On July 25, 2024, Honeywell International Inc (HON, Financial) released its 8-K filing detailing the company's second-quarter earnings results. The company reported sales of $9.6 billion, a 5% increase year-over-year, and earnings per share (EPS) of $2.36, surpassing analyst estimates of $2.34. Adjusted EPS stood at $2.49, also above the high end of previous guidance.
Company Overview
Honeywell traces its roots to 1885 with Albert Butz's firm, Butz Thermo-Electric Regulator, which produced a predecessor to the modern thermostat. Other inventions by Honeywell include biodegradable detergent and autopilot. Today, Honeywell is a global multi-industry behemoth with one of the largest installed bases of equipment. It operates through four business segments: aerospace technologies (37% of 2023 company revenue), industrial automation (29%), energy and sustainability solutions (17%), and building automation (17%). Recently, Honeywell has made several portfolio changes to focus on fewer end markets and align with a set of secular growth trends. The firm is working diligently to expand its installed base, deriving 30% of its revenue from recurring aftermarket services.
Performance and Challenges
Honeywell's second-quarter performance was driven by strong growth in its Aerospace Technologies segment, which saw a 16% increase in sales on an organic basis. This growth was fueled by sustained demand in commercial aviation and defense and space. However, the Industrial Automation segment faced challenges, with an 8% decline in sales due to volume softness in warehouse and workflow solutions.
Despite these challenges, Honeywell's overall performance was robust, with a 5% increase in operating income and a 10 basis point expansion in operating margin to 20.7%. The company's ability to navigate a dynamic operating environment and deliver strong results across most segments underscores its resilience and strategic focus.
Financial Achievements
Honeywell's financial achievements in the second quarter are noteworthy. The company deployed $6.4 billion of capital to mergers and acquisitions (M&A), dividends, share repurchases, and capital expenditures. This includes the closing of the $5 billion acquisition of Access Solutions and the announcement of two additional deals: the $1.9 billion acquisition of CAES Systems Holdings and the $1.8 billion acquisition of Air Products' LNG business.
These strategic investments are expected to drive future growth and align with Honeywell's focus on automation, the future of aviation, and energy transition, all underpinned by digitalization.
Income Statement Highlights
| Metric | 2Q 2024 | 2Q 2023 | Change |
|---|---|---|---|
| Sales | $9,577 million | $9,146 million | 5% |
| Operating Income Margin | 20.7% | 20.6% | 10 bps |
| Segment Profit | $2,199 million | $2,113 million | 4% |
| Segment Margin | 23.0% | 23.1% | -10 bps |
| Earnings Per Share | $2.36 | $2.22 | 6% |
| Adjusted Earnings Per Share | $2.49 | $2.30 | 8% |
| Operating Cash Flow | $1,371 million | $1,360 million | 1% |
| Free Cash Flow | $1,112 million | $1,127 million | -1% |
Segment Performance
The Aerospace Technologies segment led the growth with a 16% increase in sales, driven by strong performance in commercial aviation and defense and space. The Industrial Automation segment, however, saw an 8% decline in sales due to volume softness in warehouse and workflow solutions. Building Automation and Energy and Sustainability Solutions segments also showed positive growth, with sales increasing by 1% and 3% respectively on an organic basis.
Updated 2024 Outlook
Based on the strong second-quarter performance, Honeywell has updated its full-year guidance. The company now expects full-year sales to be in the range of $39.1 billion to $39.7 billion, with organic sales growth of 5% to 6%. Adjusted earnings per share are projected to be between $10.05 and $10.25, up 6% to 8% year-over-year. Operating cash flow is expected to be in the range of $6.6 billion to $7.0 billion, with free cash flow of $5.5 billion to $5.9 billion.
| Guidance 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 |
Explore the complete 8-K earnings release (here) from Honeywell International Inc for further details.
