Industry Summary Articles

Honeywell announced results for the fourth quarter and full year 2021 that met or exceeded the company's guidance despite an extremely challenging operating environment. The company also provided its outlook for 2022.

The company reported a fourth-quarter year-over-year sales decline of 3%, down 2% on an organic basis, due to supply-related constraints, a tough comparison versus 2020 due to lower COVID mask volumes, and six fewer days in the quarter. Demand remained strong, with orders up high-single digits. Closing backlog was $28 billion, up 7% year over year. Fourth-quarter operating margin declined 130 basis points to 17.5% and segment margin expanded 30 basis points to 21.4% as a result of the company’s commercial excellence efforts. Honeywell delivered fourth-quarter adjusted earnings per share of $2.09, above the midpoint of the company’s guidance.

For the full year, sales increased by 5%, or 4% on an organic basis, and operating margin expanded 50 basis points with segment margin expanding 60 basis points. The company reported full-year adjusted earnings per share⁵ of $8.06, above the high end of its initial guidance of $7.60 to $8.00.

“Honeywell had a strong finish to another challenging year. We remained resilient, focusing on operational excellence to deliver the commitments we made to our shareowners,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Our focus on differentiated solutions drove double-digit organic sales growth in 2021 in our warehouse and workflow solutions, productivity solutions and services, business and general aviation, advanced materials, and recurring connected software businesses. Our disciplined cost management, swift pricing actions to stay ahead of the inflation curve, and improved productivity resulted in 60 basis points of segment margin expansion for the year. As a result, our full-year adjusted earnings per share⁵ increased by 14% year over year. We also were strong cash generators in 2021, delivering $6.0 billion in operating cash flow with 109% conversion and $5.7 billion of free cash flow⁶ with 102% adjusted conversion and free cash flow margin of 17%.”

Adamczyk continued, “Our balance sheet remains strong, and we maintained our focus on executing our capital deployment strategy, including investing in high-return capital expenditures, repurchasing $3.4 billion of Honeywell shares, completing four acquisitions, and increasing the dividend for the 12^th time in the past 11 years. We deployed capital in excess of our operating cash flow and will continue to follow this playbook in 2022.”

Adamczyk concluded, “I am proud of the way Honeywell continues to respond to the challenging macroeconomic environment. We quickly took action to mitigate supply chain challenges and inflation by bringing on alternate suppliers, redesigning parts and implementing pricing actions. We also remained focused on growth, investing in new markets and technologies such as our environmental, social and governance (ESG) enablement solutions and the creation of Quantinuum, the world’s largest, most advanced integrated standalone quantum computing company. We entered 2022 with positive momentum and a strong backlog, and I am confident we are well positioned to continue to perform for our shareowners, our customers, and our employees in the short and long term.”

Honeywell also announced its outlook for 2022. The company expects sales of $35.4 billion to $36.4 billion, representing year-over-year organic growth of 4% to 7%, or 5% to 8% excluding the impact of COVID-driven mask sales declines; segment margin expansion of 10 to 50 basis points, including the (30) basis point impact of its newly combined Quantinuum business; earnings per share⁵ of $8.40 to $8.70, up 4% to 8% adjusted; operating cash flow of $5.7 billion to $6.1 billion, and free cash flow of $4.7 billion to $5.1 billion. A summary of the company’s 2022 guidance can be found in Table 1.

Fourth-Quarter Performance

Honeywell sales for the fourth quarter were down 3% year over year on a reported basis and down 2% year over year 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 3% year over year on an organic basis. Business and general aviation original equipment, business and general aviation aftermarket, and air transport aftermarket all grew double digits as build rates and flight hours improved, offset by lower U.S. defense volumes which were impacted by supply chain constraints and lower demand. Commercial aviation aftermarket sales were up over 16% year over year, demonstrating momentum in the aftermarket recovery. Segment margin expanded 140 basis points to 29.0% driven by pricing and productivity, partially offset by higher cost of materials.

Honeywell Building Technologies sales for the fourth quarter were down 1% on an organic basis year over year due to lower projects volume and continued supply chain constraints in the products businesses. Orders were up 4% as a result of demand for fire products, building management systems, and building projects. Building solutions backlog grew double digits year over year, positioning the business for growth in 2022. Segment margin contracted 30 basis points to 21.1% driven by lower volume leverage and cost inflation, mostly offset by favorable pricing.

Performance Materials and Technologies sales for the fourth quarter were up 2% on an organic basis year over year, driven by petrochemical catalyst and gas processing shipments in UOP, continued growth in advanced materials, and demand for thermal solutions within process solutions, partially offset by delayed projects recovery and softness in smart energy. Orders grew 10% year over year driven by double-digit growth in both UOP and process solutions projects, a positive indicator for 2022 and beyond. Segment margin expanded 430 basis points to 23.0% driven by favorable pricing and productivity, net of inflation.

Safety and Productivity Solutions sales for the fourth quarter were down 6% on an organic basis year over year, driven by lower personal protective equipment volume, partially offset by double-digit growth in productivity solutions and services and advanced sensing technologies. Backlog remained strong at over $4 billion dollars as declines in COVID-related mask demand were mostly offset by growth in advanced sensing technologies, productivity solutions and services, and gas detection. Segment margin contracted 450 basis points to 10.8% driven by lower volume leverage and Intelligrated project inefficiencies, partially offset by favorable pricing. These results exclude a $105 million charge (in Repositioning and Other) for certain long-term contract labor cost inefficiencies due to severe supply chain disruptions (attributable to the COVID-19 pandemic) related to the warehouse automation business. For more detail, please see the footnotes for the reconciliation of segment profit to operating income below.

Conference Call Details

Honeywell will discuss its fourth-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Standard Time today. To participate on the conference call, please dial (301) 715-8592 approximately 10 minutes before the 8:30 a.m. EST start. The meeting ID is 922 0876 1191. The password is 576684. 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. A replay of the webcast will be available for 30 days following the presentation. 

TABLE 1: FULL-YEAR 2022 GUIDANCE 

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS 

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

Q4 Financial Release Tables

¹ Capital deployment includes a $270M investment in Quantinuum that is consolidated in our financial statements

² Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, changes in fair value for Garrett equity securities, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.

³ Adjusted free cash flow conversion excludes pension mark-to-market, changes in fair value for Garrett equity securities, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.

⁴ Adjusted EPS V% guidance excludes pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.

⁵ Adjusted EPS and adjusted EPS V% exclude pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett.

⁶ Adjusted free cash flow conversion excludes pension mark-to-market, changes in fair value for Garrett equity securities, a non-cash charge associated with a further reduction in value of reimbursement receivables following Garrett's emergence from bankruptcy on April 30, 2021, an expense related to UOP matters, gain on the sale of the retail footwear business, a 2Q20 favorable resolution of a foreign tax matter related to the spin-off transactions, and the 2020 non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, if and as noted in the release.

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