TIDMHON
Honeywell Delivers $1.71 Earnings Per Share, Up 10 Percent
- Normalized for Tax, Earnings Per Share of $1.66, Up 11 Percent Excluding
Divestitures,
Exceeds High End of Guidance Range
- Reported Sales Flat, Organic Up Over 2 Percent
- Operating Income Margin Expansion of 100 bps, Segment Margin Expansion of 70
bps
- Free Cash Flow 6X Greater Than First-Quarter 2016
- Raising Low-End of 2017 EPS Guidance Range by 5 Cents to $6.90 - $7.10
MORRIS PLAINS, N.J., April 21, 2017 -- Honeywell (NYSE: HON) today announced
financial results for the first quarter of 2017 and updated its full-year 2017
earnings guidance.
"Honeywell reported a strong start to 2017, with over 2 percent organic sales
growth, 70 basis points of segment margin expansion, and free cash flow of
nearly $800 million that was more than six times greater than 2016. Our strong
operational performance resulted in reported earnings per share of $1.71.
Normalizing for tax, earnings per share was $1.66, or 2 cents above the
high-end of our first-quarter guidance and up 11 percent versus last year,
excluding divestitures," said Darius Adamczyk, President and Chief Executive
Officer of Honeywell.
"Each of our businesses contributed," Adamczyk said. "The commercial
aftermarket within Aerospace and the global distribution business within Home
and Building Technologies remained strong. In Performance Materials and
Technologies, robust demand for Solstice® low-global-warming products drove
double-digit organic growth in Advanced Materials, and improving conditions in
the oil and gas industry bolstered ongoing strength in UOP. In Safety and
Productivity Solutions, demand for warehouse solutions and industrial safety
products enabled growth in the quarter."
Adamczyk concluded, "Our diversified portfolio, coupled with the investments
we've made over the past several years, drove our excellent performance in the
first quarter. As a result of our performance, we are raising the low end of
our full-year guidance by 5 cents. We now anticipate that 2017 earnings per
share will be $6.90 to $7.10, up 7 percent to 10 percent, excluding
divestitures, any pension mark-to-market adjustments, and 2016 debt refinancing
charges. We look forward to continuing our track record of performance and we
remain focused on accelerating our organic growth, continuing to expand margins
by maintaining our productivity rigor, delivering best-in-class returns as the
leading software-industrial company, and more aggressively deploying capital."
Honeywell will discuss the results during its investor conference call today
starting at 9:30 a.m. Eastern Daylight Time.
First Quarter Performance
Honeywell sales for the first quarter were flat on a reported basis and up over
2 percent on an organic basis. The difference between reported and organic
sales is due to the impact of foreign currency translation, the 2016 spin-off
of the former Resins and Chemicals business in Performance Materials and
Technologies, and the 2016 divestiture of the Aerospace government services
business, partially offset by acquisitions, primarily Intelligrated in Safety
and Productivity Solutions. The first-quarter financial results can be found in
Tables 1 and 2 below.
Aerospace sales for the first quarter were flat on an organic basis driven by
growth in the Air Transport aftermarket and gas turbo penetration in Europe and
China, offset by lower OE volumes in Business and General Aviation. Overall,
Defense and Space sales were flat on an organic basis in the quarter. Segment
margin expanded 90 bps to 22.4 percent, driven by restructuring benefits,
productivity net of inflation, and commercial excellence, partially offset by
lower Business and General Aviation volumes.
Home and Building Technologies sales for the first quarter were up 3 percent on
an organic basis driven by strong performance in Distribution, air and water
products growth in China, and the impact of new product introductions. Segment
margin expanded 70 bps to 15.2 percent, driven by restructuring benefits and
productivity net of inflation, partially offset by growth investments.
Performance Materials and Technologies sales for the first quarter were up 5
percent on an organic basis driven by a continued increase in Solstice® sales
in Advanced Materials and strong modular gas processing growth in UOP. Segment
margin expanded 260 bps to 22.8 percent, driven by productivity net of
inflation, commercial excellence, and higher sales volume.
Safety and Productivity Solutions sales for the first quarter were up 3 percent
on an organic basis as a result of higher volumes in safety products and
workflow solutions. Segment margin improved 50 bps to 14.7 percent, primarily
driven by restructuring benefits and productivity, net of inflation, partially
offset by acquisition amortization and integration costs. Excluding the impact
of acquisitions, segment margin expanded by more than 300 bps.
To participate in today's conference call, please dial (888) 349-9618
(domestic) or (719) 325-2385 (international) approximately ten minutes before
the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in
for Honeywell's first quarter 2017 earnings call or provide the conference code
HON1Q17. 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 1:30 p.m. EDT, April 21, until 1:30 p.m. EDT, April
28, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The
access code is 7717044.
