Honeywell Reports Third-Quarter Eps of $1.07, Adjusted Eps of $1.56; Generates Sequential Sales And Segment Profit Growth In All Segments
- Reported Double-Digit Growth in Defense and Space, Warehouse Automation, Personal Protective Equipment, and Recurring Software Sales
- Generated 320 Basis Points of Sequential Operating Margin Improvement
- Delivered Over $450 Million of Cost Savings; Funded $124 Million of Repositioning to Drive Further Savings
- Reinstates Financial Guidance; Expects Fourth Quarter EPS of $1.97 to $2.02 and Full-Year EPS of $6.78 to $6.83, Full-Year Adjusted EPS1 of $7.00 to $7.05
CHARLOTTE, N.C., October 30, 2020 -- Honeywell (NYSE: HON) today announced results for the third quarter of 2020, which improved sequentially versus the second quarter of 2020.
The company reported a third-quarter year-over-year sales decline of 14% reported and organic, operating margin contraction of 250 basis points, and segment margin contraction of 130 basis points, with adjusted earnings per share2 of $1.56.
“I am pleased with the quarter-over-quarter improvements in sales growth, margin expansion and adjusted earnings per share that we delivered in the third quarter,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “We continued to focus on driving sales growth in areas that have not been as impacted by the current downturn, including defense and space, warehouse automation and personal protective equipment, all of which grew by double-digits organically year-over-year. Recurring software sales also grew double-digits organically, continuing our transformation to a premier software-industrial company.
“We also focused on aggressively managing cost, and delivered over $450 million in savings in the quarter, bringing our year-to-date total to $1.1 billion. We now expect to generate $1.5 billion to $1.6 billion of cost savings during 2020, up from our previous estimate of $1.4 billion to $1.6 billion,” Adamczyk continued. “Honeywell’s balance sheet remains strong, with $15 billion of cash and short-term investments on hand, and we further enhanced our financial flexibility this quarter by issuing $3 billion of bonds at attractive rates and repaying in full the $3 billion term loan borrowed earlier this year. Capital deployment remains a focus for us. In the third quarter, we resumed opportunistic share repurchases and announced the 11th consecutive increase to our dividend. We also recently announced two acquisitions that will provide emerging technologies in our Aerospace business. I am confident we are well-positioned for the economic recovery.”
Adamczyk concluded, “Last month we celebrated two significant milestones: Honeywell’s 100th anniversary on the New York Stock Exchange and our return to the Dow Jones Industrial Average. Honeywell is a company that has weathered the toughest of times and emerged from them stronger than before. This crisis is no exception. We have moved very quickly to introduce new offerings to help people get back to the workplace, back to play, back to travel, and back to life, and I am pleased with the strong demand we are seeing for these solutions. We remain focused on cost management and execution, while also investing in new markets and new technologies that will shape the next 100 years for our customers, shareowners and employees.”
Honeywell expects fourth quarter sales of $8.2 billion to $8.5 billion, representing a year-over-year organic sales decline of 11% to 14%; segment margin of 21.1% to 21.3%, down 10 to 30 basis points; and earnings per share of $1.97 to $2.02, down 2% to 4% adjusted. Full-year sales are expected to be in the range of $31.9 billion to $32.2 billion, representing a year-over-year organic sales decline of 12% to 13%; segment margin of 20.4% to 20.5%, down 60 to 70 basis points; and adjusted earnings per share1 of $7.00 to $7.05, down 14%. A summary of the company’s 2020 guidance can be found in Table 1.
Honeywell sales for the third quarter were down 14% on a reported and organic basis. The third-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the third quarter were down 25% on an organic basis driven by lower commercial aftermarket demand due to the ongoing impact of reduced flight hours and lower volumes in commercial original equipment, partially offset by double-digit growth in Defense and Space. Segment margin contracted 240 basis points to 23.2% driven by lower volumes and sales mix.
Honeywell Building Technologies sales for the third quarter were down 8% on an organic basis driven by lower demand for building products and delays in Building Solutions projects, partially offset by growth in the services verticals. Segment margin expanded 60 basis points to 21.6%. Margin performance was driven by commercial excellence and productivity actions.
Performance Materials and Technologies sales for the third quarter were down 16% on an organic basis driven by delays in Process Solutions services and automation projects as well as volume declines in smart energy; lower gas processing projects, catalyst shipments, licensing, and engineering due to softness in the oil and gas sector in UOP; and lower fluorine products volumes in Advanced Materials, partially offset by packaging and composites growth. Segment margin contracted 220 basis points to 19.6% driven by the impact of lower sales volumes, partially offset by productivity actions.
Safety and Productivity Solutions sales for the third quarter were up 8% on an organic basis driven by double-digit Intelligrated and personal protective equipment growth as well as a return to growth in productivity solutions and services, partially offset by lower gas sensing volumes. Orders were up double-digits year-over-year for the fourth straight quarter, driven by approximately 150% personal protective equipment orders growth, and backlog remained at a record high. Segment margin expanded 50 basis points to 13.9% driven by productivity actions and commercial excellence.
Conference Call Details
Honeywell will discuss its third-quarter results and fourth-quarter outlook during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (866) 548-4713 (domestic) or (323) 794-2093 (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 third-quarter 2020 earnings call or provide the conference code HON3Q20. 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, October 30, until 12:30 p.m. EST, November 6, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 1772801.