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    Honeywell Overdelivers on Sales and Earnings with Strong Second Quarter Results; Raises Organic Growth, Segment Margin, and Adjusted EPS Guidance for the Full Year

    • Sales Growth and Margin Expansion in Aerospace, Honeywell Building Technologies, and Performance Materials and Technologies
    • Reported Sales up 2%, Organic Sales up 4%, Exceeding High End of Guidance Range
    • Earnings Per Share of $1.84, Adjusted Earnings Per Share1 of $2.10, Exceeding High End of Guidance Range
    • Orders up 12%; Backlog2 up 12% to $29.5 Billion, Led by Our Long-Cycle Businesses
    • Deployed $2.3 Billion in Capital, including $1.4 Billion to Share Repurchases

    CHARLOTTE, N.C., July 28, 2022 -- Honeywell (NASDAQ: HON) today announced results for the second quarter, which met or exceeded the company's guidance. The company also raised the low end of its full-year organic growth and adjusted EPS guidance ranges and raised its full-year segment margin guidance range.

    The company reported second quarter organic sales growth of 4%, or 7% excluding the impact of lower COVID-mask volumes and the wind down of operations in Russia,3 exceeding the high end of the company's guidance range. Operating margin contracted by 20 basis points to 17.9% primarily due to an additional charge related to Russia. Segment margin expanded by 50 basis points to 20.9%, or 80 basis points excluding the year-over-year impact of Quantinuum. Adjusted earnings per share1 was $2.10, up 4% year over year and 2 cents above the high end of the company’s guidance range. Operating cash flow was $0.8 billion, down 38% year over year, and free cash flow was $0.8 billion, down 43% year over year, due to higher working capital as expected ahead of anticipated volume growth in the back half.

     “Honeywell met or exceeded guidance for all metrics in the second quarter despite a challenging macroeconomic backdrop,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Organic sales grew 4% led by strong double-digit growth in our commercial aerospace, building products, advanced sensing technologies, and advanced materials businesses. Aerospace, Honeywell Building Technologies, and Performance Materials and Technologies all grew organically and expanded margins in the quarter. While we recognize macro crosscurrents are clouding the global economic growth outlook, we remain confident in our demand outlook for the back half of the year with orders up 12% year over year and closing backlog2 of $29.5 billion, up 12% year over year, led by our long-cycle businesses, which will help drive growth for quarters to come. We once again demonstrated our operational agility by staying ahead of the inflation curve, enabling us to expand margins and beat the high end of our adjusted EPS guidance. We also continued to execute on our capital deployment strategy, deploying $2.3 billion in the quarter, including $1.4 billion of share repurchases.”

    Adamczyk continued, “As we have shown, our rigorous operating principles enable us to mitigate external challenges and deliver results that maximize shareholder value. The continued recovery of our key commercial aviation, defense, energy, and non-residential end markets, our commercial excellence, and our technologically differentiated portfolio of solutions will allow us to capitalize on near-term growth opportunities and remain highly resilient amid ongoing uncertainties.”

    As a result of the company’s second-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 $36.1 billion, up 5% to 7% organically, or up 7% to 9% excluding the one-point impact of COVID-driven mask sales declines and one-point impact of lost Russian sales. Segment margin expansion4 is now expected to be in the range of 30 to 70 basis points, including an approximate (30) basis point impact from investments in the Quantinuum business. Adjusted earnings per share4,5 is now expected to be in the range of $8.55 to $8.80. Operating cash flow is expected to be in the range of $5.5 billion to $5.9 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.

    Second-Quarter Performance

    Honeywell sales for the second quarter were up 2% year over year on a reported basis and 4% year over year on an organic basis. The second-quarter financial results can be found in Tables 2 and 3.

    Aerospace sales for the second quarter were up 5% year over year on an organic basis. Commercial aftermarket demand improved in the second quarter as flight hours continued to increase, resulting in approximately 20% growth in both air transport aftermarket and business and general aviation aftermarket. Business and general aviation original equipment grew double digits, while air transport original equipment grew over 25% year over year as we continue to see strong build rates. Growth in commercial aerospace was partially offset by lower defense volumes. Segment margin expanded 80 basis points to 26.5% in the second quarter, led by commercial excellence partially offset by cost inflation.

