01—Abstract
Summary
Summary of the 10-K filed February 14, 2020. Cited figures are marked; the original filing is the authoritative source.
Honeywell International Inc. reported its financial results for the fiscal year ended December 31, 2019.
The company experienced a net sales decrease of 12% year-over-year, primarily due to the spin-offs of its Transportation Systems and Homes and Global Distribution businesses in 2018. Excluding these divestitures, sales grew by 4%. Net income attributable to Honeywell decreased by 9% to $6.143 billion, with diluted EPS falling to $8.41a from $8.98 in the prior year.
This decline was attributed to the absence of profits from the spun-off entities and higher income tax expenses, partially offset by improved operational segment profits. The company's strategic focus remains on becoming a leading software-industrial company, emphasizing growth through innovation, expansion in high-growth regions, and the development of its Honeywell Forge connected solutions.
Honeywell continues to optimize its cost structure through operational improvements and aims for disciplined M&A to drive growth. The company deployed $7.8 billionb in capital during 2019, including significant share repurchases and dividend payments, reflecting a commitment to shareholder value.
02—Key points
Key Highlights
- Net sales decreased by 12% to $36.7 billion, largely due to the 2018 spin-offs of Transportation Systems and Homes and Global Distribution businesses. Excluding these, organic sales grew 4%.
- Net income attributable to Honeywell decreased by 9% to $6.14 billion ($8.41 diluted EPS), compared to $6.76 billion ($8.98 diluted EPS) in 2018.
- Aerospace segment led in sales at $14.05 billion, with strong organic growth in Commercial Aviation Aftermarket (7%), Commercial Aviation Original Equipment (6%), and Defense and Space (14%).
- Performance Materials and Technologies segment saw a 1% sales increase to $10.83 billion, driven by UOP and Process Solutions growth.
- Safety and Productivity Solutions segment experienced a 4% sales decline to $6.10 billion, primarily due to lower organic sales in Productivity Products.
- The company deployed $7.8 billion in capital during 2019, including dividends and share repurchases, with $7.0 billion remaining under its authorized repurchase program as of year-end.
- Honeywell continues to focus on becoming a premier software-industrial company, emphasizing the expansion of its Honeywell Forge connected solutions across its segments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 14, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $36.71B$41.80B | −12.2% |
| Cost of Revenue | $24.34B$29.05B | −16.2% |
| Gross Profit | $12.37B$12.76B | −3.0% |
| R&D Expenses | $1.56B$1.81B | −14.0% |
| SG&A Expenses | $5.52B$6.05B | −8.8% |
| Net Income | $6.14B$6.76B | −9.2% |
| EPS (Basic) | $8.52$9.10 | −6.4% |
| EPS (Diluted) | $8.41$8.98 | −6.3% |
| Shares Outstanding (Basic) | 721.00M743.00M | −3.0% |
| Shares Outstanding (Diluted) | 730.30M753.00M | −3.0% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in Honeywell's net sales in 2019?
The primary driver for the decrease in net sales for 2019 was the spin-off of the Transportation Systems business and the Homes and Global Distribution business in 2018. Excluding these divestitures, Honeywell reported a 4% increase in sales.
How did the spin-offs impact Honeywell's financial results?
The spin-offs in 2018 significantly reduced reported net sales and net income compared to the prior year's consolidated results. While the spin-offs led to a year-over-year decline in reported net income, the underlying performance of the remaining businesses, as indicated by organic sales growth and segment profit increases in key areas like Aerospace and Performance Materials and Technologies, remained robust.
What is Honeywell's strategic direction moving forward?
Honeywell's strategic direction is to become a premier software-industrial company. This involves continued investment in technology, expansion of its Honeywell Forge connected solutions across its business segments, and driving profitable growth through innovation and operational improvements. The company is also committed to disciplined capital deployment, including dividends and share repurchases, to enhance shareholder value.
What is the outlook for capital deployment and shareholder returns?
Honeywell deployed $7.8 billion in capital in 2019. The company increased its quarterly dividend by 10% in Q4 2019 and has a significant share repurchase program in place, with $7.0 billion remaining authorization as of December 31, 2019. Honeywell intends to continue returning capital to shareholders through dividends and opportunistic share repurchases.
06—Continue