Honeywell Delivers 9% Sales Growth And Expands Operating Margin By 180 Basis Points

·17 min read

- Earnings Per Share of $1.80, Adjusted Earnings Per Share(1) of $2.02, at High End of Guidance

- Organic Sales up 8%; Second Straight Quarter of Sales Growth in All Four Segments

- Operating Margin up 180 Basis Points to 18.6%; Segment Margin up 130 Basis Points to 21.2%

- Deployed $1.5 Billion in Capital to Share Repurchases, Dividends, Capital Expenditures, and Acquisitions

- Orders up High Single Digits, up Double Digits Ex-COVID Mask Demand; Backlog up 7% to $27.5 Billion

CHARLOTTE, N.C., Oct. 22, 2021 /PRNewswire/ -- Honeywell (NASDAQ: HON) today announced outstanding results for the third quarter that met or exceeded the company's guidance.

(PRNewsfoto/Honeywell)
(PRNewsfoto/Honeywell)

"The third quarter was another strong one for Honeywell, with sales growth in all four segments, significant margin expansion, and exceptional execution even as we faced tough challenges in the supply chain environment," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Organic sales grew 8%, led by 38% growth in Aerospace commercial aftermarket, 21% growth in Safety and Productivity Solutions, and 29% growth in UOP and 14% growth in advanced materials within Performance Materials and Technologies. Our focus on operational and commercial excellence enabled us to expand segment margin by 130 basis points to 21.2%, exceeding the high end of our guidance range by 60 basis points. As a result, we delivered adjusted earnings per share1 of $2.02, up 29% year over year, achieving the high end of our third-quarter guidance range. Our cash performance was strong, and we remain on track to meet our cash flow commitments for the year. We continued to execute on our capital deployment strategy, repurchasing $0.7 billion in shares, announcing our 12th dividend increase in the past 11 years, and completing the acquisition of Performix Inc. to expand our portfolio of automation solutions for the life sciences industry."

Adamczyk continued, "Our disciplined approach to productivity and pricing helped deliver a strong third quarter despite an uncertain global environment marked by supply chain constraints, increasing raw material inflation, and labor market challenges. We continue to focus on mitigating these challenges in the fourth quarter, while capitalizing on near-term growth opportunities across our portfolio."

Honeywell updated its full-year guidance to reflect the persistent effects of the macro-challenged environment as well as the third-quarter results. Full-year sales are now expected to be in the range of $34.2 billion to $34.6 billion with organic sales growth in the range of 4% to 5% due to supply chain constraints. Segment margin is expected to be in the range of 20.9% to 21.1%. Adjusted earnings per share2 is expected to be $8.00 to $8.10. Operating cash flow is still expected to be in the range of $5.9 billion to $6.2 billion and free cash flow is still expected to be in the range of $5.3 billion to $5.6 billion. A summary of the company's full-year guidance changes can be found in Table 1.

Third-Quarter Performance
Honeywell sales for the third quarter were up 9% on a reported basis and up 8% on an organic basis. The third-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the third quarter were up 2% on an organic basis driven by an ongoing recovery in commercial aftermarket demand as flight hours continued to increase as well as by strong growth in business and general aviation original equipment, partially offset by lower defense volumes, which were impacted by supply chain constraints. Commercial aftermarket sales were up 38% year over year and air transport aftermarket sales were up double digits sequentially from the second quarter, demonstrating momentum in the aftermarket recovery. Segment margin expanded 390 basis points to 27.1% driven by commercial excellence, favorable sales mix, and productivity net of inflation.

Honeywell Building Technologies sales for the third quarter were up 3% on an organic basis driven by strength across the building products portfolio and continued growth in building solutions services. Orders were up double digits year over year, driven by strong demand for building projects and products. The services backlog was up over 35% driven by strong global bookings, positioning the business for continued growth. Segment margin expanded 190 basis points to 23.5% driven by commercial excellence and productivity, partially offset by inflation.

