Honeywell(HON) - 2025 Q1 - Quarterly Results

Q1 2025 Performance and 2025 Outlook Honeywell reported strong Q1 2025 results, updated its full-year guidance, and announced significant portfolio transformation plans including the separation of Automation and Aerospace businesses First Quarter 2025 Performance Highlights Honeywell reported strong first-quarter 2025 results, exceeding guidance on all metrics. The company achieved 8% reported sales growth and 4% organic sales growth, driven by double-digit organic growth in the defense and space and building solutions sectors. While operating margin saw a slight contraction, segment margin remained flat at 23.0%. Adjusted EPS grew 7% to $2.51, and free cash flow increased significantly by 61% year-over-year Q1 2025 Financial Highlights vs. Q1 2024 (in millions) | Metric | 1Q 2025 | 1Q 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Sales | $9,822 | $9,105 | +8% | 4% | | Operating Income Margin | 20.1% | 20.4% | -30 bps | N/A | | Segment Margin | 23.0% | 23.0% | 0 bps | N/A | | EPS | $2.22 | $2.23 | 0% | N/A | | Adjusted EPS | $2.51 | $2.34 | +7% | N/A | | Operating Cash Flow | $597 | $448 | +33% | N/A | | Free Cash Flow | $346 | $215 | +61% | N/A | - Backlog increased by 8% year-over-year (excluding acquisitions), indicating strong customer demand, particularly in Building Automation and Energy and Sustainability Solutions[4] - The company deployed $2.9 billion in capital, including $1.9 billion for share repurchases, and announced the $2.2 billion acquisition of Sundyne[4][7] Full-Year 2025 Guidance Update Honeywell maintained its full-year organic sales growth forecast of 2% to 5% but updated other key metrics. The company raised its adjusted EPS guidance to a range of $10.20 to $10.50, an increase of 5 cents at the midpoint. The segment margin guidance was slightly narrowed to 23.2% - 23.5%. Free cash flow guidance remains unchanged at $5.4 billion to $5.8 billion. This guidance incorporates expected impacts from tariffs and global demand uncertainty but does not yet include the pending Sundyne acquisition Full-Year 2025 Guidance Changes | Metric | Previous Guidance | Current Guidance | | :--- | :--- | :--- | | Sales (in billions) | $39.6 - $40.6 | $39.6 - $40.5 | | Organic Growth | 2% - 5% | 2% - 5% (Maintained) | | Segment Margin | 23.2% - 23.6% | 23.2% - 23.5% | | Adjusted EPS | $10.10 - $10.50 | $10.20 - $10.50 (Raised) | | Operating Cash Flow (in billions) | $6.7 - $7.1 | $6.7 - $7.1 (Maintained) | | Free Cash Flow (in billions) | $5.4 - $5.8 | $5.4 - $5.8 (Maintained) | Portfolio Transformation Honeywell is actively transforming its portfolio by planning to separate its Automation and Aerospace businesses, in addition to the previously announced spin-off of Advanced Materials. These actions, intended for completion in the second half of 2026, will result in three distinct, publicly-listed companies. The company has established dedicated management offices to oversee these separations - The company's Board of Directors has decided to separate the Automation and Aerospace businesses, along with the planned spin-off of Advanced Materials[6] - The transformation aims to create three industry-leading public companies and is expected to be completed in the second half of 2026[6] Segment Performance Analysis Detailed analysis of Honeywell's segment performance, highlighting sales growth, profitability, and key operational drivers across its business units Aerospace Technologies Aerospace Technologies delivered strong results with a 9% organic sales increase, driven by a 15% rise in commercial aftermarket sales and 10% growth in defense and space. Backlog grew 9% on high-single-digit order growth. However, segment margin contracted by 190 basis points to 26.3% due to mix pressure and acquisition impacts, which were partially offset by productivity actions Aerospace Technologies Q1 2025 Performance | Metric | 1Q 2025 | 1Q 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $4,172 | $3,669 | +14% | 9% | | Segment Profit (in millions) | $1,099 | $1,035 | +6% | N/A | | Segment Margin | 26.3% | 28.2% | -190 bps | N/A | - Growth was primarily driven by a 15% increase in commercial aftermarket sales and a 10% increase in defense and space sales[8] Industrial