Honeywell(HON) - 2024 Q2 - Quarterly Results

Q2 2024 Performance Overview Honeywell delivered strong Q2 2024 results, meeting or exceeding guidance across key financial metrics, driven by robust segment performance and strategic capital deployment Financial Highlights Honeywell's Q2 2024 results met or exceeded guidance, with reported sales growing 5% to $9.6 billion, adjusted EPS rising 8% to $2.49, operating margin expanding by 10 basis points to 20.7%, and free cash flow remaining stable at $1.1 billion | Metric | 2Q 2024 | 2Q 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $9.6B | $9.1B | 5% | | Organic Sales Growth | 4% | - | - | | Operating Income Margin | 20.7% | 20.6% | +10 bps | | Segment Margin | 23.0% | 23.1% | -10 bps | | EPS | $2.36 | $2.22 | 6% | | Adjusted EPS | $2.49 | $2.30 | 8% | | Operating Cash Flow | $1.4B | $1.4B | 1% | | Free Cash Flow | $1.1B | $1.1B | (1%) | - Growth was led by double-digit organic sales increases in defense and space, commercial aviation, and building solutions[2] - Total orders increased by 4%, driven by particular strength in the Building Automation and Energy and Sustainability Solutions businesses[2] Management Commentary CEO Vimal Kapur highlighted strong Q2 performance and broader portfolio participation, emphasizing the company's strategic alignment with automation, future aviation, and energy transition megatrends to unlock incremental value - Management expressed confidence in an acceleration of organic growth in the second half of the year, supported by sequential growth in all four segments during Q2[2] - The company is accelerating its strategic alignment with three key megatrends: automation, the future of aviation, and energy transition, all underpinned by digitalization[3][12] Capital Deployment Honeywell actively deployed $6.4 billion of capital in Q2 across M&A, dividends, share repurchases, and capital expenditures, notably closing the $5 billion Access Solutions acquisition and announcing two additional significant deals - A total of $6.4 billion in capital was deployed during the quarter for M&A, dividends, share repurchases, and capex[2] - Key M&A activities included closing the $5 billion acquisition of Access Solutions and announcing two new deals: the $1.9 billion acquisition of CAES Systems and the $1.8 billion acquisition of Air Products' LNG business[2] Full-Year 2024 Guidance Honeywell updated its full-year 2024 guidance, raising its sales forecast to a range of $39.1 billion to $39.7 billion, but slightly lowering expectations for segment margin, adjusted EPS, and cash flow, reflecting the impact of recent acquisitions and the overall business outlook Updated Outlook Honeywell updated its full-year 2024 guidance, raising sales to $39.1 billion-$39.7 billion while slightly lowering expectations for segment margin, adjusted EPS ($10.05-$10.25), and cash flow, reflecting recent acquisitions and the overall business outlook | Metric | Previous Guidance | Current Guidance | | :--- | :--- | :--- | | Sales | $38.5B - $39.3B | $39.1B - $39.7B | | Organic Growth | 4% - 6% | 5% - 6% | | Segment Margin | 23.8% - 24.1% | 23.3% - 23.5% | | Adjusted EPS | $10.15 - $10.45 | $10.05 - $10.25 | | Operating Cash Flow | $6.7B - $7.1B | $6.6B - $7.0B | | Free Cash Flow | $5.6B - $6.0B | $5.5B - $5.9B | Segment Performance Analysis This section provides a detailed analysis of the performance of Honeywell's key business segments, including Aerospace Technologies, Industrial Automation, Building Automation, and Energy and Sustainability Solutions Aerospace Technologies Aerospace Technologies drove growth with a 16% organic sales increase, marking its eighth consecutive quarter of double-digit growth fueled by commercial aviation and defense & space, despite a 60 basis point segment margin contraction due to mix pressure | Metric | 2Q 2024 | 2Q 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $3,891M | $3,341M | 16% | | Organic Growth | 16% | - | - | | Segment Profit | $1,060M | $930M | 14% | | Segment Margin | 27.2% | 27.8% | -60 bps | - Commercial aviation aftermarket sales grew 17% as global flight activity continued to rise[4] - Defense and space sales grew 19% year-over-year, driven by sustained demand and supply chain improvements[4] Industrial Automation Industrial Automation sales declined 8% organically due to volume softness in warehouse and workflow solutions and the end of a license agreement, resulting in a 90 basis point segment margin contraction to 19.0% | Metric | 2Q 2024 | 2Q 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $2,506M | $2,727M | (8%) | | Organic Growth | (8%) | - | - | | Segment Profit | $477M | $544M | (12%) | | Segment Margin | 19.0% | 19.9% | -90 bps | - Sales declines were primarily driven by volume softness in warehouse and workflow solutions[4] Building Automation Building Automation sales grew 1% organically, driven by 14% growth in building solutions