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Honeywell Delivers Earnings Per Share Of $1.75 And Sales Of $10.1 Billion

  • Reported Sales Up 3%; Organic Sales Up 5% Driven by Strength in the Aerospace Aftermarket, Performance Materials and Technologies, and Intelligrated
  • Operating Income Margin Expansion of 220 bps, Segment Margin Expansion of 120 bps
  • Funded Approximately $120 Million in Restructuring and Other Projects
  • Year-To-Date Operating Cash Flow Up 10% and Free Cash Flow1 Up 18%; Third-Quarter Free Cash Flow Conversion of ~90%

MORRIS PLAINS, N.J., October 20, 2017 --Honeywell (NYSE: HON) todayannounced financial results for the third quarter of 2017.

“Honeywell delivered another quarter of high-qualityfinancial results, with organic growth of five percent, segment marginexpansion of 120 basis points, and earnings per share of $1.75, up 16 percent2 year-over-year,” said Darius Adamczyk,President and Chief Executive Officer of Honeywell. “This was a standoutquarter for us when it comes to organic growth. Our Aerospace aftermarket businessgrew more than seven percent, our warehouse automation business continued togrow at a double-digit pace, and there was broad strength across PerformanceMaterials and Technologies, led by 25 percent organic sales growth in UOP. We alsosaw good momentum in orders and backlog, with double-digit backlog growth inUOP, Intelligrated, Defense, and Honeywell Building Solutions, positioning usfor future growth.

“The investments we have made in people,capital expenditures, research and development, and M&A are delivering outstandinggrowth for our shareowners,” Adamczyk said. “Also, we continue to improve thecost structure of our businesses through ongoing restructuring actions, and in thethird quarter, we dedicated approximately $120 million to new projects.

“Last week, we announced our intention to spinour Homes and Global Distribution business and our Transportation Systemsbusiness into two independent public companies by the end of next year. Thespun businesses will benefit from being able to make independent investmentdecisions that will better position them for growth and value creation fordecades to come. After completion of the spins, Honeywell will have a morefocused and growth-oriented portfolio that benefits from cross-Honeywell synergies.These actions will position the company to deliver sustained financialoutperformance,” Adamczyk continued. “Honeywell is well positioned in both the shortand long term, and we anticipate a strong finish to 2017.”

Honeywell also reaffirmed its full-yearearnings-per-share guidance of $7.05 to $7.10, up nine to 10 percentyear-over-year, excluding divestitures, any pension mark-to-market adjustments,and 2016 debt refinancing charges. Earlier this month, the company raised thelow end of the range by five cents.

Honeywell will discuss the results during itsinvestor conference call today starting at 9:30 a.m. Eastern Daylight Time.

Third Quarter Performance

Honeywellsales for the third quarter were up five percent on an organic basis and up threepercent on a reported basis. The difference between reported and organic sales relatesto the 2016 spin-off of the former Resins and Chemicals business in PerformanceMaterials and Technologies and the 2016 divestiture of the Aerospace governmentservices business, partially offset by the acquisition of Intelligrated inSafety and Productivity Solutions and the impact of foreign currencytranslation. The third-quarter financial results can be found in Tables 1 and2, below.

Aerospace sales for the third quarterwere up four percent on an organic basis driven by growth in CommercialAftermarket and lower year-over-year customer incentives, strength in U.S.defense, and continued recovery in commercial vehicles in TransportationSystems. Segment margin expanded 290 bps to 21.3 percent, primarily driven bythe lower customer incentives, productivity net of inflation, and the favorableimpact of the 2016 divestiture of the government services.

Homeand Building Technologies sales forthe third quarter were up two percent on an organic basis driven by SmartEnergy program roll-outs, air and water product sales in China, and continuedgrowth in the Distribution business. Segment margin expanded 10 bps to 16.4percent, driven by restructuring benefits, productivity net of inflation, andcommercial excellence, partially offset by the unfavorable impact of highersales from lower margin products and investments for growth, including researchand development.

PerformanceMaterials and Technologies salesfor the third quarter were up 10 percent on an organic basis driven by stronggrowth in every business, including 25 percent growth in UOP driven by robustcatalyst, licensing, equipment, and gas processing volumes; continued demandfor Solstice® low-global-warming products in Advanced Materials; andshort-cycle demand within Honeywell Process Solutions. Segment margin expanded170 bps to 23.3 percent, primarily driven by commercial excellence,productivity net of inflation, and the favorable impact from the spin-off ofthe former Resins and Chemicals business.

