Industry Summary Articles

Honeywell 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 guidance^2,3 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 share^2,3 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

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

To view the original press release, please click here.

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