarter Performance

Honeywell sales for the first quarter were up 3% year over year on a reported basis and 3% year over year on an organic¹ basis. The first-quarter financial results can be found in Tables 2 and 3.

Aerospace Technologies sales for the first quarter were up 18% on an organic¹ basis year over year, the seventh consecutive quarter of double-digit organic growth, as a result of ongoing strength in both commercial aviation and defense and space. Sales growth was led by commercial original equipment, up over 20% year over year for the second straight quarter as shipset deliveries continued to increase sequentially. Commercial aftermarket grew 17% on increased flight activity, led by air transport. Defense and space grew 16% year over year as demand remained strong, while supply chain improvements allowed us to execute on our robust order book. Segment margin expanded 150 basis points year over year to 28.1%, driven by commercial excellence and volume leverage, partially offset by cost inflation and mix pressure within our original equipment business.

Industrial Automation sales for the first quarter were down 13% on an organic¹ basis year over year. Sales decline was primarily due to lower volumes in warehouse and workflow solutions. Sales in our short-cycle productivity solutions and services business were down versus the prior year, but orders grew double digits year over year and sequentially for the second straight quarter, an encouraging sign of recovering demand. Our lifecycle solutions and services business was a bright spot in the quarter, up double-digits year over year. Segment margin contracted 200 basis points to 16.8% driven by lower volume leverage and cost inflation, partially offset by productivity actions and commercial excellence.

Building Automation sales for the first quarter were down 3% on an organic¹ basis year over year. Building solutions continues to be a bright spot, with double-digit growth in projects and another quarter of growth in services. Strength in building solutions was offset by building products, where lower volumes led to sales declines across fire, security, and building management systems. Segment margin contracted 120 basis points to 24.0%, slightly above fourth quarter levels, due to product mix headwinds and cost inflation, partially offset by productivity actions and commercial excellence.

Energy and Sustainability Solutions sales for the first quarter were up 5% on an organic¹ basis year over year. Advanced materials led ESS with 6% sales growth, primarily driven by another quarter of double-digit improvement in fluorine products. UOP sales grew 3% in the quarter as a result of double-digit growth in petrochemical catalyst shipments and refining equipment, partially offset by expected challenging year-over-year comps from large gas processing equipment projects. Segment margin contracted 70 basis points to 19.8% as one-time factory restart costs were partially offset by favorable business mix and productivity actions.

Conference Call Details

Honeywell will discuss its first-quarter results and full-year 2024 guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. A live webcast of the investor call as well as related presentation materials will be available through the Investor Relations section of the company's website (www.honeywell.com/investor). A replay of the webcast will be available for 30 days following the presentation.

TABLE 1: FULL-YEAR 2024 GUIDANCE²

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

Honeywell is an integrated operating company serving a broad range of industries and geographies around the world. Our business is aligned with three powerful megatrends - automation, the future of aviation, and energy transition - underpinned by our Honeywell Accelerator operating system and Honeywell Connected Enterprise integrated software platform. As a trusted partner, we help organizations solve the world's toughest, most complex challenges, providing actionable solutions and innovations that help make the world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom. 

Honeywell uses our Investor Relations website, www.honeywell.com/investor, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media.

We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events, or developments that management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management's assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors, many of which are difficult to predict and outside of our control. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties, including ongoing macroeconomic and geopolitical risks, such as lower GDP growth or recession, capital markets volatility, inflation, and certain regional conflicts, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this release can or will be achieved. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.

This release contains financial measures presented on a non-GAAP basis. Honeywell's non-GAAP financial measures used in this release are as follows:

• Segment profit, on an overall Honeywell basis;
• Segment profit margin, on an overall Honeywell basis;
• Organic sales growth;
• Free cash flow; and
• Adjusted earnings per share.

Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

Appendix

Non-GAAP Financial Measures

The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP).

Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Other companies may calculate these non-GAAP measures differently, limiting the usefulness of these measures for comparative purposes.

Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Investors are urged to review the reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate Honeywell's business.

We define organic sales percentage as the year-over-year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided for forward-looking measures of organic sales percent change because management cannot reliably predict or estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and divestiture transactions, all of which could significantly impact our reported sales percent change.

We define segment profit, on an overall Honeywell basis, as operating income, excluding stock compensation expense, pension and other postretirement service costs, and repositioning and other charges. We define segment profit margin, on an overall Honeywell basis, as segment profit divided by net sales. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of operating income to segment profit, on an overall Honeywell basis, has not been provided for all forward-looking measures of segment profit and segment profit margin included herein. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment profit, particularly pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. The information that is unavailable to provide a quantitative reconciliation could have a significant impact on our reported financial results. To the extent quantitative information becomes available without unreasonable effort in the future, and closer to the period to which the forward-looking measures pertain, a reconciliation of operating income to segment profit will be included within future filings.

We define adjusted earnings per share as diluted earnings per share adjusted to exclude various charges as listed above. We believe adjusted earnings per share is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward-looking information, management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. We therefore do not include an estimate for the pension mark-to-market expense. Based on economic and industry conditions, future developments, and other relevant factors, these assumptions are subject to change.

We define free cash flow as cash provided by operating activities less cash for capital expenditures.

We believe that free cash flow is a non-GAAP measure that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This measure can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

We define free cash flow as cash provided by operating activities less cash for capital expenditures.

We believe that free cash flow is a non-GAAP measure that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This measure can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

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SOURCE Honeywell