TABLE 1: SUMMARY OF FINANCIAL RESULTS - TOTAL HONEYWELL
1Q 2016 1Q 2017 Change
Sales 9,522 9,492 Flat
Organic 2%
Segment Margin 18.1% 18.8% 70 bps
Operating Income Margin 17.8% 18.8% 100 bps
Earnings Per Share
Reported $1.56 $1.71 10%
Ex-Divestitures, Normalized for Expected Full-Year Tax Rate of 25% $1.50 $1.66 11%
Cash Flow From Operations 319 940 195%
Free Cash Flow1 125 772 518%
TABLE 2: SUMMARY OF FINANCIAL RESULTS - SEGMENTS
AEROSPACE 1Q 2016 1Q 2017 Change
Sales 3,705 3,546 (4%)
Segment Profit 798 796 Flat
Segment Margin 21.5% 22.4% 90 bps
HOME AND BUILDING TECHNOLOGIES
Sales 2,477 2,553 3%
Segment Profit 360 389 8%
Segment Margin 14.5% 15.2% 70 bps
PERFORMANCE MATERIALS AND TECHNOLOGIES
Sales 2,281 2,069 (9%)
Segment Profit 461 471 2%
Segment Margin 20.2% 22.8% 260 bps
SAFETY AND PRODUCTIVITY SOLUTIONS
Sales 1,059 1,324 25%
Segment Profit 150 194 29%
Segment Margin 14.2% 14.7% 50 bps
Ex-M&A 330 bps
Honeywell (http://www.honeywell.com/) is a Fortune 100 software-industrial
company that delivers industry specific solutions that include aerospace and
automotive products and services; control technologies for buildings, homes,
and industry; and performance materials globally. Our technologies help
everything from aircraft, cars, homes and 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, and technological factors affecting our
operations, markets, products, services and prices. Such forward-looking
statements are not guarantees of future performance, and actual results,
developments and business decisions may differ from those envisaged by such
forward-looking statements. 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.
______________________________
1 Cash Flow From Operations Less Capital Expenditures
Contacts:
Media Investor Relations
Robert C. Ferris Mark Macaluso
(973) 455-3388 (973) 455-2222
rob.ferris@honeywell.com mark.macaluso@honeywell.com
Honeywell International Inc
Consolidated Statement of Operations (Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2017 2016
Product sales $ 7,540 $ 7,619
Service sales 1,952 1,903
Net sales 9,492 9,522
Costs, expenses and other
Cost of products sold (A) 5,237 5,349
Cost of services sold (A) 1,119 1,198
6,356 6,547
Selling, general and administrative expenses (A) 1,349 1,280
Other (income) expense (12) (18)
Interest and other financial charges 75 85
7,768 7,894
Income before taxes 1,724 1,628
Tax expense 392 402
Net income 1,332 1,226
Less: Net income attributable to the noncontrolling interest 6 10
Net income attributable to Honeywell $ 1,326 $ 1,216
Earnings per share of common stock - basic $ 1.74 $ 1.58
Earnings per share of common stock - assuming dilution $ 1.71 $ 1.56
Weighted average number of shares outstanding - basic 763.1 767.9
Weighted average number of shares outstanding - assuming dilution 773.9 779.6
(A) Cost of products and services sold and selling, general and administrative
expenses include amounts for repositioning and other charges, pension and other
postretirement (income) expense, and stock compensation expense.
Honeywell International Inc
Segment Data (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
Net Sales 2017 2016
Aerospace $ 3,546 $ 3,705
Home and Building Technologies 2,553 2,477
Performance Materials and Technologies 2,069 2,281
Safety and Productivity Solutions 1,324 1,059
Total $ 9,492 $ 9,522
Reconciliation of Segment Profit to Income Before Taxes
Three Months Ended
March 31,
Segment Profit 2017 2016
Aerospace $ 796 $ 798
Home and Building Technologies 389 360
Performance Materials and Technologies 471 461
Safety and Productivity Solutions 194 150
Corporate (61) (49)
Total segment profit 1,789 1,720
Other income (expense) (A) 6 12
Interest and other financial charges (75) (85)
Stock compensation expense (B) (50) (53)
Pension ongoing income (B) 179 150
Other postretirement income (B) 4 9
Repositioning and other charges (B) (129) (125)
Income before taxes $ 1,724 $ 1,628
(A) Equity income (loss) of affiliated companies is included in segment profit.
(B) Amounts included in cost of products and services sold and selling, general
and administrative expenses.
