Media Contact


Nina Krauss

+1(973) 455-4253 - Mobile

Email


Mark Macaluso

Investor Relations

+1(973) 455-2222

Email

Honeywell Delivers Strong First Quarter; Raises 2019 Sales and Earnings Per Share Guidance


 
  • Earnings per Share of $1.92, up 2%, up 13% Ex-Spins1; Exceeding High End of Guidance by 7 Cents
  • Reported Sales Down 15% Due to Impact of Spin-Offs; Organic Sales up 8% Driven by Strength in Long-Cycle Businesses
  • Operating Income Margin up 190 Basis Points to 18.5%, Segment Margin up 120 Basis Points to 20.4%
  • Operating Cash Flow of $1.1 Billion; Adjusted Free Cash Flow2 of $1.2 Billion, Conversion 82% vs. 68% in First Quarter 2018

 

MORRIS PLAINS, N.J., April 18, 2019 -- Honeywell (NYSE: HON) today announced financial results for the first quarter of 2019 and raised its full-year sales and earnings per share guidance.

 

“Honeywell delivered a very strong start to 2019 with first-quarter results that exceeded the high end of our sales and earnings guidance. Organic sales grew 8% led by our long-cycle businesses in commercial aerospace, defense, and warehouse and process automation, and strong demand for commercial fire and security products. Our robust sales growth, supported by winning positions in attractive end markets and the continuous improvements we are making across our supply chain, drove earnings per share of $1.92, seven cents above the high end of our first-quarter guidance and up 13%1 excluding the impact of the spin-offs.” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Segment margin was above 20% for the second quarter in a row with 120 basis points of segment margin expansion year-over-year driven by the favorable impact of the spin-offs, increased sales volumes, and operational improvements. We also continued to make progress on cash, generating $1.2 billion of adjusted free cash flow2, with conversion of 82%, up 14 percentage points year-over-year, while repurchasing $750 million in Honeywell shares in the quarter. We remain on a path to 95% to 100% conversion for the full year.”

 

Adamczyk continued, “As a result of our first-quarter performance and our confidence in our ability to continue to deliver for our shareowners, we are raising our full-year earnings per share guidance to a new range of $7.90 to $8.15, and organic sales guidance to a new range of 3% to 6%.” A summary of the company’s full-year guidance changes can be found in Table 1.

 

“We are very pleased with the start to 2019. Organic sales growth was strong in all of our segments this quarter. Our long-cycle backlog increased more than 10%, and our investments in new product development and commercial excellence are delivering results, while positioning the company for short- and long-term success,” Adamczyk concluded.

 

First-Quarter Performance

        Honeywell sales for the first quarter were down 15% on a reported basis and up 8% on an organic basis. The difference between reported and organic sales primarily relates to the spin-offs of the Transportation Systems business (formerly in Aerospace) and the Homes and ADI Global Distribution business (formerly in Honeywell Building Technologies) as well as the unfavorable impact of foreign currency translation. First-quarter reported earnings per share was $1.92. The first-quarter financial results can be found in Tables 2 and 3.

 

        Aerospace sales for the first quarter were up 10% on an organic basis driven by robust demand from business aviation original equipment manufacturers, continued strength in the U.S. and international defense business, and growth in the commercial aviation aftermarket. Segment margin expanded 260 basis points to 25.1%, primarily driven by commercial excellence and the favorable impact from the spin-off of the Transportation Systems business.

 

        Honeywell Building Technologies sales for the first quarter were up 9% on an organic basis driven by strong demand for commercial fire and security offerings, and global building projects growth. Segment margin expanded 240 basis points to 19.5%, primarily driven by the favorable impact from the spin-off of the Homes and ADI Global Distribution business, partially offset by stranded cost impacts related to the spin, which the company intends to eliminate by the end of 2019 as planned, and unfavorable mix.

 

        Performance Materials and Technologies sales for the first quarter were up 5% on an organic basis driven by broad-based growth in automation projects and maintenance and migration services in Process Solutions, as well as continued demand for fluorine products. Segment margin expanded 140 basis points to 21.9%, primarily driven by higher sales volumes and commercial excellence.

 

Safety and Productivity Solutions sales for the first quarter were up 10% on an organic basis driven by continued double-digit sales growth in the Intelligrated warehouse automation business, robust demand in sensing and IoT, and strong demand across China. Segment margin contracted 260 basis points to 13.4%, primarily driven by lower sales volumes in productivity products, impact of inflation, and unfavorable mix due to higher sales in Intelligrated, partially offset by commercial excellence.

 

Conference Call Details

Honeywell will discuss its first 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 (800) 239-9838 (domestic) or (323) 794-2551 (international) approximately ten minutes before the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell’s first quarter 2019 earnings call or provide the conference code HON1Q19. The 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). Investors can hear a replay of the conference call from 12:30 p.m. EDT, April 18, until 12:30 p.m. EDT, April 25, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 7279499.