Automation Industrial Automation sales declined by 2% organically. While warehouse and workflow solutions returned to growth (up 5%), this was offset by modest declines in smart energy and thermal solutions and demand headwinds in Europe for productivity solutions. Segment margin contracted 130 basis points to 17.8%, impacted by receivables write-downs and lower volume Industrial Automation Q1 2025 Performance | Metric | 1Q 2025 | 1Q 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $2,378 | $2,478 | -4% | -2% | | Segment Profit (in millions) | $424 | $474 | -11% | N/A | | Segment Margin | 17.8% | 19.1% | -130 bps | N/A | - Warehouse and workflow solutions grew 5%, but this was offset by declines in other areas. Sensing and safety technologies decreased 5% due to weaker volumes in personal protective equipment[9] Building Automation Building Automation demonstrated robust performance with 8% organic sales growth. This was led by 11% organic growth in building solutions for the second consecutive quarter and 6% organic growth in building products. Orders grew both year-over-year and sequentially. Segment margin expanded significantly by 150 basis points to 26.0%, driven by volume leverage and productivity Building Automation Q1 2025 Performance | Metric | 1Q 2025 | 1Q 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $1,692 | $1,426 | +19% | 8% | | Segment Profit (in millions) | $440 | $350 | +26% | N/A | | Segment Margin | 26.0% | 24.5% | +150 bps | N/A | - Growth was strong across the segment, with building solutions up 11% organically and building products up 6% organically, highlighted by double-digit growth in fire products[9] Energy and Sustainability Solutions Energy and Sustainability Solutions saw a 2% organic sales decline. UOP grew 2%, but this was offset by a 4% decline in advanced materials due to tough prior-year comparisons in fluorine products. Despite the sales dip, advanced materials orders grew 7% year-over-year. Segment margin expanded by an impressive 230 basis points to 22.2%, benefiting from commercial excellence, productivity, and a margin-accretive acquisition Energy and Sustainability Solutions Q1 2025 Performance | Metric | 1Q 2025 | 1Q 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Sales (in millions) | $1,561 | $1,525 | +2% | -2% | | Segment Profit (in millions) | $346 | $303 | +14% | N/A | | Segment Margin | 22.2% | 19.9% | +230 bps | N/A | - UOP grew 2% led by strength in refining, petrochemicals, and sustainability projects. Advanced materials sales declined 4% but saw double-digit order growth in fluorine products[9] Consolidated Financial Statements Overview of Honeywell's consolidated financial statements, detailing the statement of operations, balance sheet, and cash flows for the reported periods Consolidated Statement of Operations For the first quarter of 2025, Honeywell's net sales increased to $9.82 billion from $9.11 billion in the prior year. Income before taxes was relatively flat at $1.88 billion, and net income attributable to Honeywell was $1.45 billion, resulting in diluted earnings per share of $2.22, compared to $2.23 in Q1 2024 Q1 2025 Statement of Operations (in millions) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $9,822 | $9,105 | | Total Cost of products and services sold | $6,037 | $5,583 | | Income before taxes | $1,884 | $1,871 | | Net income attributable to Honeywell | $1,449 | $1,463 | | Earnings per share - assuming dilution | $2.22 | $2.23 | Consolidated Balance Sheet As of March 31, 2025, Honeywell's total assets were $75.22 billion, nearly unchanged from December 31, 2024. Cash and cash equivalents decreased to $9.66 billion from $10.57 billion. Total liabilities increased slightly to $55.42 billion, while total shareowners' equity decreased to $18.02 billion from $19.15 billion at year-end 2024, partly due to share repurchases Balance Sheet Summary (in millions) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $27,645 | $27,908 | | Total assets | $75,218 | $75,196 | | Total current liabilities | $22,071 | $21,256 | | Long-term debt | $25,744 | $25,479 | | Total shareowners' equity | $18,024 | $19,154 | Consolidated Statement of Cash Flows In the first three months of 2025, net cash provided by operating