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    Honeywell Delivers Strong Third Quarter Results and Beats Guidance on Segment Margin and Earnings; Raises Full Year Outlook

    • Operating Margin up 90 Basis Points to 19.5%; Segment Margin1 up 60 Basis Points to 21.8%, Exceeding High End of Guidance Range by 60 bps
    • Earnings Per Share of $2.28, Adjusted EPS1 of $2.25, Exceeding High End of Guidance Range by 5 Cents
    • Operating Cash Flow up 86% to $2.1 Billion; Free Cash Flow1 up 108% to $1.9 Billion
    • $1.2 Billion of Capital Deployed to Share Repurchases, Dividends, and Capital Expenditures
    • Company Raises Midpoint of Organic Sales Growth, Segment Margin,2 and Adjusted EPS Guidance2,3; Reaffirms Full-Year Free Cash Flow Guidance

    CHARLOTTE, N.C., October 27, 2022 -- Honeywell (NASDAQ: HON) today announced results for the third 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 guidance2,3 ranges and raised its full-year segment margin guidance range.2

    The company reported third quarter sales growth of 6% and organic sales growth1 of 9%, or 10% excluding the impact of the wind down of operations in Russia,4 with double-digit organic sales growth in Honeywell Building Technologies, Performance Materials and Technologies, and Aerospace. Operating margin expanded by 90 basis points to 19.5%, or 110 basis points excluding the year-over-year impact of Quantinuum. Segment margin1 expanded by 60 basis points to 21.8%, or 90 basis points excluding the year-over-year impact of Quantinuum,1 led by 250 basis points of segment margin expansion in Safety and Productivity Solutions. Earnings per share was $2.28, up 27% year over year. Adjusted earnings per share1 was $2.25, up 11% year over year and 5 cents above the high end of the company’s guidance range. Operating cash flow was $2.1 billion, up 86% year over year, with an operating cash flow margin of 23.3%. Free cash flow1 was $1.9 billion, up 108% year over year, with a free cash flow margin1 of 21.2%, driven by working capital as a result of improved receivables and inventory.

    "Honeywell executed exceptionally well in the third quarter, meeting or exceeding guidance for all metrics," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Despite ongoing challenges across supply chains, we grew sales by 6% on a reported basis and 9% organically,1 with strong double-digit growth in our advanced materials, commercial aerospace, and building products businesses. Our backlog remains near record levels, closing the third quarter at $29.1 billion,5 up 9% year over year, and providing us with confidence in our demand expectations against an increasingly uncertain macroeconomic backdrop. We continued to reap the benefits of our Honeywell Digital transformation investments made over the past few years and we leveraged these digital tools to drive agile commercial and operational actions, which enabled us to stay ahead of the inflation curve, expand margins, and beat the high end of our adjusted EPS guidance. We also executed on our capital deployment strategy, deploying $1.2 billion in the quarter, including $0.4 billion of share repurchases, and raising our dividend for the 13th time over 12 consecutive years."

    Adamczyk continued, "The Honeywell playbook continues to deliver outstanding results as we successfully maneuver through a challenged operating environment. These operating principles, combined with our attractive end-market exposures and differentiated portfolio of solutions, will allow us to maintain resiliency and continue successfully navigating the current economic crosscurrents. The third quarter was a strong performance for Honeywell, and I remain confident that our best quarters lie ahead."

    As a result of the company's third-quarter performance and management's outlook for the remainder of the year, full-year sales are now expected to be in the range of $35.4 billion to $35.7 billion, up 6% to 7% organically, or up 8% to 9% excluding the one-point impact of COVID-driven mask sales declines and one-point impact of lost Russian sales. Segment margin expansion2 is now expected to be in the range of 60 to 80 basis points, including an approximate (30) basis point impact from investments in the Quantinuum business. Adjusted earnings per share2,3 is now expected to be in the range of $8.70 to $8.80. Operating cash flow is expected to be in the range of $5.2 billion to $5.6 billion and free cash flow1 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.

    Third-Quarter Performance

    Honeywell sales for the third quarter were up 6% year over year on a reported basis and 9% year over year on an organic basis.1 The third-quarter financial results can be found in Tables 2 and 3.

    Aerospace sales for the third quarter were up 10% year over year on an organic basis1 led by growth in commercial aviation. Commercial aftermarket demand remained strong as flight hours continued to recover, with both air transport aftermarket and business and general aviation aftermarket sales growing over 20% organically. Commercial original equipment sales increased 30% year over year in the third quarter, primarily driven by higher shipset deliveries to air transport customers. Increased commercial aviation sales were partially offset by lower defense volumes. Segment margin expanded 40 basis points to 27.5%, led by commercial excellence partially offset by cost inflation.

    Honeywell Building Technologies sales for the third quarter were up 19% on an organic basis1 year over year including 23% organic sales growth in the building products portfolio. Building solutions also grew double digits organically in the quarter, led by increased project volumes. Segment margin expanded 60 basis points to 24.1% due to commercial excellence, partially offset by cost inflation.