 

TABLE 1: FULL-YEAR 2019 GUIDANCE

 

Previous Guidance

Current Guidance

Sales

$36.0B - $36.9B

$36.5B - $37.2B

Organic Growth

2% - 5%

3% - 6%

Segment Margin

20.7% - 21.0%

20.7% - 21.0%

Expansion

Up 110 - 140 bps

Up 110 - 140 bps

Expansion Ex-Spins3

Up 30 - 60 bps

Up 30 - 60 bps

Earnings Per Share

$7.80 - $8.10

$7.90 - $8.15

Earnings Growth Ex-Spins4

6% - 10%

7% - 10%

Operating Cash Flow

$5.9B - $6.5B

$6.0B - $6.5B

Adjusted Free Cash Flow5

$5.4B - $6.0B

$5.5B - $6.0B

Conversion

95% - 100%

95% - 100%

 

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

1Q 2018

1Q 2019

Change

Sales

10,392

8,884

(15%)

Organic Growth

 

 

8%

Segment Margin

19.2%

20.4%

120 bps

Operating Income Margin

16.6%

18.5%

190 bps

Reported Earnings Per Share

$1.89

$1.92

2%

Adjusted Earnings Per Share Ex-Spins6

$1.70

$1.92

13%

Cash Flow from Operations

1,136

1,134

Flat

Adjusted Free Cash Flow7

1,006

1,158

15%

 

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

AEROSPACE

1Q 2018

1Q 2019

Change

Sales

3,977

3,341

(16%)

Organic Growth

 

 

10%

Segment Profit

893

838

(6%)

Segment Margin

22.5%

25.1%

260 bps

 

 

 

 

 

HONEYWELL BUILDING TECHNOLOGIES

 

 

 

Sales

2,433

1,389

(43%)

Organic Growth

 

 

9%

Segment Profit

416

271

(35%)

Segment Margin

17.1%

19.5%

240 bps

 

 

 


 

 

 

PERFORMANCE MATERIALS AND TECHNOLOGIES

 

 

 

Sales

2,534

2,572

2%

Organic Growth

 

 

5%

Segment Profit

519

564

9%

Segment Margin

20.5%

21.9%

140 bps

 

 

 


 

 

 

SAFETY AND PRODUCTIVITY SOLUTIONS

 

 

 

Sales

1,448

1,582

9%

Organic Growth

 

 

10%

Segment Profit

231

212

(8%)

Segment Margin

16.0%

13.4%

(260) bps

 

 

 

 

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.

 

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. 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. 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 and which we adjust to exclude sales and segment profit contribution from Resideo and Garrett in 2018, if and as noted in the release; 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 transaction date; adjusted free cash flow, which we define as cash flow from operations less capital expenditures and which we adjust to exclude the impact of separation costs related to the spin-offs of Resideo and Garrett, if and as noted in the release; adjusted free cash flow conversion, which we define as adjusted free cash flow divided by net income attributable to Honeywell, excluding pension mark-to-market expenses, separation costs related to the spin-offs, and adjustments to the 4Q17 U.S. tax legislation charge, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market expenses, as well as for other components, such as separation costs related to the spin-offs, adjustments to the 4Q17 U.S. tax legislation charge, and after-tax segment profit contribution from Resideo and Garrett in the periods noted in the release, net of spin indemnification impacts assuming both indemnification agreements were effective in such periods, if and as noted in the release. 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.

 



[1] Adjusted EPS V% ex-spins excludes 1Q18 after-tax separation costs related to the spin-offs of Resideo and Garrett and 1Q18 after-tax segment profit contribution from Resideo and Garrett, net of the spin indemnification impacts assuming both indemnification agreements were effective in 1Q18.

[2] Adjusted free cash flow and associated conversion exclude impacts from separation costs related to the spin-offs of $165M in 1Q19 and $10M in 1Q18. Associated conversion for 1Q18 also excludes after-tax separation costs related to the spin-offs of Resideo and Garrett.

[3] Segment margin expansion ex-spins guidance excludes sales and segment profit contribution from Resideo and Garrett in 2018.

[4] EPS V% ex-spins guidance excludes 2018 pension mark-to-market, 2018 after-tax separation costs related to the spin-offs of Resideo and Garrett, and 2018 adjustments to the 4Q17 U.S. tax legislation charge. Also excludes the 2018 after-tax segment profit contribution from the spin-offs, net of spin indemnification impacts assuming both indemnification agreements were effective for all of 2018, of $0.62.

[5] Adjusted free cash flow guidance and associated conversion excludes estimated payments of ~$0.3B for separation costs incurred in 2018 related to the spin-offs of Resideo and Garrett.

[6] Adjusted EPS ex-spins and adjusted EPS V% ex-spins exclude 1Q18 after-tax separation costs related to the spin-offs of Resideo and Garrett of $49M. Also excludes the 1Q18 after-tax segment profit contribution from the spin-offs, net of spin indemnification impacts assuming both indemnification agreements were effective in 1Q18, of $0.25.

[7] Adjusted free cash flow and adjusted free cash flow V% exclude impacts from separation costs related to the spin-offs of $165M in 1Q19 and $10M in 1Q18.

 

Q1 2019 Press Release Financials