Honeywell Overdelivers On All Guided Metrics In The First Quarter; Raises Full-Year Sales And Adjusted EPS Guidance

CHARLOTTE, N.C., April 23, 2021 /PRNewswire/ -- Honeywell (NYSE: HON) today announced results for the first quarter that exceeded the company's guidance. The company also raised its full-year sales guidance and raised the midpoint of its adjusted earnings per share and cash flow guidance.

"Honeywell delivered a strong start to 2021 with first-quarter results that exceeded our expectations. We are seeing promising signs of a rapid recovery in some of our markets, and we are poised to capitalize on new business opportunities as they arise," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "We reported first-quarter sales of $8.5 billion, flat year over year, or a decline of 2% on an organic basis. Our first-quarter sales exceeded the high end of our guidance range by approximately $250 million driven by continued double-digit growth in our Warehouse and Workflow Solutions and personal protective equipment businesses as well as demand for our building products and services, advanced materials, and connected software. Operating margin contracted 220 basis points for the quarter to 17.8%, with segment margin contracting 80 basis points to 21.0%, which exceeded the high end of our guidance by 10 basis points. We delivered segment margin expansion in Aerospace, Honeywell Building Technologies, and Safety and Productivity Solutions for the second consecutive quarter, supported by our streamlined cost base following the cost actions we took in 2020. We delivered earnings per share of $2.03, with adjusted earnings per share¹ of $1.92, down 13% year over year but 9 cents above the high end of the previously provided guidance range. We continued to take advantage of our strong balance sheet, and deployed capital to high-return opportunities in the quarter, including closing our acquisition of quality management software leader Sparta Systems and announcing the acquisition of a majority stake in Fiplex, a leading provider of in-building communications systems. In addition, we repurchased $0.8 billion in Honeywell shares and made five strategic investments through Honeywell Ventures."

Adamczyk continued, "As we look to the rest of 2021 and beyond, we are well positioned for the recovery to come. Our new offerings in growing markets like life sciences are gaining traction and the industries that were hardest hit by the pandemic are expected to improve throughout the year. We have a robust portfolio of technologies that help our customers meet their environmental and social goals. In fact, about half of Honeywell's new product introduction research and development investment is directed toward products that improve environmental and social outcomes for customers. Earlier this month, we pledged to become carbon neutral in our operations and facilities by 2035, building on our commitment to reduce our carbon footprint in 2024 by 10% from 2018 levels. Our confidence in this commitment is underpinned by our history of setting aggressive environmental targets and beating them, which has enabled us to reduce our greenhouse gas intensity by more than 90% since 2004. We look forward to continuing to deliver outstanding results for our shareowners, customers, and employees."

As a result of the company's first-quarter performance and management's outlook for the remainder of the year, Honeywell raised its full-year sales guidance and raised the midpoint of its adjusted earnings per share and cash flow guidance. Full-year organic sales growth is now expected to be in the range of 3% to 5%. Adjusted earnings per share² is expected to be $7.75 to $8.00, up 15 cents from the low end of the prior guidance range. Operating cash flow is now expected to be in the range of $5.8 billion to $6.1 billion and free cash flow is now expected to be in the range of $5.2 billion to $5.5 billion. 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 flat on a reported basis and down 2% on an organic basis. The first-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the first quarter were down 22% on an organic basis driven by lower commercial aftermarket demand due to the ongoing impact of reduced flight hours, softness in commercial original equipment, and lower volumes in international defense, partially offset by growth in U.S. defense and space. Segment margin expanded 110 basis points to 29.0%. Margin performance was due to a number of factors, including commercial excellence, cost management, and a one-time benefit.

Honeywell Building Technologies sales for the first quarter were up 2% on an organic basis driven by demand for Products and growth in Building Solutions services. Orders were up mid-single digits year over year, driven by strong bookings for services and security products. Segment margin expanded 200 basis points to 22.5% driven by commercial excellence and productivity, net of inflation.