and a 10% sequential increase from the Access Solutions acquisition, though segment margin contracted by 60 basis points to 25.3% due to product mix and cost inflation | Metric | 2Q 2024 | 2Q 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $1,571M | $1,510M | 4% | | Organic Growth | 1% | - | - | | Segment Profit | $397M | $391M | 2% | | Segment Margin | 25.3% | 25.9% | -60 bps | - Building solutions delivered a solid quarter, growing 14% organically, as both projects and services grew double digits[4] Energy and Sustainability Solutions Energy and Sustainability Solutions achieved 3% organic sales growth, led by 8% growth in advanced materials, despite a 4% decline in UOP sales, with segment margin significantly expanding by 200 basis points to 25.2% due to productivity actions | Metric | 2Q 2024 | 2Q 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $1,604M | $1,567M | 2% | | Organic Growth | 3% | - | - | | Segment Profit | $405M | $363M | 12% | | Segment Margin | 25.2% | 23.2% | 200 bps | - Advanced materials led growth with 8% sales growth, driven by continued strength in fluorine products[5] Financial Statements This section presents Honeywell's consolidated financial statements, including the Statement of Operations, Balance Sheet, and Cash Flows, providing a comprehensive overview of the company's financial position and performance Consolidated Statement of Operations For Q2 2024, Honeywell reported net sales of $9.58 billion, a 5% increase from Q2 2023, with net income attributable to Honeywell at $1.54 billion, resulting in a diluted EPS of $2.36, a 6% increase year-over-year | (In millions, except per share) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net sales | $9,577 | $9,146 | | Income before taxes | $1,974 | $1,904 | | Net income attributable to Honeywell | $1,544 | $1,487 | | Earnings per share - assuming dilution | $2.36 | $2.22 | Consolidated Balance Sheet As of June 30, 2024, Honeywell's total assets increased to $69.3 billion from $61.5 billion at year-end 2023, primarily due to recent acquisitions, while total liabilities also rose, with long-term debt increasing to $20.9 billion from $16.6 billion | (In millions) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $25,369 | $23,502 | | Total assets | $69,329 | $61,525 | | Total current liabilities | $21,044 | $18,539 | | Long-term debt | $20,865 | $16,562 | | Total shareowners' equity | $17,510 | $16,434 | Consolidated Statement of Cash Flows In Q2 2024, net cash provided by operating activities was $1.37 billion, nearly flat year-over-year, with $4.9 billion utilized for acquisitions, and net cash from financing activities at a positive $1.6 billion, driven by commercial paper issuance and short-term borrowings | (In millions) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,371 | $1,360 | | Capital expenditures | ($259) | ($233) | | Cash paid for acquisitions, net | ($4,913) | ($661) | | Net cash provided by financing activities | $1,602 | $1,110 | Non-GAAP Reconciliations This section provides reconciliations of Honeywell's non-GAAP financial measures, including organic sales, adjusted earnings per share, and free cash flow, to their most directly comparable GAAP financial measures Organic Sales Reconciliation This section reconciles the 5% reported sales growth to the 4% organic sales growth for Q2 2024, with the 1% difference attributed to the positive impact from acquisitions, net of divestitures, and negligible foreign currency translation | Reconciliation (Q2 2024) | Honeywell | AERO | IA | BA | ESS | | :--- | :--- | :--- | :--- | :--- | :--- | | Reported sales % change | 5% | 16% | (8)% | 4% | 2% | | Less: Acquisitions, net | 1% | 0% | 1% | 4% | 0% | | Less: Foreign currency | 0% | 0% | (1)% | (1)% | (1)% | | Organic sales % change | 4% | 16% | (8)% | 1% | 3% | Adjusted Earnings Per Share (EPS) Reconciliation This section reconciles the GAAP diluted EPS of $2.36 to the non-GAAP Adjusted EPS of $2.49 for Q2 2024, primarily adjusted for amortization of acquisition-related intangibles ($0.10 per share) and other acquisition-related costs ($0.03 per share) | Reconciliation (Q2 2024) | Per Share Amount | | :--- | :--- | | Diluted EPS (GAAP) | $2.36 | | Amortization of acquisition-related intangibles | $0.10 | | Acquisition-related costs | $0.03 | | Adjusted EPS (Non-GAAP) | $2.49 | Free Cash Flow (FCF) Reconciliation This section reconciles cash provided by operating activities of $1.37 billion to Free Cash Flow of $1.11 billion for Q2 2024, after subtracting $259 million in capital expenditures, with full-year 2024 free cash flow projected between $5.5 billion and $5.9 billion | (In millions) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $1,371 | $1,360 | | Capital expenditures | ($259) | ($233) | | Free cash flow | $1,112 | $1,127 | - The company's full-year 2024 guidance for free cash flow is in the range of $5.5 billion to $5.9 billion[57]