Honeywell announced results for the first quarter that exceeded the company's guidance across all metrics. The company also raised the midpoint of its full-year organic1 growth, segment margin3, and adjusted EPS3 guidance ranges.
The company reported first-quarter year-over-year sales growth of 6% and organic1 sales growth of 8%, with another quarter of double-digit organic sales growth in Performance Materials and Technologies and Aerospace. Operating margin expanded 390 basis points to 19.1% and segment margin1 expanded by 90 basis points to 22.0%, led by continued robust expansion in Safety and Productivity Solutions and Honeywell Building Technologies. Honeywell first-quarter earnings per share was $2.07, up 26% year over year, or up 8% adjusted1 year over year. Operating cash flow was negative $0.8 billion and free cash flow1 was negative $1.0 billion. Excluding the net impact of settlements signed in the fourth quarter of 2022, the company generated $0.3 billion of free cash flow1 in the first quarter, $250 million better than the first quarter of 2022.
"Honeywell delivered an outstanding start to 2023, exceeding expectations for all guided metrics in the first quarter," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Organic sales growth1 was underpinned by double-digit growth in our commercial aviation, UOP, process solutions, building solutions, and advanced materials businesses. Backlog2 increased to a record $30.3 billion, up 6% year over year, with particular strength in our aerospace business that gives us confidence in our full-year guidance. Our continued focus on commercial excellence and productivity enabled us to remain ahead of the inflation curve and overdeliver on our segment margin3 and earnings per share3 guidance. Excluding the net impact of settlements signed in the fourth quarter of 2022, we delivered free cash flow1 of $0.3 billion. We also continued to leverage our strong balance sheet, deploying $1.6 billion in the quarter to share repurchases, dividends, and capex. In addition, we announced the acquisition of Compressor Controls Corporation, a leading provider of turbomachinery controls and automation solutions, which combined with our process solutions installed base and Honeywell Forge capabilities will help customers accelerate their energy transition."
Adamczyk continued, "As we look to the rest of 2023, we are well positioned to continue outperforming despite an uncertain macroeconomic environment. Our businesses are poised for sustained growth, our backlog will support our projections, and our technologically differentiated portfolio of solutions is allowing us to address the world's toughest automation, digitalization, and sustainability challenges. This setup is enabling us to raise our full-year 2023 guidance, and I am confident that Honeywell will continue to outperform under Vimal Kapur's leadership. I am grateful for the opportunity I have had to lead Honeywell, and I know our future is bright."
As a result of the company's first-quarter performance and management's outlook for the remainder of the year, Honeywell raised the midpoint of its full-year sales, segment margin3, and adjusted earnings per share3 guidance. Full-year sales are now expected to be $36.5 billion to $37.3 billion with organic1 sales growth in the range of 3% to 6%. Segment margin3 is now expected to be in the range of 22.3% to 22.6%, with segment margin expansion3 of 60 to 90 basis points. Adjusted earnings per share3,4 is now expected to be in the range of $9.00 to $9.25, up 20 cents on the low end and 5 cents on the high end from the prior guidance range. Operating cash flow is still expected to be in the range of $4.9 billion to $5.3 billion. Free cash flow1 is still expected to be in the range of $3.9 billion to $4.3 billion, or $5.1 billion to $5.5 billion excluding the net impact of settlements signed in the fourth quarter of 2022. A summary of the company's full-year guidance changes can be found in Table 1.
First-Quarter Performance
Honeywell sales for the first quarter were up 6% year over year on a reported basis and 8% year over year on an organic1 basis. The first-quarter financial results can be found in Tables 2 and 3.
Aerospace sales for the first quarter were up 14% year over year on an organic1 basis led by commercial aviation. Commercial aviation aftermarket sales grew over 20%, supported by continued flight hour recovery in air transport. Commercial original equipment also had double-digit sales growth in the quarter, including over 30% growth in business and general aviation original equipment. Defense and space sales returned to growth in the first quarter and maintained a book-to-bill greater than one. Segment margin contracted 80 basis points to 26.6%, driven by higher sales of lower margin products partially offset by commercial excellence.
Honeywell Building Technologies sales for the first quarter were up 9% on an organic1 basis year over year. Building solutions grew 13% organically driven by the fourth consecutive quarter of double-digit project sales growth. Strong demand for our fire offerings resulted in 7% organic sales growth in building products. Segment margin expanded 170 basis points to 25.2% due to commercial excellence partially offset by cost inflation.
Performance Materials and Technologies sales for the first quarter were up 15% on an organic1 basis year over year. Sales growth was led by UOP, which grew 19% organically due to strength in refining catalyst shipments and gas processing. In HPS, strength in projects and smart energy led to 16% organic growth in the quarter. Demand remained robust in fluorine products, which led to 12% growth in advanced materials. Segment margin contracted 20 basis points to 20.6% as a result of cost inflation and higher sales of lower margin products, partially offset by commercial excellence and volume leverage.
Safety and Productivity Solutions sales for the first quarter decreased 11% on an organic1 basis year over year. Sales declines were led by lower volumes in warehouse and workflow solutions and productivity solutions and services, partially offset by the sensing portion of sensing and safety technologies. Segment margin remained a positive contributor to Honeywell, expanding 270 basis points year over year to 17.2%, driven by productivity actions and commercial excellence, partially offset by lower volume leverage and cost inflation.
Conference Call Details
Honeywell will discuss its first-quarter results and updated full-year 2023 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.