activities increased to $597 million from $448 million in the prior-year period. Net cash used for investing activities was $371 million. Financing activities resulted in a net cash use of $1.18 billion, driven primarily by $1.9 billion in common stock repurchases and $732 million in dividend payments. This led to a net decrease in cash of $910 million for the quarter Q1 2025 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $597 | $448 | | Net cash used for investing activities | ($371) | ($273) | | Net cash (used for) provided by financing activities | ($1,180) | $3,696 | | Net (decrease) increase in cash | ($910) | $3,831 | - Key financing activities included $1.9 billion in share repurchases and $732 million in cash dividends paid[35] Non-GAAP Reconciliations Reconciliations of key non-GAAP financial measures to their GAAP equivalents, including organic sales, segment profit, adjusted EPS, and free cash flow Reconciliation of Organic Sales The company provides a reconciliation from reported sales growth to organic sales growth, which excludes the impacts of foreign currency translation and acquisitions/divestitures. For Q1 2025, total company reported sales growth of 8% was adjusted for a 5% positive impact from acquisitions and a 1% negative impact from currency, resulting in 4% organic sales growth Q1 2025 Organic Sales Reconciliation | Segment | Reported Change | Foreign Currency | Acquisitions/Divestitures | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Honeywell | 8% | (1)% | 5% | 4% | | Aerospace | 14% | 0% | 5% | 9% | | Industrial Auto. | (4)% | (2)% | 0% | (2)% | | Building Auto. | 19% | (2)% | 13% | 8% | | Energy & Sust. | 2% | (1)% | 5% | (2)% | Reconciliation of Operating Income to Segment Profit Honeywell reconciles GAAP Operating Income to the non-GAAP measure of Segment Profit by excluding items such as stock compensation, repositioning charges, amortization of acquisition-related intangibles, and other specific costs. In Q1 2025, Operating Income of $1.97 billion was reconciled to Segment Profit of $2.26 billion. This resulted in an Operating Income Margin of 20.1% and a Segment Profit Margin of 23.0% Q1 2025 Operating Income to Segment Profit (in millions) | Line Item | Q1 2025 | | :--- | :--- | | Operating income | $1,970 | | Stock compensation expense | $61 | | Repositioning, Other | $62 | | Amortization of acquisition-related intangibles | $136 | | Impairment of assets held for sale | $15 | | Other adjustments | $14 | | Segment profit | $2,258 | | Operating income margin % | 20.1% | | Segment profit margin % | 23.0% | Reconciliation of EPS to Adjusted EPS The company adjusts diluted EPS to arrive at adjusted EPS, which it believes provides a more meaningful measure of ongoing performance. For Q1 2025, diluted EPS of $2.22 was adjusted for items including pension mark-to-market expense ($0.02), amortization of acquisition-related intangibles ($0.16), and divestiture-related costs ($0.08), resulting in an adjusted EPS of $2.51 Q1 2025 EPS to Adjusted EPS Reconciliation | Line Item | Per Share Amount | | :--- | :--- | | Earnings per share - diluted | $2.22 | | Pension mark-to-market expense | $0.02 | | Amortization of acquisition-related intangibles | $0.16 | | Acquisition-related costs | $0.01 | | Divestiture-related costs | $0.08 | | Impairment of assets held for sale | $0.02 | | Adjusted earnings per share - diluted | $2.51 | Reconciliation of Operating Cash Flow to Free Cash Flow Honeywell defines Free Cash Flow (FCF) as cash from operating activities minus capital expenditures. For Q1 2025, the company generated $597 million in operating cash flow and had $251 million in capital expenditures, resulting in Free Cash Flow of $346 million, a 61% increase from the $215 million generated in Q1 2024. The full-year 2025 FCF guidance is projected at $5.4 to $5.8 billion Q1 Free Cash Flow Reconciliation (in millions) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $597 | $448 | | Capital expenditures | ($251) | ($233) | | Free cash flow | $346 | $215 | Full-Year 2025 Expected Free Cash Flow (in billions) | Line Item | FY 2025 (E) | | :--- | :--- | | Cash provided by operating activities | ~$6.7 - $7.1 | | Capital expenditures | ~($1.3) | | Free cash flow | ~$5.4 - $5.8 |