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Honeywell Delivers Outstanding First-Quarter Results Driven By Strong Sales Performance Raises 2018 Guidance

• Reported Earnings per Share of $1.89, Up 11%; Excluding Separation Costs, EPS of $1.95, Up 14%

• Reported Sales Up 9%; Organic Sales Up 5% Driven by Aerospace, Intelligrated, and Process Solutions

• Operating Cash Flow of $1.1 Billion and Free Cash Flow 1 (Excl. Separation Costs) of $1.0 Billion, Up 30%

• Deployed Nearly $950 Million in Capital to Share Repurchases in the First Quarter• Raising Full-Year Sales, EPS 2 and Free Cash Flow 3 Guidance to Reflect Stronger Expectations 

 

MORRIS PLAINS, N.J., April 20, 2018 -- Honeywell(NYSE: HON) today announced financialresults for the first quarter of 2018 and raised its full-year sales, earningsper share2 andfree cash flow3 guidance.

“Honeywell had a very strong start to 2018,with first-quarter results that were driven by exceptional sales and operationalperformance. Organic sales grew 5 percent, driven by strong demand for originalequipment for commercial aviation; U.S. defense; continued sales and ordersgrowth in the warehouse automation business, Intelligrated; and short-cycledemand in process automation. Segment margin expanded by 40 basis points as aresult of our Commercial Excellence efforts and from the Honeywell OperatingSystem, including material productivity and volume leverage. Earnings per share(excluding separation costs) were $1.95, up 14 percent year-over-year,exceeding the high end of our guidance range,” said Darius Adamczyk, Presidentand Chief Executive Officer of Honeywell. “Our balance sheet remains strong,and we continue to aggressively deploy capital. In the first quarter, werepurchased nearly $950 million in Honeywell shares.

“As a result of our strong first-quarterperformance, the healthy demand environment, and our continued confidence inour ability to execute, we are raising our full-year organic sales guidance toa new range of 3 percent to 5 percent and our earnings per share guidance2 to anew range of $7.85 to $8.05. We are also raising our free cash flow guidance3 by $0.1 billion after a strong firstquarter,” Adamczyk continued.

“We are making great progress in transformingHoneywell into a software-industrial leader. In the first quarter, we hadsignificant new Connected product launches and commercial wins across ourportfolio. The preparations to spin-off our Transportation Systems and Homesbusinesses are well underway, and we expect those to be complete by the end ofthe year. This is an exciting time to be a customer, shareowner, or employee ofHoneywell, and I am confident in our ability to continue to outperform,”Adamczyk concluded.

A summary of the Company’s full-year guidancechanges can be found in Table 1.

Honeywell will discuss the results during aninvestor conference call today starting at 7:30 a.m. Eastern Daylight Time.

First Quarter Performance

Honeywellsales for the first quarter were up 9 percent on a reported basis and up 5percent on an organic basis. The difference between reported and organic sales primarilyrelates to the impact of foreign currency translation. The first-quarterfinancial results can be found in Tables 2 and 3.

Aerospace sales for the first quarterwere up 8 percent on an organic basis driven by growth in commercial OE andU.S. defense, and strength in light vehicle gas and commercial vehicleturbochargers in Transportation Systems. Segment margin expanded 10 bps to 22.5percent, with benefits from commercial excellence, productivity, and lowercustomer incentives partially offset by higher volumes of lower-margin OEshipments, inflation, and foreign exchange.

Homeand Building Technologies sales forthe first quarter were up 2 percent on an organic basis driven by demandfor residential thermal solutions and thermostats, continued strength in ADI ona global basis, and strong backlog conversion in the energy vertical withinBuilding Solutions. Segment margin expanded 50 bps to 17.1 percent, primarily drivenby commercial excellence, the benefits from previously funded and executedrestructuring, and material productivity.

PerformanceMaterials and Technologies salesfor the first quarter were up 3 percent on anorganic basis driven by strong short-cycle demand in thermal solutions, smart energy,maintenance services, and field instrumentation in Process Solutions, and engineeringand catalyst growth in UOP. Segment margin was unchanged at 20.5 percent,primarily driven by productivity net of inflation and commercial excellence,offset by unfavorable mix, primarily in UOP; catalyst shipment timing; andforeign exchange.

Safetyand Productivity Solutions sales for the first quarter were up 6percent on an organic basis driven by strong organic sales and orders growth atIntelligrated and higher volumes in Sensing. Segment margin expanded 130 bps to16.0 percent, primarily driven by higher sales volumes and productivity net ofinflation.