    Honeywell Building Technologies sales for the second quarter were up 14% on an organic basis year over year driven by strength in both building products and building solutions. Orders were up double digits for the second consecutive quarter, led by building projects, building management systems, and security products. Segment margin expanded 110 basis points to 23.5% due to pricing actions partially offset by cost inflation.

    Performance Materials and Technologies sales for the second quarter were up 10% on an organic basis year over year despite an approximately 3% headwind from Russia. Sales growth was led by solid pricing and greater volumes in advanced materials, as well as strength in petrochemical catalyst shipments and thermal solutions, which both grew over 20% in the quarter. This growth was partially offset by lower equipment volumes and lost Russian sales in UOP. Segment margin expanded 150 basis points to 22.3%, primarily driven by price actions partially offset by cost inflation.

    Safety and Productivity Solutions sales for the second quarter decreased 10% on an organic basis year over year as strength in advanced sensing technologies and productivity solutions and services was offset by lower personal protective equipment and warehouse automation volumes. Excluding the impact of lower COVID-mask volumes, organic sales decreased by 5% in the quarter. Advanced sensing technologies grew 25% and productivity solutions and services grew 19%, demonstrating excellent execution in a difficult supply constrained environment. Segment margin contracted 140 basis points to 12.6%, primarily driven by lower volume leverage, cost inflation, and a one-time write-down of excess COVID-related mask inventory, partially offset by pricing and a favorable licensing agreement with a competitor.

    Conference Call Details

    Honeywell will discuss its second-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.

    TABLE 1: FULL-YEAR 2022 GUIDANCE4

     

    Previous Guidance

    Current Guidance

    Sales

    $35.5B - $36.4B

    $35.5B - $36.1B

    Organic Growth

    4% - 7%

    5% - 7%

    Organic Growth Excluding Impact of COVID-Driven Mask Sales Declines and Lost Russian Sales

    6% - 9%

    7% - 9%

    Segment Margin

    21.1% - 21.5%

    21.3% - 21.7%

    Expansion

    Up 10 - 50 bps

    Up 30 - 70 bps

    Expansion Excluding the Impact of Quantinuum

    Up 40 - 80 bps

    Up 60 - 100 bps

    Adjusted Earnings Per Share5

    $8.50 - $8.80

    $8.55 - $8.80

    Adjusted Earnings Growth6

    5% - 9%

    6% - 9%

    Operating Cash Flow

    $5.7B - $6.1B

    $5.5B - $5.9B

    Free Cash Flow

    $4.7B - $5.1B

    $4.7B - $5.1B

    Excluding Impact of Quantinuum

    $4.9B - $5.3B

    $4.9B - $5.3B

     

    TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

     

    2Q 2022

    2Q 2021

    Change

    Sales

    8,953

    8,808

    2%

    Organic Growth

     

     

    4%

    Operating Income Margin

    17.9%

    18.1%

    -20 bps

    Segment Margin

    20.9%

    20.4%

    50 bps

    Earnings Per Share

    $1.84

    $2.04

    (10%)

    Adjusted Earnings Per Share1

    $2.10

    $2.02

    4%

    Cash Flow from Operations

    789

    1,278

    (38%)

    Operating Cash Flow Conversion

    63%

    89%

    (26%)

    Free Cash Flow

    843

    1,468

    (43%)

    Adjusted Free Cash Flow Conversion7

    59%

    103%

    (44%)

     

    TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

    AEROSPACE

    2Q 2022

    2Q 2021

    Change

    Sales

    2,898

    2,766

    5%

    Organic Growth

     

     

    5%

    Segment Profit

    767

    710

    8%

    Segment Margin

    26.5%

    25.7%

    80 bps

    HONEYWELL BUILDING TECHNOLOGIES

     

     

     

    Sales

    1,531

    1,407

    9%

    Organic Growth

     

     

    14%

    Segment Profit

    360

    315

    14%

    Segment Margin

    23.5%

    22.4%

    110 bps

    PERFORMANCE MATERIALS AND TECHNOLOGIES

     

     

     

    Sales

    2,694

    2,552

    6%

    Organic Growth

     

     

    10%

    Segment Profit

    601

    530

    13%

    Segment Margin

    22.3%

    20.8%

    150 bps

    SAFETY AND PRODUCTIVITY SOLUTIONS

     

     

     

    Sales

    1,829

    2,083

    (12%)

    Organic Growth

     

     

    (10%)

    Segment Profit

    231

    292

    (21%)

    Segment Margin

    12.6%

    14.0%

    -140 bps

    1Adjusted EPS and adjusted EPS V% exclude charges and the accrual of reserves related to foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance, related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, changes in fair value for Garrett equity securities, and a non-cash charge associated with the reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021.

