The club, which owns Honeywell International (HON), reported a solid third quarter result before the opening bell on Thursday. Estimates compiled by Refinitiv show that the stronger dollar resulted in a 9% year-over-year increase in sales for him to $8.95 billion, below analysts’ expectations of $8.98 billion. Adjusted earnings per share (EPS) of $2.25 beat consensus expectations of $2.16 per share. In line with adjusted operating margin, segment margin increased 60 basis points year-over-year to 21.8%, but fell short of analyst expectations of 22.3% margin. Conclusion Despite supply chain constraints, decades of high inflation, geopolitical turmoil, rapidly rising interest rates and a persistently strong U.S. dollar, yet again for Honeywell as management once again demonstrated its ability to deliver. It’s been a great quarter. Margins improved across all business segments, operating cash flow exceeded expectations, and Honeywell’s adjusted free cash flow conversion ratio was 124%. Management said it has raised its full-year EPS guidance for 2022 and expects further revenue and earnings growth next year along with continued margin expansion. Despite macro challenges, Honeywell’s backlog remains strong due to strong demand and resilient end markets. These factors, combined with the solid execution of management, continue to favor Honeywell’s stock and repeat 1 rating. Honeywell shares were up 3.74% in intraday trading to $197.4 per share. Corporate Third Quarter Results Ending quarter backlog (sales commitments realized in future periods) increased 9% year-over-year to $29.1 billion. Operating cash flow increased 86% year-over-year to $2.1 billion in the third quarter, while free cash flow increased 108% to $1.9 billion, versus Wall Street expectations of $1.87 billion and $2.0 billion, respectively. The company said it “continues to focus on strong collections and matching supply and demand,” which has allowed Honeywell to reduce inventory for the first time in seven quarters. As a result of strong cash flow and Honeywell’s strong balance sheet, management has been able to invest approximately $1.2 billion in share repurchases, dividends and capital expenditures. Segment Third Quarter Results Aerospace revenue increased 9 percent year-over-year to $2.98 billion, exceeding analyst estimates of $2.92 billion. Organic sales growth increased 10% year-over-year. Operating income increased more than 10% year-over-year to $818 million, beating estimates of $780 million. Segment profit margin increased 40 basis points on an annual basis to 27.5%. Within the segment, there was a 30% organic increase in commercial aviation original equipment, a 24% organic increase in commercial aviation aftermarket, and a 10% organic decline in defense and space. Honeywell Building Technologies revenue increased 11 percent year-over-year to $1.53 billion, below analyst estimates of $1.55 billion. Organic sales growth increased 19% compared to the prior year period. Operating income of $368 million was up 14% year-over-year, just below consensus expectations of $370 million. Segment profit margin expanded 60 basis points year-over-year to 24.1%. Within the segment, we saw 23% organic growth in products and 13% organic growth in building solutions. Performance Materials and Technologies sales increased 8 percent year-over-year to $2.72 billion, in line with analyst estimates of $2.71 billion. Organic sales growth increased 14% on an annual basis. Operating income of $615 million increased 10% year-over-year and exceeded consensus expectations of $607 million. Segment profit margin increased 40 basis points year-over-year to 22.6%. Within the segment, UOP increased 6% organic with 6% organic growth in Honeywell Process Solutions and 33% organic growth in Advanced Materials. Safety and Productivity Solutions revenue fell 7% year-over-year to $1.73 billion, below analyst estimates of $1.83 billion. Organic sales growth decreased 4% year-over-year. Operating income increased 10.6% year-over-year to $271 million, slightly ahead of analyst estimates of $270 million. Segment profit margin increased 250 basis points on an annual basis to 15.7%. Within the segment, 3% organic growth in Sensing and Safety Technologies and 2% organic growth in Productivity Solutions and Services were offset by a 15% organic decline in Warehouse and Workflow Solutions. Looking ahead to the guidance, management provided updates to both the fourth quarter and full year 2022 guidance. Honeywell now forecasts fourth-quarter sales of $9.1 billion to $9.4 billion, while Wall Street expects $9.27 billion. Management expects fourth-quarter EPS to be between $2.46 and $2.56, while the consensus number is $2.54 per share. The overall segment margin is expected to be between 22.8% and 23.2% against the consensus estimate of 22.9%. For the full year, management lowered its revenue guidance slightly from $35.5 billion to $36.1 billion to a range of $35.4 billion to $35.7 billion as a result of foreign exchange headwinds. This matches the consensus forecast of $35.6 billion. However, despite a weaker-than-expected top-line guide, management has raised the lower end of its full-year adjusted earnings per share guidance to a range of $8.7 to $8.8. share. Full-year segment margin is expected to be between 21.6% and 21.8%, up from the previous range of 21.3% to 21.7%, 60 to 80 basis points higher than a year ago. The new margin guidance is still below Wall Street’s forecast of 21.9%. The company reaffirmed its full-year free cash flow guidance, targeting a range of $4.7 billion to $5.1 billion, compared to the consensus forecast of $4.95 billion. Management also provided some preliminary thinking for 2023, stating that record levels of demand and a strong backlog will support organic growth in Aerospace, Performance Materials and Technologies, and Honeywell Building Technologies. said he expects Additionally, the team expects to deliver overall revenue growth, margin expansion, adjusted earnings and free cash flow growth in 2023 despite the volatile business environment. Finally, management said, “We have significant balance sheet capacity to conduct meaningful M&A, we anticipate a favorable trading environment heading into 2023, and our commitment to accelerate capital deployment. are supporting,” he said. (Jim Cramer’s Charitable Trust is Long HON. See here for a full list of shares.) 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Aircraft engines are tested at Honeywell Aerospace in Phoenix.
Alwyn Scott | Reuters
club holding Honeywell International (HON) reported strong third quarter results ahead of Thursday’s opening bell.
