KEY TAKEAWAYSHoneywell International shares jumped Tuesday to an all-time high, after Elliott Investment Management said it has built a $5 billion-plus position in the industrials conglomerate and is seeking a breakup of the company.Elliott said in a statement that it had sent a letter to Honeywell's board of directors seeking separations of the aerospace and automation businesses as standalone companies.General Electric's three-way split earlier this year has resulted in shares of the companies spun off su ...

The Honeywell International sign sits outside of the company's former global headquarters in Morristown, New Jersey.Activist investor Elliott Management has a $5 billion-plus stake in Honeywell, and it is pushing the industrial conglomerate to break itself up into two companies.Elliott believes that Honeywell should divide itself along its two primary business lines — Aerospace, which supplies engines and avionics to the military and commercial users, and Automation,  which is a supplier of sensors and cont ...

Core Viewpoint - Honeywell is facing challenges due to its conglomerate structure, which has led to inconsistent financial results and an underperforming share price, prompting a call for simplification through the separation of its Aerospace and Automation divisions [1][7][30]. Group 1: Investment Opportunity - Elliott Investment Management has invested over $5 billion in Honeywell, becoming its largest active investor, and believes there is a significant opportunity for value creation through a separation of its business units [5][64]. - A separation could lead to share price gains of 51% to 75% over the next two years, reflecting the potential for improved operational performance and valuation for both Aerospace and Automation as standalone entities [4][80]. Group 2: Current Performance and Challenges - Honeywell has experienced uneven execution and inconsistent financial results over the past five years, resulting in a decline in its share price and overall underperformance compared to peers [7][23][26]. - The conglomerate structure has led to operational challenges, with smaller business units lacking management attention and larger units competing for investment, hindering overall performance [37][41]. Group 3: Benefits of Simplification - Separating into two independent companies would allow for enhanced strategic focus, improved capital allocation, and better operational performance, as evidenced by other companies that have successfully simplified their structures [3][35][36]. - A simplified investment narrative would likely attract more investor interest, as the current conglomerate model is viewed as less attractive compared to pure-play companies [54][56]. Group 4: Market Position and Valuation - Honeywell Aerospace is positioned as a top-five global aerospace supplier with strong aftermarket revenue, while Honeywell Automation is expected to be a significant player in the automation sector, with nearly $20 billion in annual revenue [64][70]. - Despite its strong market position, Honeywell currently trades at a discount compared to its peers, indicating a disconnect between its operational capabilities and market valuation [26][58]. Group 5: Path Forward - The recommendation is for Honeywell to pursue a separation of its Aerospace and Automation divisions to unlock value and improve operational focus, aligning with market trends favoring simplified business structures [84][85]. - The current market environment presents a favorable opportunity for such a separation, as investor preferences have shifted towards pure-play companies that can deliver better performance and returns [68][69].

Core Viewpoint - Honeywell International reported a slight earnings beat, but overall revenue was soft, leading to a decline in share price by 4% [1][2]. Financial Performance - The company reported third-quarter earnings of $2.58 per share, exceeding expectations by $0.07, while revenue was $9.73 billion, falling short of the $9.9 billion consensus [2]. - Earnings were positively impacted by a lower-than-expected share count and effective tax rate, but segment profits aligned with expectations [2]. - Aerospace sales decreased by 2%, industrial automation sales fell by 5%, energy remained flat, and building automation increased by 3% year over year [2]. Strategic Moves - Honeywell is undergoing a portfolio transformation, planning to spin off its advanced material business, similar to previous divestitures of automotive and security units [3]. - The company completed approximately $3.7 billion in acquisitions during the quarter while continuing share repurchases and maintaining a dividend yield of over 2% [3]. Market Position - Despite having a diverse set of assets, Honeywell's stock has underperformed the S&P 500 over the past five years, leading investors to remain cautious [3]. - The company raised the lower end of its full-year 2024 earnings guidance but lowered its revenue and free cash flow forecasts [2].