Performance Materials and Technologies sales for the third quarter were up 9% on an organic basis driven by demand for process solutions services and thermal solutions, petrochemical catalyst shipments and equipment volumes in UOP, and continued double-digit growth in advanced materials driven by strong demand across the portfolio. Robust demand for services, automation projects, gas processing, and advanced materials drove double-digit orders growth year over year for the second consecutive quarter. Segment margin expanded 260 basis points to 22.2% driven by commercial excellence and productivity, partially offset by inflation.

Safety and Productivity Solutions sales for the third quarter were up 21% on an organic basis driven by another quarter of double-digit growth in the warehouse and workflow solutions, productivity solutions and services, and gas analysis businesses, partially offset by lower personal protective equipment volumes. Orders were up double digits year over year driven by over 50% orders growth in warehouse and workflow solutions, productivity solutions and services, and advanced sensing, which should drive continued growth. Segment margin contracted 70 basis points to 13.2% driven by unfavorable business mix and Intelligrated supply chain challenges, partially offset by commercial excellence.

Conference Call Details
Honeywell will discuss its third-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (301) 715-8592 approximately 10 minutes before the 8:30 a.m. EDT start. The meeting ID is 996 7173 6928. The access code is 528460. 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 2021 GUIDANCE5


Previous Guidance

Current Guidance

Sales

$34.6B - $35.2B

$34.2B - $34.6B

Organic Growth

4% - 6%

4% - 5%

Segment Margin

20.8% - 21.1%

20.9% - 21.1%

Expansion

Up 40 - 70 bps

Up 50 - 70 bps

Adjusted Earnings Per Share2

$7.95 - $8.10

$8.00 - $8.10

Adjusted Earnings Growth3

12% - 14%

13% - 14%

Operating Cash Flow

$5.9B - $6.2B

$5.9B - $6.2B

Free Cash Flow

$5.3B - $5.6B

$5.3B - $5.6B

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS



3Q 2021


3Q 2020


Change

Sales


8,473


7,797


9%

Organic Growth






8%

Segment Margin


21.2%


19.9%


130 bps

Operating Income Margin


18.6%


16.8%


180 bps

Earnings Per Share


$1.80


$1.07


68%

Adjusted Earnings Per Share1


$2.02


$1.56


29%

Cash Flow from Operations


1,119


1,007


11%

Operating Cash Flow Conversion


89%


133%


(44%)

Free Cash Flow


911


758


20%

Adjusted Free Cash Flow Conversion4


64%


68%


(4%)

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

AEROSPACE


3Q 2021


3Q 2020


Change

Sales


2,732


2,662


3%

Organic Growth






2%

Segment Profit


740


617


20%

Segment Margin


27.1%


23.2%


390 bps

HONEYWELL BUILDING TECHNOLOGIES







Sales


1,370


1,305


5%

Organic Growth






3%

Segment Profit


322


282


14%

Segment Margin


23.5%


21.6%


190 bps

PERFORMANCE MATERIALS AND TECHNOLOGIES







Sales


2,510


2,252


11%

Organic Growth






9%

Segment Profit


558


442


26%

Segment Margin


22.2%


19.6%


260 bps

SAFETY AND PRODUCTIVITY SOLUTIONS







Sales


1,861


1,578


18%

Organic Growth






21%

Segment Profit


245


219


12%

Segment Margin


13.2%


13.9%


-70 bps

1Adjusted EPS and adjusted EPS V% exclude changes in fair value for Garrett Motion Inc. (Garrett) equity securities, an expense related to UOP
matters, gain on the sale of the retail footwear business, and 3Q20 non-cash charges associated with the reduction in value of reimbursement
receivables due from Garrett.

2Adjusted EPS guidance excludes an expense related to UOP matters, gain on the sale of the retail footwear business, non-cash charges
associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, and
any potential future one-time items that we cannot reliably predict or estimate such as pension
mark-to-market and changes in fair value for Garrett equity securities.

