10-QPeriod: Q3 FY2016

HONEYWELL INTERNATIONAL INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 21, 2016For Securities:HONHONIV

Summary

Honeywell International Inc. reported solid third-quarter results for 2016, demonstrating resilience across its diverse business segments. Net sales increased by 2% year-over-year to $9.8 billion, with overall net income attributable to Honeywell slightly declining to $1.24 billion from $1.26 billion in the prior year period. Diluted earnings per share remained stable at $1.60. The company executed a significant acquisition, Intelligrated, bolstering its Safety and Productivity Solutions segment, and continued its strategic portfolio management with the spin-off of its Resins and Chemicals business (AdvanSix). The company's financial health remains strong, supported by healthy operating cash flows and a robust balance sheet. Despite some headwinds in specific segments like Aerospace due to increased OEM incentives and lower volumes, the overall performance was bolstered by growth in Home and Building Technologies and Performance Materials and Technologies. Honeywell's strategic initiatives, including cost controls and targeted acquisitions, appear to be driving value, positioning the company for continued operational performance.

Financial Highlights

48 data points
Beta

Revenue

$9.80B

29.6% Gross Margin

Net Income

$1.24B

12.6% Net Margin

EPS (Diluted)

$1.60

Total Assets

$53.56B

Cash & Equivalents

$6.43B

Free Cash Flow

$1.28B

Financial Statements
Beta
Revenue$9.80B
Cost of Revenue$6.90B
Gross Profit$2.90B
SG&A Expenses$1.37B
Net Income$1.24B
EPS (Basic)$1.62
EPS (Diluted)$1.60
Shares Outstanding (Basic)763.70M
Shares Outstanding (Diluted)774.40M

Key Highlights

  • 1Net sales increased by 2% to $9.8 billion for the third quarter of 2016 compared to the prior year period.
  • 2Net income attributable to Honeywell was $1.24 billion for the quarter, resulting in diluted earnings per share of $1.60, flat compared to the prior year.
  • 3The company completed the acquisition of Intelligrated for approximately $1.48 billion, strengthening its Safety and Productivity Solutions segment.
  • 4Honeywell completed the tax-free spin-off of its Resins and Chemicals business into a standalone company, AdvanSix.
  • 5Aerospace segment sales decreased by 6% due to lower volumes and the divestiture of Honeywell Technology Solutions Inc., despite growth in Commercial Aftermarket.
  • 6Home and Building Technologies saw a significant sales increase of 17% driven by acquisitions and organic growth.
  • 7Operating cash flow for the first nine months of 2016 was $3.46 billion, demonstrating strong cash generation.
  • 8The company repurchased approximately $0.23 billion of its stock in the third quarter, with $4.3 billion remaining under its share repurchase program.

Frequently Asked Questions

Sales growth was primarily driven by acquisitions, notably the acquisition of Intelligrated, and organic growth in segments like Home and Building Technologies. However, these were partially offset by a decline in the Aerospace segment due to lower volumes and divestitures, as well as unfavorable foreign currency translation.

The acquisition of Intelligrated, a key player in supply chain and warehouse automation, was completed in August 2016 for approximately $1.48 billion. This acquisition significantly contributed to the revenue growth of the Safety and Productivity Solutions segment and added $1.124 billion to goodwill.

Honeywell completed the tax-free spin-off of its Resins and Chemicals business (AdvanSix) on October 1, 2016. The assets and liabilities of AdvanSix were removed from Honeywell's balance sheet for the third quarter. Prior to the spin-off, AdvanSix made a cash distribution of $269 million to Honeywell.

Key challenges include managing the integration of acquisitions, navigating the cyclical nature of certain industries like Aerospace (affected by OEM incentives), and managing foreign currency fluctuations. The company also faces ongoing legal and environmental contingencies, though it maintains that these are adequately reserved for and not expected to have a material adverse effect on its financial position.