To participate on the conference call, pleasedial (888) 394-8218 (domestic) or (323) 701-0225 (international) approximatelyten minutes before the 7:30 a.m. EDT start. Please mention to the operatorthat you are dialing in for Honeywell’s first quarter 2018 earnings call or providethe conference code HON1Q18. The live webcast of the investor call as well asrelated 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 11:30 a.m. EDT, April 20, until 11:30a.m. EDT, April 27, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international).The access code is 7398687.

TABLE 1: FULL-YEAR 2018GUIDANCE4

 

 

Previous Guidance

Current Guidance

Sales

$41.8B - $42.5B

$42.7B - $43.5B

Organic Growth

2% - 4%

3% - 5%

Segment Margin

19.3% - 19.6%

19.3% - 19.6%

Expansion

Up 30 - 60 bps

Up 30 - 60 bps

Earnings Per Share 

$7.75 - $8.00

$7.85 - $8.05

Earnings Growth

9% - 13%

10% - 13%

Free Cash Flow5

$5.2B - $5.9B

$5.3B - $5.9B

TABLE 2:SUMMARY OF FINANCIAL RESULTS – TOTAL HONEYWELL

 

1Q 2017

1Q 2018

Change

Sales

9,492

10,392

9%

Organic

 

 

5%

Segment Margin

18.8%

19.2%

40 bps

Operating Income Margin

16.2%

16.6%

40 bps

Earnings Per Share

 

 

 

Reported

$1.71

$1.89

11%

Excluding Separation Costs of $49M (Net of Tax)

$1.71

$1.95

14%

Cash Flow from Operations

940

1,136

21%

Free Cash Flow5(Excluding Cash Separation Costs of $10M)

772

1,006

30%

 

 

 

 

TABLE 3: SUMMARY OF FINANCIALRESULTS – SEGMENTS

AEROSPACE

1Q 2017

1Q 2018

Change

Sales

3,546

3,977

12%

Organic

 

 

8%

Segment Profit 

796

893

12%

Segment Margin

22.4%

22.5%

10 bps

 

 

 

 

HOME AND BUILDING TECHNOLOGIES

 

 

 

Sales

2,269

2,433

7%

Organic

 

 

2%

Segment Profit 

377

416

10%

Segment Margin

16.6%

17.1%

50 bps

 

 

 

 

PERFORMANCE MATERIALS AND TECHNOLOGIES

     

Sales

2,353

2,534

8%

Organic

 

 

3%

Segment Profit 

483

519

7%

Segment Margin

20.5%

20.5%

0 bps

 

 

 

 

SAFETY AND PRODUCTIVITY SOLUTIONS

     

Sales

1,324

1,448

9%

Organic

 

 

6%

Segment Profit 

194

231

19%

Segment Margin

14.7%

16.0%

130 bps

1Cash flow from operations less capital expenditures 2EPS guidance excludes pension mark-to-market, separation costs, and adjustments to the provisional charge related to tax legislation3Free cash flow guidance excludes impacts from separation costs and tax legislation4EPS, EPS V% exclude pension mark-to-market, separation costs related to the spin-offs of the Homes and Transportation Systems businesses, the provisional charge related to tax legislation and adjustments to such charge; free cash flow, free cash flow V% exclude impacts from separation costs and tax legislation.5Cash flow from operations less capital expenditures 

Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company that delivers industry specific solutions that include aerospace and automotive products and services; control technologies for buildings, homes, and industry; and performance materials globally. Our technologies help everything from aircraft, cars, homes and 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.

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, and technological factors affecting our operations, markets, products, services and prices, as well as the ability to effect the separations. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements, including with respect to any changes in or abandonment of the proposed separations. 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, acquisitions and divestitures for the first 12 months following transaction date, and impacts from adoption of the new accounting guidance on revenue from contracts with customers that arise solely due to non-comparable accounting treatment of contracts existing in the prior period; free cash flow, which we define as cash flow from operations less capital expenditures and which we adjust to exclude impact of separation cost and adjustments to the provisional charge related to Tax Legislation, if and as noted in the release; and earnings per share, which we adjust to exclude pension mark-to-market expenses, as well as for other components, such as separation costs, the provisional charge related to Tax Legislation, and adjustments to such provisional charge, if and as noted in the release. Other than references to reported earnings per share, all references to earnings per share in this release are so adjusted. The respective tax rates applied when adjusting earnings per share for these items are identified in the release or in the reconciliations presented in the Appendix. 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. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

Q1 2018 Press Release Financials.pdf

Mark Macaluso
Investor Relations