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    Honeywell Overdelivers on Sales, Announces Four Acquisitions in the Fourth Quarter; Issues 2021 Guidance

    • Reported Fourth Quarter Earnings Per Share of $1.91 and Adjusted EPS1 of $2.07, Above High End of Guidance
    • Delivered Fourth Quarter Operating Cash Flow of $2.8 Billion, Conversion of 205%, and Free Cash Flow of $2.5 Billion, Adjusted Conversion2 of 170%
    • Completed Three M&A Deals Aligned to Key Growth Vectors and Announced Agreement to Acquire Sparta Systems for $1.3 Billion
    • Expect 2021 Earnings Per Share of $7.60 - $8.00, Up 13% - 19%, 7% - 13% Adjusted3

    CHARLOTTE, N.C., January 29, 2021 -- Honeywell (NYSE: HON) today announced results for the fourth quarter and full year 2020 that exceeded investor expectations, as well as its outlook for 2021.

    The company reported a fourth-quarter year-over-year sales decline of 6%, down 7% on an organic basis, and a full-year sales decline of 11% on a reported and organic basis. For the full year, operating margin contracted 120 basis points and segment margin contracted 70 basis points, with earnings per share of $6.72 and adjusted earnings per share4 of $7.10, above the high end of our guidance.

    “We finished a challenging 2020 with another quarter of sequential improvements in sales growth, margin expansion, and adjusted earnings per share,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Our focus on delivering differentiated solutions drove double-digit organic sales growth in our defense and space, warehouse automation, personal protective equipment, and recurring connected software businesses for the second consecutive quarter. We continued to prudently reduce costs in the quarter, bringing our full-year total fixed cost savings to $1.5 billion. Our fourth quarter adjusted earnings per share was $2.07, flat year-over-year on an adjusted basis1 and above the high end of our guidance. We also continued our focus on generating cash and achieved 170% adjusted free cash flow conversion2 in the quarter. For the year, we generated $6.2 billion in operating cash flow with 130% conversion and $5.3 billion in free cash flow with 105% adjusted free cash flow conversion5.

     “Honeywell’s strong balance sheet put us in a good position to weather the challenges of 2020 while investing for future growth. We invested in high-return capital expenditures, repurchased $3.7 billion of Honeywell shares, completed three acquisitions, made six new investments within Honeywell Ventures, and announced our 11th consecutive dividend increase. Even with this level of cash deployment, we ended 2020 with $15.2 billion of cash and short-term investments on hand,” Adamczyk said.

    The company also announced its outlook for 2021. Honeywell expects sales of $33.4 billion to $34.4 billion, representing year-over-year organic growth of 1% to 4%; segment margin expansion of 30 to 70 basis points; earnings per share of $7.60 to $8.00, up 7% to 13% adjusted3; operating cash flow of $5.7 billion to $6.1 billion, and free cash flow6 of $5.1 billion to $5.5 billion. A summary of the company’s 2021 guidance can be found in Table 1.

    Adamczyk concluded, “I am very proud of the way Honeywell responded to the crisis in 2020. We quickly focused on liquidity, cost management, and execution, while rapidly innovating and ramping up production of a wide array of offerings to help the world recover, including critical personal protective equipment. We also remained focused on growth and investing in new markets and technologies. We entered 2021 with positive momentum following two quarters of sequential improvement. I am confident we are well-positioned for the economic recovery and will continue to perform for our shareowners, our customers, and our employees in the short and long term.”

    Fourth-Quarter Performance

    Honeywell sales for the fourth quarter were down 6% on a reported basis and down 7% on an organic basis. The fourth-quarter financial results can be found in Tables 2 and 3.

    Aerospace sales for the fourth quarter were down 19% 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 expanded 150 basis points to 27.6% driven by productivity actions and commercial excellence.

    Honeywell Building Technologies sales for the fourth quarter were down 4% on an organic basis driven by timing of Building Solutions projects and lower demand for security products and building management systems, partially offset by growth in commercial fire. Building Solutions orders were up double digits year-over-year, driven by large project bookings in the Americas and Europe. Segment margin expanded 110 basis points to 21.4%. Margin performance was driven by commercial excellence and productivity actions.

    Performance Materials and Technologies sales for the fourth quarter were down 12% on an organic basis driven by continued delays in Process Solutions automation projects as well as volume declines in smart energy and thermal solutions, and lower gas processing projects, catalyst shipments, licensing, and engineering due to softness in the oil and gas sector in UOP, partially offset by return to growth in Advanced Materials driven by demand for fluorine products. Segment margin contracted 380 basis points to 18.7% driven by the impact of lower sales volumes and mix, partially offset by productivity actions.

    Safety and Productivity Solutions sales for the fourth quarter were up 27% on an organic basis driven by double-digit Intelligrated and personal protective equipment growth as well as strength in productivity solutions and services. Orders were up double digits year-over-year for the fifth straight quarter, driven by strong personal protective equipment and productivity solutions and services orders growth. Backlog remained at a record high. Segment margin expanded 260 basis points to 15.3% driven by productivity actions and higher volumes.

    Conference Call Details

    Honeywell will discuss its fourth-quarter and full-year results as well as its 2021 outlook during an investor conference call starting at 8:30 a.m. Eastern Standard 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. EST start. Please mention to the operator that you are dialing in for Honeywell’s fourth quarter 2020 earnings and 2021 outlook call or provide the conference code HON2021. 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. EST January 29 until 12:30 p.m. EST February 5 by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 1005277.

