Honeywell Reports Third Quarter Results; Updates 2024 Guidance

CHARLOTTE, N.C., Oct. 24, 2024 /PRNewswire/ -- Honeywell (NASDAQ: HON) today announced results for the third quarter, including segment margin¹ and adjusted earnings per share¹ that exceeded the company's guidance despite lower revenues in a challenging operating environment. The company also updated its full-year sales, segment margin², adjusted earnings per share^2,3, and cash flow guidance ranges.

In the past few months, Honeywell executed several additional actions to further simplify and improve its portfolio, including closing the acquisitions of Civitanavi, CAES Systems, and Air Products' LNG business. Earlier this month, the company also announced its intention to spin off Advanced Materials into an independent company that will be a leading provider of sustainability-focused specialty chemicals and materials.

"Honeywell executed through a challenging environment in the third quarter, delivering segment margin¹ and adjusted earnings per share¹ above the high end of our guidance," said Vimal Kapur, chairman and chief executive officer of Honeywell. "Our Accelerator operating system and culture of execution enabled us to grow segment profit¹ by 6% in spite of transitory sales headwinds. We continue to see healthy order rates and sequential growth in our backlog, even excluding the impact of acquisitions closed in the quarter, giving us confidence in our ability to achieve our long-term targets. We also further advanced on our capital deployment strategy, deploying $3.1 billion to M&A, dividends, and high-return capex."

Kapur continued, "We have made significant progress this year on the simplification and optimization of the Honeywell portfolio with the announcement of our plans to spin off Advanced Materials and exit our PPE business, as well as the closing of four strategic acquisitions. We are proud of the steps we have taken throughout 2024 to progress on our key priorities, but the work is not yet finished. I look forward to sharing more in the future as we further align our portfolio with the key megatrends of automation, the future of aviation, and energy transition."

As a result of the company's third-quarter performance and management's outlook for the remainder of the year, including the impact of recently closed acquisitions, Honeywell updated its full-year sales, segment margin², adjusted earnings per share^2,3, and cash flow guidance¹. Full-year sales are now expected to be $38.6 billion to $38.8 billion with organic¹ sales growth of 3% to 4%. Segment margin² is now expected to be in the range of 23.4% to 23.5% with segment margin² flat to down 10 basis points year over year. Adjusted earnings per share^2,3 is now expected to be in the range of $10.15 to $10.25, up 7% to 8% year over year. Operating cash flow is now expected to be in the range of $6.2 billion to $6.5 billion, with free cash flow¹ of $5.1 billion to $5.4 billion. A summary of the company's full-year guidance 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 3% on an organic¹ basis year over year. The third-quarter financial results can be found in Tables 2 and 3.

Aerospace Technologies sales for the third quarter increased 10% on an organic¹ basis year over year, the ninth consecutive quarter of double-digit organic growth, led by continued strength in defense and space. Commercial original equipment grew double digits organically in the quarter on increased shipset deliveries, particularly in business and general aviation. Commercial aftermarket saw another quarter of strong growth as global flight activity rises. Defense and space sales increased 14% organically in the third quarter due to robust demand and supply chain improvements. Segment margin remained flat year over year at 27.7% as commercial excellence and productivity actions were offset by cost inflation and mix pressure within original equipment.

Industrial Automation sales for the third quarter decreased 5% on an organic¹ basis year over year and were flat sequentially. Sales declines were led by volume softness in warehouse and workflow solutions and safety and sensing technologies. Process solutions delivered 2% organic growth in the third quarter and grew sequentially, as continued strength in aftermarket services and compressor controls was offset by softness in thermal solutions and smart energy. Productivity solutions and services delivered double-digit orders and organic sales¹ growth when excluding the impact of a prior year license and settlement payment. Segment margin expanded 60 basis points to 20.3% as a result of productivity actions and commercial excellence, partially offset by cost inflation and volume deleverage.

Building Automation sales for the third quarter were up 3% on an organic¹ basis year over year and up sequentially for the second consecutive quarter even excluding the first full quarter of access solutions ownership. Building solutions continues to lead the way, growing 8% organically on another quarter of double-digit growth in projects. Strength in solutions was partially offset by modest year over year declines in building products. Products delivered sequential growth in both sales and orders for the second consecutive quarter. Segment margin improved sequentially for the third consecutive quarter and expanded 30 basis points year over year to 25.9%, driven by the impact of access solutions and commercial excellence partially offset by cost inflation.

Energy and Sustainability Solutions grew 1% on an organic¹ basis year over year in the third quarter. Advanced Materials increased 3% year over year due to further improvement in specialty chemicals and materials and continued growth in fluorine products. UOP sales declined 2% as growth in refining catalysts and aftermarket services was offset by softness in project timing. Orders were a bright spot in UOP, reaching a record $1 billion and up over 50% overall with strength in both core process technologies and sustainable technology solutions. Segment margin expanded 10 basis points to 24.5% as a result of commercial excellence net of inflation.

Conference Call Details

Honeywell will discuss its third-quarter results and full-year 2024 guidance during an investor conference call starting at 8:30 a.m. Eastern 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 2024 GUIDANCE

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

During the third quarter of 2024, Honeywell concluded the assets and liabilities of the personal protective equipment business (part of the Sensing and Safety Technologies business unit within the Industrial Automation segment) met the held for sale criteria as of September 30, 2024; therefore, the associated assets and liabilities of the business have been presented as held for sale in the Consolidated Balance Sheet as of September 30, 2024. The company recognized a valuation allowance of $125 million in the third quarter of 2024 to write down the disposal group to fair value, less costs to sell, as well as recorded an impairment charge of $37 million (after tax) on indefinite-lived intangible assets.

Honeywell is an integrated operating company serving a broad range of industries and geographies around the world. Our business is aligned with three powerful megatrends - automation, the future of aviation, and energy transition - underpinned by our Honeywell Accelerator operating system and Honeywell Connected Enterprise integrated software platform. As a trusted partner, we help organizations solve the world's toughest, most complex challenges, providing actionable solutions and innovations that help make the 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.

We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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 and include statements related to the proposed spin-off of the Company's Advanced Materials business into a stand-alone, publicly traded company. 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, many of which are difficult to predict and outside of our control. 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 material risks and uncertainties, including ongoing macroeconomic and geopolitical risks, such as lower GDP growth or recession, supply chain disruptions, capital markets volatility, inflation, and certain regional conflicts, 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. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K, and our other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.

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 margin, on an overall Honeywell basis;
• Organic sales growth;
• Free cash flow; 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 measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures 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 2024 Earnings Release Financial