3Adjusted EPS V% guidance excludes an expense related to UOP matters, gain on the sale of the retail footwear business, non-cash charges
associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, 4Q20
pension mark-to-market, 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, non-cash charges associated with
the 2020 reduction in value of reimbursement receivables due from Garrett, net of proceeds from the settlement of related hedging transactions,
and any potential future one-time items that we cannot reliably predict or estimate such as pension mark-to-market or changes in fair value for
Garrett equity securities.

4Adjusted free cash flow conversion is free cash flow (cash flow from operations less capital expenditures plus cash receipts from Garrett) divided
by adjusted net income attributable to Honeywell. Adjusted net income attributable to Honeywell excludes 3Q20 non-cash charges associated with
the reduction in value of reimbursement receivables due from Garrett, changes in fair value for Garrett equity securities, an expense related to
UOP matters, and gain on the sale of the retail footwear business.

5As discussed in the notes to the attached reconciliations, we do not provide guidance for margin or EPS on a GAAP basis.

Honeywell (www.honeywell.com) is a Fortune 100 technology company that delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Our technologies help everything from aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our 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.

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, technological, and COVID-19 public health factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, and other developments, including the potential impact of the COVID-19 pandemic, and business decisions may differ from those envisaged by such forward-looking statements. Any forward-looking plans described herein are not final and may be modified or abandoned at any time. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

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, a measure by which we assess operating performance, which we define as operating income adjusted for certain items as presented in the Appendix; segment margin, on an overall Honeywell basis, which we define as segment profit divided by sales; organic sales growth, which we define as sales growth less the impacts from foreign currency translation and acquisitions and divestitures for the first 12 months following the transaction date; free cash flow, which we define as cash flow from operations less capital expenditures plus cash receipts from Garrett, if and as noted in the release; adjusted free cash flow conversion, which we define as free cash flow divided by adjusted net income attributable to Honeywell; adjusted net income attributable to Honeywell, which we define as net income attributable to Honeywell which we adjust to exclude changes in fair value for Garrett equity securities, an expense related to UOP matters, gain on the sale of the retail footwear business, and the 3Q20 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market, changes in fair value for Garrett equity securities, an expense related to UOP matters, gain on the sale of the retail footwear business, the non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transactions, the favorable resolution of a foreign tax matter related to the spin-off transactions, and a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, if and as noted in the release. 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 metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain metrics 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.

Contacts:




Media

Investor Relations

Nina Krauss

Reena Vaidya

(704) 627-6035

(704) 627-6200

nina.krauss@honeywell.com

reena.vaidya@honeywell.com

Honeywell International Inc.

Consolidated Statement of Operations (Unaudited)

(Dollars in millions, except per share amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2021


2020


2021


2020

Product sales

$

6,233



$

5,885



$

19,281



$

17,933


Service sales

2,240



1,912



6,454



5,804


Net sales

8,473



7,797



25,735



23,737


Costs, expenses and other








Cost of products sold(1)

4,463



4,315



13,748



12,852


Cost of services sold(1)

1,283



1,068



3,710



3,341



5,746



5,383



17,458



16,193


Selling, general and administrative expenses(1)

1,152



1,103



3,595



3,524


Other (income) expense

(215)



62



(1,023)



(546)


Interest and other financial charges

90



101



263



264



6,773



6,649



20,293



19,435


Income before taxes

1,700



1,148



5,442



4,302


Tax expense (benefit)

427



367



1,274



816


Net income

1,273



781



4,168



3,486


Less: Net income attributable to the noncontrolling interest

16



23



54



66


Net income attributable to Honeywell

$

1,257



$

758



$

4,114



$

3,420


Earnings per share of common stock - basic

$

1.82



$

1.08



$

5.93



$

4.85


Earnings per share of common stock - assuming dilution

$

1.80



$

1.07



$

5.86



$

4.81


Weighted average number of shares outstanding - basic

690.6



702.6



693.6



704.8


Weighted average number of shares outstanding -
assuming dilution

698.9



709.6



702.0



711.6





















(1)

Cost of products and services sold and Selling, general and administrative expenses include amounts for
repositioning and other charges, the service cost component of pension and other postretirement (income)
expense, and stock compensation expense.

Honeywell International Inc.