     

    TABLE 1: FULL-YEAR 2021 GUIDANCE

    Sales

    $33.4B - $34.4B

    Organic Growth

    1% - 4%

    Segment Margin

    20.7% - 21.1%

    Expansion

    Up 30 - 70 bps

    Earnings Per Share

    $7.60 - $8.00

    Adjusted Earnings Growth3

    7% - 13%

    Operating Cash Flow

    $5.7B - $6.1B

    Free Cash Flow6

    $5.1B - $5.5B

     

    TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

     

    FY 2020

    FY 2019

    Change

    Sales

    32,637

    36,709

    (11)%

    Organic Growth

     

     

    (11)%

    Segment Margin

    20.4%

    21.1%

    -70 bps

    Operating Income Margin

    17.5%

    18.7%

    -120 bps

    Reported Earnings Per Share

    $6.72

    $8.41

    (20)%

    Adjusted Earnings Per Share4

    $7.10

    $8.16

    (13)%

    Cash Flow from Operations

    6,208

    6,897

    (10)%

    Conversion

    130%

    112%

    18%

    Adjusted Free Cash Flow7

    5,302

    6,271

    (15)%

    Adjusted Free Cash Flow Conversion5

    105%

    105%

    —%

     

    4Q 2020

    4Q 2019

    Change

    Sales

    8,900

    9,496

    (6)%

    Organic Growth

     

     

    (7)%

    Segment Margin

    21.1%

    21.4%

    -30 bps

    Operating Income Margin

    18.8%

    17.8%

    100 bps

    Reported Earnings Per Share

    $1.91

    $2.16

    (12)%

    Adjusted Earnings Per Share1

    $2.07

    $2.06

    —%

    Cash Flow from Operations

    2,782

    2,614

    6%

    Conversion

    205%

    167%

    38%

    Adjusted Free Cash Flow7

    2,491

    2,292

    9%

    Adjusted Free Cash Flow Conversion2

    170%

    154%

    16%

     

    TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

    AEROSPACE

    FY 2020

    FY 2019

    Change

    Sales

    11,544

    14,054

    (18)%

    Organic Growth

     

     

    (18)%

    Segment Profit

    2,904

    3,607

    (19)%

    Segment Margin

    25.2%

    25.7%

    -50 bps

     

    4Q 2020

    4Q 2019

     

    Sales

    2,978

    3,661

    (19)%

    Organic Growth

     

     

    (19)%

    Segment Profit

    822

    954

    (14)%

    Segment Margin

    27.6%

    26.1%

    150 bps

    HONEYWELL BUILDING TECHNOLOGIES

    FY 2020

    FY 2019

    Change

    Sales

    5,189

    5,717

    (9)%

    Organic Growth

     

     

    (9)%

    Segment Profit

    1,099

    1,165

    (6)%

    Segment Margin

    21.2%

    20.4%

    80 bps

     

    4Q 2020

    4Q 2019

     

    Sales

    1,426

    1,463

    (3)%

    Organic Growth

     

     

    (4)%

    Segment Profit

    305

    297

    3%

    Segment Margin

    21.4%

    20.3%

    110 bps

    PERFORMANCE MATERIALS AND TECHNOLOGIES

    FY 2020

    FY 2019

    Change

    Sales

    9,423

    10,834

    (13)%

    Organic Growth

     

     

    (13)%

    Segment Profit

    1,851

    2,433

    (24)%

    Segment Margin

    19.6%

    22.5%

    -290 bps

     

    4Q 2020

    4Q 2019

     

    Sales

    2,556

    2,857

    (11)%

    Organic Growth

     

     

    (12)%

    Segment Profit

    478

    643

    (26)%

    Segment Margin

    18.7%

    22.5%

    -380 bps

    SAFETY AND PRODUCTIVITY SOLUTIONS

    FY 2020

    FY 2019

    Change

    Sales

    6,481

    6,104

    6%

    Organic Growth

     

     

    6%

    Segment Profit

    907

    790

    15%

    Segment Margin

    14.0%

    12.9%

    110 bps

     

    4Q 2020

    4Q 2019

     

    Sales

    1,940

    1,515

    28%

    Organic Growth

     

     

    27%

    Segment Profit

    297

    192

    55%

    Segment Margin

    15.3%

    12.7%

    260 bps

    1Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett Motion Inc. (Garrett), net of proceeds from settlement of related hedging transaction, and 2019 adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge.

    2Adjusted free cash flow conversion excludes impacts from 2019 separation cost payments related to the spin-offs, pension mark-to-market, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, and 2019 adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge, if applicable.

    3Adjusted EPS V% guidance excludes pension mark-to-market, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, and 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions.

    4Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and 2019 adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge.

    5Adjusted free cash flow conversion excludes impacts from 2019 separation cost payments related to the spin-offs, pension mark-to-market, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and 2019 adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge, if applicable.

    6Free cash flow guidance assumes proposed reorganization plan contemplated in the plan support agreement signed by Garrett is confirmed; should such plan be confirmed free cash flow definition would be revised to include cash payment from Garrett to Honeywell under such proposed reorganization plan. See appendix for details.

    7Adjusted free cash flow excludes impacts from 2019 separation cost payments related to the spin-offs.

    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 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, 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 transaction date; free cash flow, which we define as cash flow from operations less capital expenditures and should the proposed reorganization plan contemplated in the plan support agreement signed by Garrett be confirmed, free cash flow definition would be revised to include cash payment from Garrett to Honeywell under such proposed reorganization plan; 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, adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, and 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market, adjustments to the charges taken in connection with the 4Q17 U.S. tax legislation charge, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transaction, and 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, 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.

    View here Q4 2020 Financials

    Nina Krauss
    Mark Bendza