Financial Data and Key Metrics - Q3 2024 organic sales growth was 3%, below guidance, but aerospace technologies showed sustained strength [5] - Adjusted EPS was $2.58, up 8% YoY, exceeding the high-end of guidance [16] - Free cash flow increased 10% YoY to $1.7 billion, driven by stronger operational income and higher collections [16] - Backlog grew 10% YoY to a record $34 billion, with a book-to-bill ratio of 1.1 [14] - Full-year sales guidance revised to $38.6 billion to $38.8 billion, representing organic growth of 3% to 4%, down from 5% to 6% previously [24] Business Segment Performance Aerospace Technologies - Sales grew 10% organically YoY, marking the ninth consecutive quarter of double-digit growth [17] - Defense & Space and Commercial Aviation OE both saw double-digit growth [17] - Segment margin remained flat at 27.7% due to cost inflation and mix pressure [18] Industrial Automation - Sales were flat sequentially but declined 5% organically YoY, primarily due to lower volumes in warehouse and workflow solutions [18] - Segment margin expanded 60 basis points to 20.3% due to productivity actions and commercial excellence [20] Building Automation - Sales grew 14% YoY and 11% sequentially, driven by the Access Solutions acquisition and acceleration in the fire business [20] - Orders grew 25% YoY, led by strong demand in data centers, healthcare, and energy [21] - Segment margin expanded 30 basis points to 25.9% [21] Energy and Sustainability Solutions - Sales grew 1% organically, with Advanced Materials up 3% YoY [21] - UOP orders reached a record $1 billion, with sustainable technology solutions accounting for over $200 million [22] - Segment margin expanded 10 basis points to 24.5% [22] Market and Strategic Direction - The company is focusing on three megatrends: automation, the future of aviation, and energy transition [9] - Four acquisitions were closed in 2024, representing over $9 billion in deployed capital, aligning with the company's strategic priorities [10] - Advanced Materials will be spun off into an independent, publicly-traded company to focus on sustainability-focused specialty chemicals and materials [11] - The PPE business was reclassified as an asset held for sale to strengthen core business growth and margins [12] Management Commentary on Operating Environment and Future Outlook - The company expects organic growth across all four businesses in 2025, with margin expansion driven by volume leverage and productivity actions [33] - Despite macroeconomic challenges, the company remains confident in its ability to execute its long-term growth algorithm [32] - The company is cautious about the short-term macroeconomic environment but sees a constructive outlook due to its robust backlog and leading market positions [33] Other Important Information - The company deployed $3.1 billion in capital in Q3, including $2.1 billion in M&A, $700 million in dividends, and $300 million in high-return CapEx [16] - Full-year capital deployment is expected to reach a record $14 billion in 2024 [12] - The company expects adjusted EPS for 2024 to be between $10.15 and $10.25, up 7% to 8% YoY [31] Q&A Session Summary Question: Thoughts on 2025 outlook and cost-cutting measures - The company plans to provide detailed 2025 guidance in January but expects organic growth across all segments and margin expansion [36][37] - Repositioning guidance was adjusted due to lower Q3 spending, but the company maintains a robust productivity pipeline [38][39] Question: Impact of portfolio actions on organic growth and margins - Portfolio actions, such as the Advanced Materials spin-off and PPE divestiture, are driven by strategic fit and are expected to accelerate organic growth and margin expansion [40][41] Question: Free cash flow guidance reduction - The reduction in free cash flow guidance is primarily due to slower inventory progress in Aerospace and slower payment cycles in high-growth regions [45] Question: Aerospace performance and Boeing strike impact - The Boeing strike had no impact on Q4 revenue, but the company is adjusting shipments to aftermarket customers [48] - Commercial aftermarket growth was led by ATR, with BGA showing single-digit growth [49] Question: Portfolio divestiture pipeline - The company has largely completed its initial portfolio reshaping but will continue to evaluate opportunities for further optimization [73][74] Question: Project delays in Process Solutions - Project delays in Process Solutions were due to short-cycle pushouts, driven by geopolitical uncertainty and oil price fluctuations [76][77] Question: Defense business growth outlook - The defense business is expected to maintain strong growth in 2025, supported by robust order books and supply chain normalization [78] Question: Accelerating new product development - The company expects a material step-up in core growth in 2025 due to accelerated new product development and the evolution of the Accelerator operating system [81][82] Question: Geographic performance - Europe showed signs of recovery in Building Automation, while China remains flat to slightly contracting in automation businesses [83][84]