    2Effective March 31, 2022, performance obligations exclude contracts with customers related to Russia as collectability is not reasonably assured. Backlog V% includes prior year revisions to reflect a prior period correction, which had no impact on our results of operations.

    3Lost Russian sales is defined as the year-over-year decline in sales due to the decision to wind down our businesses and operations in Russia. This does not reflect management’s estimate of 2022 Russian sales absent the decision to wind down our businesses and operations in Russia.

    4As discussed in the notes to the attached reconciliations, we do not provide guidance for margin or EPS on a GAAP basis.

    5Adjusted EPS guidance excludes charges and the accrual of reserves related to outstanding accounts receivable and contract assets, impairment of intangible assets, foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance, related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, and any potential future one-time items that we cannot reliably predict or estimate such as pension mark-to-market.

    6Adjusted EPS V% guidance excludes charges and the accrual of reserves related to outstanding accounts receivable and contract assets, impairment of intangible assets, foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance, related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with the reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, gain on the sale of the retail footwear business, and any potential future one-time items that we cannot reliably predict or estimate.

    7Adjusted free cash flow conversion is free cash flow (cash flow from operations less capital expenditures plus cash receipts from Garrett) divided by adjusted net income attributable to Honeywell. Adjusted net income attributable to Honeywell excludes charges and the accrual of reserves related to foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance, related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, changes in fair value for Garrett equity securities,  and a non-cash charge associated with a reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021.

    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.

    Honeywell uses our Investor Relations website, www.honeywell.com/investor, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media.

    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. Forward-looking statements are those that address activities, events or developments that management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to risks and uncertainties, including the impact of the COVID-19 pandemic and the Russia-Ukraine conflict, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal commitment, expectation, or prospect set forth in this release can or will be achieved. 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 profit excluding Quantinuum, which we define as segment profit excluding segment profit attributable to Quantinuum;
    • Segment margin, on an overall Honeywell basis, which we define as segment profit divided by net sales;
    • Segment margin excluding Quantinuum, which we define as segment profit excluding Quantinuum divided by net sales excluding Quantinuum;
    • Expansion in segment profit margin percentage, which we define as the year-over-year increase in segment profit margin percentage;
    • Expansion in segment profit margin percentage excluding Quantinuum, which we define as the year-over-year increase in segment profit margin percentage excluding Quantinuum;
    • Organic sales growth, which we define as net sales growth less the impacts from foreign currency translation, and acquisitions and divestitures for the first 12 months following transaction date;
    • Organic sales growth excluding COVID-driven masks, which we define as organic sales excluding any sales attributable to COVID-driven masks;
    • Organic sales growth excluding COVID-driven mask sales and lost Russian sales, which we define as organic sales growth excluding any sales attributable to COVID-driven mask sales and substantial suspension and wind down of operations in Russia;
    • Free cash flow, which we define as cash flow from operations less capital expenditures plus cash receipts from Garrett, if and as noted in the release;
    • Free cash flow excluding Quantinuum which we define as free cash flow less free cash flow attributable to Quantinuum;
    • Adjusted net income attributable to Honeywell, which we define as net income attributable to Honeywell which we adjust to exclude: charges and the accrual of reserves related to foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, changes in fair value for Garrett equity securities, and a non-cash charge associated with a reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, if and as noted in the release;
    • Adjusted free cash flow conversion, which we define as free cash flow divided by adjusted net income attributable to Honeywell; and
    • Adjusted earnings per share, which we adjust to exclude: charges and the accrual of reserves related to outstanding accounts receivable and contract assets, impairment of intangible assets, foreign exchange revaluation, inventory reserves, the write-down of other assets, impairment of property, plant and equipment, employee severance, and a tax valuation allowance, related to the initial suspension and wind down of our businesses and operations in Russia, expenses related to UOP matters, pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with the reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, and a gain on the sale of the retail footwear business, if and as noted in the release.

    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. Certain metrics presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. 

    Q2 2022 Press Release Financials

    Bevin Maguire
    Sean Meakim