Honeywell International Inc
Consolidated Balance Sheet (Unaudited)
(Dollars in millions)
March 31, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 7,710 $ 7,843
Short-term investments 1,885 1,520
Accounts receivable - net 8,155 8,177
Inventories 4,652 4,366
Other current assets 1,178 1,152
Total current assets 23,580 23,058
Investments and long-term receivables 533 587
Property, plant and equipment - net 5,816 5,793
Goodwill 17,827 17,707
Other intangible assets - net 4,592 4,634
Insurance recoveries for asbestos related liabilities 407 417
Deferred income taxes 337 347
Other assets 1,687 1,603
Total assets $ 54,779 $ 54,146
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $ 5,805 $ 5,690
Commercial paper and other short-term borrowings 3,415 3,366
Current maturities of long-term debt 1,271 227
Accrued liabilities 6,790 7,048
Total current liabilities 17,281 16,331
Long-term debt 11,181 12,182
Deferred income taxes 414 486
Postretirement benefit obligations other than pensions 546 473
Asbestos related liabilities 1,002 1,014
Other liabilities 3,877 4,110
Redeemable noncontrolling interest 3 3
Shareowners' equity 20,475 19,547
Total liabilities, redeemable noncontrolling interest and shareowners' $ 54,779 $ 54,146
equity
Honeywell International Inc
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2017 2016
Cash flows from operating activities:
Net income $ 1,332 $ 1,226
Less: Net income attributable to the noncontrolling interest 6 10
Net income attributable to Honeywell 1,326 1,216
Adjustments to reconcile net income attributable to Honeywell to net
cash provided by operating activities:
Depreciation 170 179
Amortization 101 74
Repositioning and other charges 129 125
Net payments for repositioning and other charges (137) (134)
Pension and other postretirement income (183) (159)
Pension and other postretirement benefit payments (24) (38)
Stock compensation expense 50 53
Deferred income taxes (42) 48
Other 14 88
Changes in assets and liabilities, net of the effects of
acquisitions and divestitures:
Accounts receivable 23 (208)
Inventories (286) (241)
Other current assets (25) (54)
Accounts payable 115 (113)
Accrued liabilities (291) (517)
Net cash provided by operating activities 940 319
Cash flows from investing activities:
Expenditures for property, plant and equipment (168) (194)
Proceeds from disposals of property, plant and equipment 24 1
Increase in investments (1,256) (836)
Decrease in investments 825 880
Cash paid for acquisitions, net of cash acquired - (1,056)
Other (29) 9
Net cash used for investing activities (604) (1,196)
Cash flows from financing activities:
Proceeds from issuance of commercial paper and other short-term borrowings 2,468 6,300
Payments of commercial paper and other short-term borrowings (2,467) (8,750)
Proceeds from issuance of common stock 221 105
Proceeds from issuance of long-term debt 11 4,448
Payments of long-term debt (5) (419)
Repurchases of common stock (310) (1,156)
Cash dividends paid (503) (499)
Payments to purchase the noncontrolling interest - (238)
Other (33) (14)
Net cash used for financing activities (618) (223)
Effect of foreign exchange rate changes on cash and cash equivalents 149 118
Net decrease in cash and cash equivalents (133) (982)
Cash and cash equivalents at beginning of period 7,843 5,455
Cash and cash equivalents at end of period $ 7,710 $ 4,473
Honeywell International Inc
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited)
(Dollars in millions)
Three Months
Ended
March 31,
2017 2016
Cash provided by operating activities $ 940 $ 319
Expenditures for property, plant and (168) (194)
equipment
Free cash flow $ 772 $ 125
We define free cash flow as cash provided by operating activities less cash
expenditures for property, plant and equipment.
We believe that this metric is useful to investors and management as a measure
of cash generated by business 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 business operations and the
impact that this cash flow has on our liquidity.
Honeywell International Inc
Reconciliation of Segment Profit to Operating Income and Calculation of Segment
Profit and Operating Income Margins (Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2017 2016
Segment Profit $ 1,789 $ 1,720
Stock compensation expense (A) (50) (53)
Repositioning and other (A, B) (135) (131)
Pension ongoing income (A) 179 150
Other postretirement income (A) 4 9
Operating Income $ 1,787 $ 1,695
Segment Profit $ 1,789 $ 1,720
÷ Sales 9,492 9,522
Segment Profit Margin % 18.8% 18.1%
Operating Income $ 1,787 $ 1,695
÷ Sales 9,492 9,522
Operating Income Margin % 18.8% 17.8%
(A) Included in cost of products and services sold and selling, general and
administrative expenses.