Financial Performance - Honeywell reported net sales of $9,728 million for the three months ended September 30, 2024, an increase of 5.6% compared to $9,212 million in the same period of 2023[9]. - The company's net income for the three months ended September 30, 2024, was $1,415 million, down from $1,515 million in the same period of 2023, representing a decrease of 6.6%[11]. - Earnings per share (EPS) for the third quarter of 2024 was $2.17, compared to $2.29 in the same quarter of 2023, reflecting a decline of 5.2%[9]. - Honeywell's total costs and expenses for the three months ended September 30, 2024, were $7,904 million, an increase from $7,245 million in the same period of 2023, marking a rise of 9.1%[9]. - The company reported a comprehensive income of $1,107 million for the three months ended September 30, 2024, down from $1,572 million in the same period of 2023[11]. - For the nine months ended September 30, 2024, net sales reached $28,410 million, compared to $27,222 million for the same period in 2023, reflecting a growth of 4.4%[39]. Cash and Debt Management - Honeywell's cash and cash equivalents increased to $10,644 million as of September 30, 2024, compared to $7,925 million at the end of 2023[13]. - Long-term debt rose to $25.934 billion as of September 30, 2024, compared to $16.562 billion at December 31, 2023, marking an increase of 56.5%[14]. - The company reported net cash provided by operating activities for the nine months ended September 30, 2024, was $3.816 billion, significantly higher than $2.385 billion for the same period in 2023, indicating a growth of 60.2%[16]. - The company issued a total of $3.5 billion in August 2024 Senior Notes, with interest rates ranging from 4.65% to 5.00%[65]. - The company entered into a $1.5 billion 364-day credit agreement and a $4.0 billion amended and restated five-year credit agreement in March 2024, with no outstanding borrowings as of September 30, 2024[66]. Acquisitions and Investments - The company acquired Air Products' liquefied natural gas process technology and equipment business for a total consideration of $1,837 million, enhancing its energy transition portfolio[26]. - Honeywell acquired CAES Systems Holdings LLC for $1,930 million, enhancing its defense and space portfolio with high-reliability radio frequency technologies[29]. - The acquisition of Civitanavi Systems S.p.A. was completed for $200 million, focusing on position navigation and timing technology for aerospace and defense markets[30]. - Carrier Global Corporation's Global Access Solutions business was acquired for $4,917 million, which includes $2,050 million in intangible assets and $2,826 million in goodwill[31]. - The company reported capital expenditures of $771 million for the nine months ended September 30, 2024, compared to $675 million for the same period in 2023, an increase of 14.2%[16]. Shareholder Equity and Dividends - Honeywell's total shareowners' equity increased to $17,974 billion as of September 30, 2024, from $16,434 billion at December 31, 2023, a growth of 9.4%[14]. - Honeywell declared cash dividends per share of $1.08 for the third quarter of 2024, up from $1.03 in the same quarter of 2023, indicating a year-over-year increase of approximately 4.85%[18]. - The ending balance of retained earnings as of September 30, 2024, was $50,287 million, compared to $47,426 million in the prior year, marking an increase of approximately 6.0%[18]. Segment Performance - Aerospace Technologies segment reported net sales of $11,472 million for the nine months ended September 30, 2024, up from $9,951 million in the prior year[39]. - Industrial Automation segment net sales decreased to $7,485 million for the nine months ended September 30, 2024, compared to $8,160 million in the same period of 2023[39]. - Building Automation segment achieved net sales of $1,745 million for the three months ended September 30, 2024, up from $1,530 million in the same period of 2023, marking a growth of 14.0%[107]. - Energy and Sustainability Solutions segment reported net sales of $1,563 million for Q3 2024, slightly up from $1,551 million in Q3 2023, indicating a growth of 0.8%[107]. Legal and Compliance Matters - The company is cooperating with an SEC investigation focused on accounting matters related to its former Performance Materials and Technologies segment[97]. - Honeywell agreed to pay $202.7 million to resolve investigations by the DOJ, SEC, and Brazilian authorities related to compliance issues[98]. - The company continually assesses liabilities for various lawsuits and disputes, recognizing those that are probable and reasonably estimable[99]. Tax and Impairment Charges - The effective tax rate decreased in 2024 compared to 2023, attributed to increased benefits from non-U.S. earnings and employee share-based compensation[59]. - An impairment charge of $125 million was recorded on assets held for sale related to the personal protective equipment business during Q3 2024[128]. Foreign Exchange and Other Financial Adjustments - The company experienced a foreign exchange translation adjustment loss of $288 million for the three months ended September 30, 2024, compared to a gain of $59 million in the same period of 2023[11]. - Honeywell's foreign currency exchange contracts resulted in a loss of $213 million for the three months ended September 30, 2024[73].

Core Insights - Honeywell International Inc. reported quarterly earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.50 per share, and up from $2.27 per share a year ago, representing an earnings surprise of 3.20% [1] - The company posted revenues of $9.73 billion for the quarter ended September 2024, which was below the Zacks Consensus Estimate by 1.71%, but an increase from $9.21 billion year-over-year [1] - Honeywell has surpassed consensus EPS estimates three times in the last four quarters and has topped consensus revenue estimates two times in the same period [1] Earnings Outlook - The sustainability of Honeywell's stock price movement will largely depend on management's commentary during the earnings call [2] - The current consensus EPS estimate for the upcoming quarter is $2.73 on revenues of $10.49 billion, and for the current fiscal year, it is $10.10 on revenues of $38.98 billion [4] Industry Context - The Diversified Operations industry, to which Honeywell belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [5] - Another company in the same industry, Markel Group, is expected to report quarterly earnings of $21.97 per share, reflecting a year-over-year increase of 32.7% [5]

Exhibit 99 | --- | --- | --- | |-----------------------------------|--------------------------------|---------------------------| | | | | | | | | | | | | | | | | | Contacts: | | | | Media | Investor | Relations | | Stacey Jones (980) 378-6258 | Sean Meakim (704) 627-6200 | | | stacey.jones@honeywell.com | | sean.meakim@honeywell.com | HONEYWELL REPORTS THIRD QUARTER RESULTS; UPDATES 2024 GUIDANCE 1 • Sales of $9.7 Billion, Reported Sales Up 6%, Organic Sales Up 3% • Operating Margin of 19.1% and Segment Mar ...

Sales of $9.7 Billion, Reported Sales Up 6%, Organic1 Sales Up 3%Operating Margin of 19.1% and Segment Margin1 of 23.6%, Above High End of Previous GuidanceEarnings Per Share of $2.16 and Adjusted Earnings Per Share1 of $2.58, Above High End of Previous GuidanceClosed $1.9 Billion Acquisition of CAES Systems and $1.8 Billion Acquisition of Air Products' LNG BusinessAnnounced Intention to Spin Off Advanced Materials Business and Exit PPE BusinessCHARLOTTE, N.C., Oct. 24, 2024 /PRNewswire/ -- Honeywell (NASDA ...

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