Segment Data (Unaudited)

(Dollars in millions)



Three Months Ended
September 30,


Nine Months Ended
September 30,


Net Sales

2021


2020


2021


2020


Aerospace

$

2,732



$

2,662



$

8,130




$

8,566



Honeywell Building Technologies

1,370



1,305



4,135



3,763



Performance Materials and Technologies

2,510



2,252



7,408



6,867



Safety and Productivity Solutions

1,861



1,578



6,062



4,541



Total

$

8,473



$

7,797



$

25,735




$

23,737























Reconciliation of Segment Profit to Income Before Taxes



Three Months Ended
September 30,


Nine Months Ended
September 30,


Segment Profit

2021


2020


2021


2020


Aerospace

$

740



$

617



$

2,212




$

2,082



Honeywell Building Technologies

322



282



942



794



Performance Materials and Technologies

558



442



1,522



1,373



Safety and Productivity Solutions

245



219



840



610



Corporate

(72)



(7)



(155)



(73)



Total segment profit

1,793



1,553



5,361



4,786



Interest and other financial charges

(90)



(101)



(263)



(264)



Stock compensation expense (1)

(56)



(40)



(172)



(118)



Pension ongoing income (2)

261



197



809



593



Other postretirement income (2)

18



13



53



40



Repositioning and other charges (3,4)

(96)



(144)



(338)



(486)



Other (5)

(130)



(330)



(8)



(249)



Income before taxes

$

1,700



$

1,148



$

5,442




$

4,302

























(1)

Amounts included in Selling, general and administrative expenses.

(2)

Amounts included in Cost of products and services sold and Selling, general and administrative expenses
(service costs) and Other income (expense) (non-service cost components).

(3)

Amounts included in Cost of products and services sold, Selling, general and administrative expenses, and
Other (income) expense.

(4)

Includes repositioning, asbestos, and environmental expenses.

(5)

Amounts include the other components of Other (income) expense not included within other categories in this
reconciliation. Equity income of affiliated companies is included in segment profit.

Honeywell International Inc.

Consolidated Balance Sheet (Unaudited)

(Dollars in millions)



September 30, 2021


December 31, 2020

ASSETS




Current assets:




Cash and cash equivalents

$

11,087



$

14,275


Short-term investments

1,049



945


Accounts receivable - net

7,239



6,827


Inventories

4,967



4,489


Other current assets

1,691



1,639


Total current assets

26,033



28,175


Investments and long-term receivables

1,243



685


Property, plant and equipment - net

5,514



5,570


Goodwill

16,963



16,058


Other intangible assets - net

3,637



3,560


Insurance recoveries for asbestos related liabilities

330



366


Deferred income taxes

760



760


Other assets

9,711



9,412


Total assets

$

64,191



$

64,586


LIABILITIES




Current liabilities:




Accounts payable

$

6,116



$

5,750


Commercial paper and other short-term borrowings

3,559



3,597


Current maturities of long-term debt

3,344



2,445


Accrued liabilities

7,188



7,405


Total current liabilities

20,207



19,197


Long-term debt

14,346



16,342


Deferred income taxes

2,372



2,113


Postretirement benefit obligations other than pensions

225



242


Asbestos-related liabilities

1,765



1,920


Other liabilities

7,155



6,975


Redeemable noncontrolling interest

7



7


Shareowners' equity

18,114



17,790


Total liabilities, redeemable noncontrolling interest and shareowners'
equity

$

64,191



$

64,586


Honeywell International Inc.

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in millions)



Three Months Ended
September 30,


Nine Months Ended
September 30,



2021


2020


2021


2020


Cash flows from operating activities:










Net income

$

1,273



$

781



$

4,168



$

3,486



Less: Net income attributable to the noncontrolling interest

16



23



54



66



Net income attributable to Honeywell

1,257



758



4,114



3,420



Adjustments to reconcile net income attributable to Honeywell to net cash provided by
operating activities:








Depreciation

171



166



506



480



Amortization

137



89



427



268



Gain on sale of non-strategic businesses and assets

(5)...

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