Performance Materials and Technologies sales for the first quarter were down 6% on an organic basis driven by continued delays in Process Solutions automation projects, lower volumes in smart energy, and lower demand for licensing and catalysts in UOP, partially offset by continued growth in Advanced Materials driven by strong demand for fluorine products and specialty materials. Segment margin contracted 290 basis points to 18.5% driven by the impact of sales mix, partially offset by commercial excellence.

Safety and Productivity Solutions sales for the first quarter were up 47% on an organic basis driven by double-digit Warehouse and Workflow Solutions, personal protective equipment, and Productivity Solutions and Services growth. Orders were up double digits year over year for the sixth straight quarter, led by continued demand for personal protective equipment and Productivity Solutions and Services, and backlog remained above $4 billion for the third quarter in a row. Segment margin expanded 180 basis points to 14.3% driven by the impact of higher sales volumes.

Conference Call Details
Honeywell will discuss its first-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (800) 263-0877 (domestic) or (646) 828-8143 (international) approximately ten minutes before the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's first-quarter 2021 earnings call or provide the conference code HON1Q21. The 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). Investors can hear a replay of the conference call from 12:30 p.m. EDT April 23 until 12:30 p.m. EDT April 30 by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 8053208.

TABLE 1: FULL-YEAR 2021 GUIDANCE⁴

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

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.

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. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, technological, and COVID-19 public health factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, and other developments, including the potential impact of the COVID-19 pandemic, and business decisions may differ from those envisaged by such forward-looking statements. 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, a measure by which we assess operating performance, which we define as operating income adjusted for certain items as presented in the Appendix; segment margin, on an overall Honeywell basis, which we define as segment profit divided by sales; organic sales growth, which we define as sales growth less the impacts from foreign currency translation, and acquisitions and divestitures for the first 12 months following transaction date; free cash flow, which we define as cash flow from operations less capital expenditures plus anticipated cash receipts from Garrett, if and as noted in the release; adjusted free cash flow conversion, which we define as free cash flow divided by net income attributable to Honeywell, excluding the gain on sale of the Retail footwear business, if and as noted in the release; and adjusted earnings per share, which we adjust to exclude pension mark-to-market, the favorable resolution of a foreign tax matter related to the spin-off transactions, non-cash charges associated with the reduction in value of reimbursement receivables due from Garrett, net of proceeds from settlement of related hedging transactions, and the gain on sale of the Retail footwear business, if and as noted in the release. 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. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.   

We define organic sales percent as the year over year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided for forward-looking measures of organic sales percent change because management cannot reliably predict or estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and divestiture transactions, all of which could significantly impact our reported sales percent change.

We define segment profit as operating income, excluding stock compensation expense, pension and other postretirement service costs, and repositioning and other charges. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of segment profit, on an overall Honeywell basis, to operating income has not been provided for all forward-looking measures of segment profit and segment margin included herewithin. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment profit. The information that is unavailable to provide a quantitative reconciliation could have a significant impact on our reported financial results. To the extent quantitative information becomes available without unreasonable effort in the future, and closer to the period to which the forward-looking measures pertain, a reconciliation of segment profit to operating income will be included within future filings.

We believe adjusted earnings per share, excluding spin-off impact, is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward looking information, management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. We therefore do not include an estimate for the pension mark-to-market expense. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus anticipated cash receipts from Garrett.

We believe that free cash flow is a non-GAAP metric that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity. For forward looking information, we do not provide cash flow conversion guidance on a GAAP basis as management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus anticipated cash receipts from Garrett.

We believe that free cash flow is a non-GAAP metric that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity. For forward looking information, we do not provide cash flow conversion guidance on a GAAP basis as management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets.

We believe adjusted earnings per share is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward looking information, management cannot reliably predict or estimate any potential future one-time items, such as pension mark-to-market, without unreasonable effort. Pension mark-to-market expense is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. We therefore do not include an estimate for the pension mark-to-market expense. Based on economic and industry conditions, future developments and other relevant factors, these assumptions are subject to change.

SOURCE Honeywell

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