(B) Includes repositioning, asbestos, environmental expenses and equity income
adjustment.
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Calculation of Segment Profit Margin Excluding Mergers and Acquisitions
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31,
2017 2016
Safety and Productivity Solutions
Segment Profit excluding mergers and acquisitions $ 190 $ 149
÷ Sales excluding mergers and acquisitions $ 1,080 $ 1,041
Segment Profit Margin excluding mergers and acquisitions % 17.6% 14.3%
We believe these measures are useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Reconciliation of Organic Sales % Change (Unaudited)
Three Months Ended
March 31,
2017
Honeywell
Reported sales % change -
Less: Foreign currency translation (1)%
Less: Acquisitions and divestitures, net (1)%
Organic sales % change 2%
Aerospace
Reported sales % change (4)%
Less: Foreign currency translation (1)%
Less: Acquisitions and divestitures, net (3)%
Organic sales % change -
Home and Building Technologies
Reported sales % change 3%
Less: Foreign currency translation (2)%
Less: Acquisitions and divestitures, net 2%
Organic sales % change 3%
Performance Materials and Technologies
Reported sales % change (9)%
Less: Foreign currency translation (1)%
Less: Acquisitions and divestitures, net (13)%
Organic sales % change 5%
Safety and Productivity Solutions
Reported sales % change 25%
Less: Foreign currency translation (1)%
Less: Acquisitions and divestitures, net 23%
Organic sales % change 3%
We believe organic sales growth is a measure that is useful to investors and
management in understanding our ongoing operations and in analysis of ongoing
operating trends.
Honeywell International Inc
Calculation of Earnings Per Share at 25% Tax Rate Excluding 2016 Divestitures
(Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
2017 2016
Income before taxes $ 1,724 $ 1,628
Taxes at 25% 431 407
Net income at 25% tax rate $ 1,293 $ 1,221
Less: Net income attributable to the noncontrolling interest 6 10
Net income attributable to Honeywell at 25% tax rate $ 1,287 $ 1,211
Weighted average number of shares outstanding - assuming dilution 773.9 779.6
Earnings per share at 25% tax rate $ 1.66 $ 1.55
Earnings per share impact attributable to 2016 divestitures (1) - 0.05
Earnings per share of common stock - assuming dilution, at 25% tax rate,
excluding 2016 divestitures $ 1.66 $ 1.50
Earnings per share of common stock - assuming dilution $ 1.71 $ 1.56
Earnings per share impact of normalizing to 25% tax rate 0.05 0.01
Earnings per share impact attributable to 2016 divestitures (1) - 0.05
Earnings per share of common stock - assuming dilution, at 25% tax rate,
excluding 2016 divestitures $ 1.66 $ 1.50
(1) Earnings per share attributable to 2016 divestitures uses weighted average
shares of 779.6 million and a blended tax rate of 36.0% for three months ended
March 31, 2016.
We believe earnings per share adjusted to expected 2017 full-year tax rate of
approximately 25% is a measure that is useful to investors and management in
understanding our ongoing operations and in analysis of ongoing operating
trends.
Honeywell International Inc
Reconciliation of Earnings Per Share to Earnings Per Share, Excluding Pension
Mark-to-Market Expense, Debt Refinancing Expense and Earnings Attributable to
2016 Divestitures (Unaudited)
Twelve Months Ended
December 31,
2017E (1) 2016 (2)
Earnings per share of common stock - assuming dilution (EPS) TBD $ 6.20
Pension mark-to-market expense TBD 0.28
Debt refinancing expense - 0.12
EPS, excluding pension mark-to-market expense and debt refinancing expense $6.90 - $7.10 6.60
Earnings attributable to 2016 divestitures - (0.14)
EPS, excluding pension mark-to-market expense, debt refinancing expense and
earnings attributable to 2016 divestitures $6.90 - $7.10 $ 6.46
(1) Utilizes weighted average shares of approximately 774 million and an
expected effective tax rate of approximately 25%
(2) Utilizes weighted average shares of 775.3 million. Pension mark-to-market
expense uses a blended tax rate of 21.3%. Debt
refinancing expense uses a tax rate of 26.5%. Earnings attributable to
2016 divestitures use a blended tax rate of 33.9%.
We believe EPS, excluding pension mark-to-market expense, debt refinancing
expense and earnings attributable to 2016 divestitures is a measure that is
useful to investors and management in understanding our ongoing operations and
in analysis of ongoing operating trends. 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 in this reconciliation.
Management is not currently forecasting an impact to earnings per share arising
from a debt refinancing or divestiture transaction. Based on economic and
industry conditions, future developments and other relevant factors, these
assumptions are subject to change.
END
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