Safetyand Productivity Solutions sales for the third quarter were up 3percent on an organic basis driven by increased demand for industrial safetyproducts, voice-enabled workflow solutions and Movilizer software, anddouble-digit organic sales growth at Intelligrated, a leading provider ofwarehouse automation solutions, which Honeywell acquired in 2016. Segmentmargin expanded 40 bps to 15.1 percent, primarily driven by productivity net ofinflation, partially offset by acquisition amortization and integration costs.Excluding the impact of acquisitions, segment margin expanded 190 bps.

To participate on the conference call, pleasedial (866) 548-4713 (domestic) or (719) 457-1036 (international) approximatelyten minutes before the 9:30 a.m. EDT start. Please mention to the operatorthat you are dialing in for Honeywell's third quarter 2017 earnings call orprovide the conference code HON3Q17. The live webcast of the investor call aswell as related presentation materials will be available through the “InvestorRelations” section of the company's Website (www.honeywell.com/investor). Investorscan hear a replay of the conference call from 1:30 p.m. EDT, October 20, until1:30 p.m. EDT, October 27, by dialing (888) 203-1112 (domestic) or (719)457-0820 (international). The access code is 1952662.


TABLE1: SUMMARY OF FINANCIAL RESULTS &endash; TOTAL HONEYWELL

3Q 2016

3Q 2017

Change

Sales

9,804

10,121

3%

Organic

5%

Segment Margin

17.5%

18.7%

120 bps

Operating Income Margin

15.6%

17.8%

220 bps

Earnings Per Share

Reported

$1.60

$1.75

9%

Ex-Divestitures & Additional 3Q17 Restructuring, Normalized for Tax

$1.51

$1.75

16%

Cash Flow From Operations

1,554

1,407

(9%)

Free Cash Flow3

1,280

1,195

(7%)

TABLE 2: SUMMARY OF FINANCIALRESULTS &endash; SEGMENTS

AEROSPACE

3Q 2016

3Q 2017

Change

Sales

3,601

3,657

2%

Organic

4%

Segment Profit

663

780

18%

Segment Margin

18.4%

21.3%

290 bps

HOME AND BUILDING TECHNOLOGIES

Sales

2,701

2,790

3%

Organic

2%

Segment Profit

441

458

4%

Segment Margin

16.3%

16.4%

10 bps


PERFORMANCE MATERIALS AND TECHNOLOGIES

Sales

2,329

2,260

(3%)

Organic

10%

Segment Profit

503

526

5%

Segment Margin

21.6%

23.3%

170 bps

SAFETY AND PRODUCTIVITY SOLUTIONS

Sales

1,173

1,414

21%

Organic

3%

Segment Profit

172

213

24%

Segment Margin

14.7%

15.1%

40 bps

Ex-M&A

190 bps

1 Cash Flow From Operations Less Capital Expenditures
2 Earnings per share variance excludes 2016 divestitures and additional 3Q17 restructuring funding enabled by a lower than planned effective tax rate, normalized for tax at 26 percent
3 Cash Flow From Operations Less Capital Expenditures

Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company thatdelivers industry specific solutions that include aerospace and automotiveproducts and services; control technologies for buildings, homes, and industry;and performance materials globally. Our technologies help everything fromaircraft, cars, homes and buildings, manufacturing plants, supply chains, andworkers 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.

Thisrelease contains certain statements that may be deemed “forward-lookingstatements” within the meaning of Section 21E of the Securities Exchange Act of1934. All statements, other than statements of historical fact, that addressactivities, events or developments that we or our management intends, expects,projects, believes or anticipates will or may occur in the future areforward-looking statements. Such statements are based upon certain assumptionsand assessments made by our management in light of their experience and theirperception of historical trends, current economic and industry conditions, expectedfuture developments and other factors they believe to be appropriate. Theforward-looking statements included in this release are also subject to anumber of material risks and uncertainties, including but not limited toeconomic, competitive, governmental, and technological factors affecting ouroperations, markets, products, services and prices, as well as the ability toeffect the separations. Such forward-looking statements are not guarantees offuture performance, and actual results, developments and business decisions maydiffer from those envisaged by such forward-looking statements, including withrespect to any changes in or abandonment of the proposed separations. Weidentify the principal risks and uncertainties that affect our performance inour Form 10-K and other filings with the Securities and Exchange Commission.

Q3 2017 Press Release Financials.pdf

Mark Macaluso
Investor Relations