Honeywell Delivers Strong First Quarter Results, Adjusted EPS Exceeds High End Of Guidance Range; Raises Full-Year Adjusted EPS Range By 10 Cents And Midpoint Of Sales Guidance
- Sales of $8.4 Billion at High End of Previous Guidance, Down 1% Year Over Year, Up 1% on an Organic Basis
- Earnings Per Share of $1.64, Adjusted Earnings Per Share1 of $1.91, Exceeding High End of Guidance Range
- Deployed $2.0 Billion in Capital, including $1.0 Billion to Share Repurchases as Part of $4 Billion Commitment in 2022
- Company Raises 2022 Adjusted EPS Range and Midpoint of Sales Guidance
CHARLOTTE, N.C., April 29, 2022 -- Honeywell (NASDAQ: HON) today announced results for the first quarter that met or exceeded the company's guidance in a challenging operating environment. The company also raised the midpoint of its full-year sales guidance and increased its full-year adjusted earnings per share guidance.
The company reported first quarter organic sales growth of 1%, or 3% excluding the impact of lower COVID-mask volumes. Operating margin contracted by 260 basis points to 15.2% due to a $183 million charge related to the substantial suspension of its operations in Russia, which translated to a loss of approximately $30M in sales in the first quarter. Segment margin expanded by 10 basis points to 21.1%, or 40 basis points excluding the year over year Quantinuum impact, exceeding the high end of the company's guidance range by 10 basis points as a result of the company's commercial excellence efforts. Adjusted earnings per share1 was $1.91, down 1% year over year but one cent above the high end of the company's guidance range.
"Honeywell delivered a strong start to 2022, meeting or exceeding expectations in the first quarter despite considerable new macroeconomic challenges and the ongoing impact of supply chain constraints," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Organic sales growth was underpinned by double-digit growth in our commercial aviation aftermarket, building products, productivity solutions and services, and advanced materials businesses. Demand remained strong, with orders up 13% year over year and long-cycle orders growth of over 20%, which will help drive growth as we progress through 2022. Closing backlog was $28.5 billion2, up 9% year over year, led by strength in Aero, HBT, and PMT. Our strategic pricing actions allowed us to continue to stay ahead of the inflation curve, enabling us to expand segment margins and exceed the high end of our EPS guidance range. We also continued to leverage our strong balance sheet, deploying $2.0 billion of total capital in the quarter with $1.0 billion allocated to share repurchases as we executed on our updated commitment to buy back $4 billion in shares in 2022. From an M&A perspective, we closed the acquisition of U.S. Digital Designs, a public safety communications hardware and software solutions provider."
Adamczyk continued, "As we look toward the rest of 2022, we are well positioned to navigate the macroeconomic environment and remain confident in our ability to execute on our rigorous operating principles and deliver strong results. We see solid recovery in our key commercial aerospace and energy end markets, and our ongoing investments in areas like our sustainable technology solutions business will provide additional sources of growth. Our operational excellence is enabling us to absorb the impact of external macroeconomic factors, and today I am pleased to announce that we are raising the midpoint of our sales guidance and improving our EPS outlook."
As a result of the company's first-quarter performance and management's outlook for the remainder of the year, full-year sales are now expected to be in the range of $35.5 billion to $36.4 billion, up 4% to 7% organically, or up 6% to 9% excluding the one-point impact of COVID-driven mask sales declines and one-point impact of lost Russian sales. Segment margin expansion3 is expected to be in the range of 10 to 50 basis points, including an approximate (30) basis point impact from investments in the Quantinuum business. Adjusted earnings per share3 is now expected to be in the range of $8.50 to $8.80, up 10 cents on both ends to reflect the updated share repurchase target announced at our investor day. Operating cash flow is expected to be in the range of $5.7 billion to $6.1 billion, and free cash flow is expected to be $4.7 billion to $5.1 billion. A summary of the company's full year guidance changes can be found in Table 1.
"As discussed in our recent investor day, we are turning our focus to the next phase of Honeywell's growth, including driving innovation that builds on our long-standing expertise in controls, automation, and software, as well as successful breakthrough initiatives," Adamczyk concluded. "We are executing on the capital deployment commitments we announced in March, which will help us achieve faster growth and innovation while delivering significant value to our shareholders now and in the future."
Honeywell sales for the first quarter were down 1% year over year on a reported basis and up 1% year over year on an organic basis. The first-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the first quarter were up 5% year over year on an organic basis. Both air transport aftermarket and business and general aviation aftermarket sales grew by over 25% in the first quarter as flight hours continued to improve. Commercial original equipment grew double digits in the first quarter as air transport original equipment returned to growth, partially offset by lower volumes in business and general aviation original equipment. Growth in commercial aerospace was partially offset by lower defense volumes. Segment margin contracted 160 basis points in the first quarter to 27.4%, driven by increased sales mix from lower margin original equipment products, cost inflation, and the absence of a one-time gain in 2021, partially offset by favorable pricing.
Honeywell Building Technologies sales for the first quarter were up 8% on an organic basis year over year driven by strength across the building products portfolio, partially offset by lower projects volume. Orders were up double digits as a result of strong demand for fire products and building management systems. Segment margin expanded 100 basis points to 23.5% due to pricing actions and favorable sales mix, partially offset by cost inflation.
Performance Materials and Technologies sales for the first quarter were up 6% on an organic basis year over year despite an approximately 1% headwind from Russia. Sales growth was led by strength across the advanced materials portfolio and demand for thermal solutions and lifecycle solutions and services within process solutions. This growth was partially offset by lower process technologies equipment within UOP. Orders increased double digits year over year, headlined by over 20% growth in process solutions. Segment margin expanded 230 basis points to 20.8% led by favorable pricing and sales mix, partially offset by cost inflation.
Safety and Productivity Solutions sales for the first quarter decreased 15% on an organic basis year over year due to lower personal protective equipment and warehouse automation volume. Excluding the impact of lower COVID-mask volumes, sales decreased by 6% in the quarter. However, productivity solutions and services, advanced sensing technologies, and gas detection sales all grew at double-digit rates in the quarter, highlighting the strength in much of the underlying SPS portfolio. Segment margin expanded 20 basis points to 14.5% led by favorable pricing and sales mix, partially offset by lower volume leverage and cost inflation.
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. A 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). A replay of the webcast will be available for 30 days following the presentation.