    Performance Materials and Technologies sales for the third quarter were up 14% on an organic basis1 year over year despite an approximate 3% headwind from Russia. Sales growth was led by advanced materials, which grew more than 30% organically due to continued pricing actions and improved volumes. Sales strength was also driven by refining catalyst shipments and thermal solutions, both of which were up double digits in the quarter. This growth was partially offset by lower equipment volumes in UOP and lost Russian sales.2 Orders increased double digits year over year, headlined by strength in fluorine products within advanced materials. Segment margin expanded 40 basis points to 22.6%, primarily due to commercial excellence, partially offset by cost inflation.

    Safety and Productivity Solutions sales for the third quarter decreased 4% on an organic basis1 year over year. Strength in the advanced sensing and gas detection portions of our sensing and safety technologies business and growth in productivity solutions and services was offset by lower volumes in warehouse and workflow solutions and personal protective equipment. Segment margin reached the highest level since 4Q18, expanding 250 basis points year over year to 15.7%, primarily driven by commercial excellence and favorable business mix, partially offset by cost inflation.

    In July, the safety and retail and advanced sensing technologies business units were aligned into a new business unit within the Safety and Productivity Solutions segment named sensing and safety technologies, which we will use for reporting purposes going forward. We recast historical periods to reflect this realignment.

    Conference Call Details

    Honeywell will discuss its third-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 GUIDANCE2

     

    Previous Guidance

    Current Guidance

    Sales

    $35.5B - $36.1B

    $35.4B - $35.7B

    Organic Growth

    5% - 7%

    6% - 7%

    Organic Growth Excluding Impact of COVID-Driven Mask Sales Declines and Lost Russian Sales4

    7% - 9%

    8% - 9%

    Segment Margin

    21.3% - 21.7%

    21.6% - 21.8%

    Expansion

    Up 30 - 70 bps

    Up 60 - 80 bps

    Expansion Excluding the Impact of Quantinuum

    Up 60 - 100 bps

    Up 90 - 110 bps

    Adjusted Earnings Per Share3

    $8.55 - $8.80

    $8.70 - $8.80

    Adjusted Earnings Growth3

    6% - 9%

    8% - 9%

    Operating Cash Flow

    $5.5B - $5.9B

    $5.2B - $5.6B

    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

     

    3Q 2022

    3Q 2021

    Change

    Sales

    8,951

    8,473

    6%

    Organic Growth1

     

     

    9%

    Operating Income Margin

    19.5%

    18.6%

    90 bps

    Segment Margin1

    21.8%

    21.2%

    60 bps

    Earnings Per Share

    $2.28

    $1.80

    27%

    Adjusted Earnings Per Share1

    $2.25

    $2.02

    11%

    Cash Flow from Operations

    2,083

    1,119

    86%

    Operating Cash Flow Conversion

    134%

    89%

    45%

    Free Cash Flow1

    1,899

    911

    108%

    Adjusted Free Cash Flow Conversion1

    124%

    64%

    60%

     

    TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

    AEROSPACE

    3Q 2022

    3Q 2021

    Change

    Sales

    2,976

    2,732

    9%

    Organic Growth1

     

     

    10%

    Segment Profit

    818

    740

    11%

    Segment Margin

    27.5%

    27.1%

    40 bps

    HONEYWELL BUILDING TECHNOLOGIES

     

     

     

    Sales

    1,526

    1,370

    11%

    Organic Growth1

     

     

    19%

    Segment Profit

    368

    322

    14%

    Segment Margin

    24.1%

    23.5%

    60 bps

    PERFORMANCE MATERIALS AND TECHNOLOGIES

     

     

     

    Sales

    2,720

    2,510

    8%

    Organic Growth1

     

     

    14%

    Segment Profit

    615

    558

    10%

    Segment Margin

    22.6%

    22.2%

    40 bps

    SAFETY AND PRODUCTIVITY SOLUTIONS

     

     

     

    Sales

    1,727

    1,861

    (7%)

    Organic Growth1

     

     

    (4%)

    Segment Profit

    271

    245

    11%

    Segment Margin

    15.7%

    13.2%

    250 bps

    1See additional information at the end of this release regarding non-GAAP financial measures.

    2Segment margin and adjusted EPS are non-GAAP financial measures. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment margin or adjusted EPS. We therefore, do not present a guidance range, or a reconciliation to, the nearest GAAP financial measures of operating margin or EPS.

    3Adjusted EPS and adjusted EPS V% guidance excludes items identified in the non-GAAP reconciliation of adjusted EPS at the end of this release, and any potential future one-time items that we cannot reliably predict or estimate such as pension mark-to-market.

    4Lost 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.

    5Effective 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.

    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;
    • Segment profit, excluding Quantinuum;
    • Segment margin, on an overall Honeywell basis;
    • Segment margin excluding Quantinuum;
    • Expansion in segment profit margin percentage;
    • Expansion in segment profit margin percentage excluding Quantinuum;
    • Organic sales growth;
    • Organic sales growth excluding lost Russian sales:
    • Organic sales growth excluding COVID-driven mask sales and lost Russian sales;
    • Free cash flow;
    • Free cash flow excluding Quantinuum;
    • Free cash flow margin;
    • Adjusted net income attributable to Honeywell;
    • Adjusted free cash flow conversion; and
    • Adjusted earnings per share.

    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.

    Q3 2022 Press Release Financials

    Bevin Maguire
    VP Communications
    Sean Meakim
    Investor Relations