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Honeywell International Inc. - 1st Quarter Results

21/04/17 12:00PM by about : - 0 Comments - 4317 words

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 ( 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.


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%


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
Sales 2,477 2,553 3%
Segment Profit 360 389 8%
Segment Margin 14.5% 15.2% 70 bps
Sales 2,281 2,069 (9%)
Segment Profit 461 471 2%
Segment Margin 20.2% 22.8% 260 bps
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 ( 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

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

Media Investor Relations
Robert C. Ferris Mark Macaluso
(973) 455-3388 (973) 455-2222


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
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
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' equity $     54,779 $     54,146


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

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