10-QPeriod: Q2 FY2016

HONEYWELL INTERNATIONAL INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 22, 2016For Securities:HONHONIV

Summary

Honeywell International Inc. reported solid financial results for the second quarter and first half of 2016, demonstrating revenue growth and increased net income compared to the prior year period. Net sales for the quarter increased by 2% to $9.99 billion, and for the six-month period, net sales grew by 3% to $19.51 billion. This top-line growth was driven by contributions from acquisitions, partially offset by unfavorable foreign currency translation and organic volume declines in certain segments. Profitability also showed improvement, with Net Income Attributable to Honeywell rising to $1.28 billion for the quarter and $2.47 billion for the six months. Diluted Earnings Per Share (EPS) increased to $1.66 for the quarter and $3.19 for the six months, reflecting operational efficiencies, favorable pension income, and disciplined cost management. The company also continued to actively manage its capital structure, repurchasing shares and paying dividends, while strategically investing in acquisitions and business realignments to position for future growth.

Financial Highlights

48 data points
Beta

Revenue

$9.99B

31.7% Gross Margin

Net Income

$1.32B

13.2% Net Margin

EPS (Diluted)

$1.70

Total Assets

$51.18B

Cash & Equivalents

$5.04B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$9.99B
Cost of Revenue$6.82B
Gross Profit$3.17B
SG&A Expenses$1.33B
Net Income$1.32B
EPS (Basic)$1.73
EPS (Diluted)$1.70
Shares Outstanding (Basic)763.30M
Shares Outstanding (Diluted)774.90M

Key Highlights

  • 1Net sales increased by 2% to $9.99 billion for the quarter and 3% to $19.51 billion for the six months ended June 30, 2016.
  • 2Net income attributable to Honeywell rose to $1.28 billion for the quarter and $2.47 billion for the six months.
  • 3Diluted Earnings Per Share (EPS) improved to $1.66 for the quarter and $3.19 for the six months.
  • 4The company announced a significant acquisition of Intelligrated for approximately $1.5 billion, expected to close in Q3 2016, and integrated the Elster Division for approximately $4.9 billion in December 2015.
  • 5Honeywell is realigning its Automation and Control Solutions (ACS) segment into two new segments: Home and Building Technologies (HBT) and Safety and Productivity Solutions (SPS), effective with Q3 2016 reporting.
  • 6Cash provided by operating activities was $1.80 billion for the six months, though lower than the prior year due to working capital impacts.
  • 7The company repurchased $477 million of its common stock in the quarter, with $4.5 billion remaining under its share repurchase program.

Frequently Asked Questions

Revenue growth was primarily driven by acquisitions, notably the integration of the Elster Division and planned acquisition of Intelligrated. While acquisitions provided a boost, organic sales volumes saw some declines in specific segments, and foreign currency translation had an unfavorable impact.

Profitability improved, with net income and EPS showing increases year-over-year. This was attributed to higher segment profits in Aerospace and ACS, favorable pension income, and a reduction in weighted average shares outstanding due to share repurchases. These factors helped offset decreases in segment profit from Performance Materials and Technologies.

Honeywell announced a significant realignment of its Automation and Control Solutions (ACS) business segment into two new segments: Home and Building Technologies (HBT) and Safety and Productivity Solutions (SPS), effective for the third quarter of 2016. The company also announced a succession plan, with Darius Adamczyk slated to become CEO in March 2017.

The company generated $1.80 billion in cash from operating activities during the first half of 2016, primarily managing liquidity through these flows, available cash, credit lines, and debt markets. Key uses of cash included significant investments in acquisitions, share repurchases totaling $477 million in the quarter, and dividend payments. The company also noted a decrease in cash used for investing activities due to reduced investment in marketable securities, despite increased acquisition spending.