10-QPeriod: Q2 FY2017

HONEYWELL INTERNATIONAL INC Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 21, 2017For Securities:HONHONIV

Summary

Honeywell International Inc. reported solid financial results for the second quarter and first half of 2017. Net sales saw a slight increase year-over-year, driven by organic growth across most segments, particularly in Safety and Productivity Solutions and Home and Building Technologies. Profitability remained strong, with net income attributable to Honeywell increasing in both periods. The company also demonstrated effective cash flow generation, with operating cash flow significantly improving in the first half of the year due to better working capital management and higher net income. The company continued its strategic focus on operational efficiency and growth initiatives. Repositioning actions are underway to generate cost savings, and the company is managing its capital allocation effectively through share repurchases and dividends, while also exploring strategic acquisitions. Despite some headwinds in specific markets like commercial aviation original equipment and advanced materials, the overall financial health and operational performance of Honeywell remain robust, indicating a positive outlook.

Financial Highlights

53 data points
Beta

Revenue

$10.08B

30.3% Gross Margin

Net Income

$1.39B

13.8% Net Margin

EPS (Diluted)

$1.80

Total Assets

$55.67B

Cash & Equivalents

$7.88B

Free Cash Flow

$1.21B

Financial Statements
Beta
Revenue$10.08B
Cost of Revenue$7.02B
Gross Profit$3.05B
SG&A Expenses$1.46B
Net Income$1.39B
EPS (Basic)$1.82
EPS (Diluted)$1.80
Shares Outstanding (Basic)764.20M
Shares Outstanding (Diluted)774.00M

Key Highlights

  • 1Net sales increased slightly by 1% to $10,078 million for the three months ended June 30, 2017, and were flat at $19,570 million for the six months ended June 30, 2017, compared to the prior year periods.
  • 2Net income attributable to Honeywell increased to $1,392 million for the quarter ($1.80 diluted EPS) and $2,718 million for the six months ($3.51 diluted EPS), showing year-over-year growth.
  • 3Operating cash flow improved significantly, increasing by $485 million to $2,387 million for the six months ended June 30, 2017, driven by improved working capital and higher net income.
  • 4The Safety and Productivity Solutions segment showed strong sales growth of 30% in the quarter and 27% in the six months, largely driven by acquisitions and organic volume.
  • 5The Aerospace segment faced some sales declines, primarily due to the divestiture of the government services business and weakness in business aviation, though commercial aftermarket sales showed growth.
  • 6Honeywell continued its share repurchase program, with $3.1 billion remaining available under its $5 billion authorization as of June 30, 2017.
  • 7The company maintained a strong balance sheet with total assets of $55,668 million as of June 30, 2017, and manageable debt levels.

Frequently Asked Questions

In the second quarter of 2017, Honeywell's net sales increased by 1% to $10,078 million compared to the same period in 2016. This growth was driven by organic sales increases across most segments, particularly in Safety and Productivity Solutions and Home and Building Technologies, partially offset by unfavorable foreign currency translation and divestitures.

The significant increase in operating cash flow for the six months ended June 30, 2017, was primarily due to a $309 million favorable impact from working capital management, an increase in net income of $179 million, and an improvement in customer advances and deferred income, partially offset by higher cash tax payments.

The Aerospace segment experienced a sales decrease of 3% in the second quarter and 4% for the first half of 2017. Key factors include the divestiture of the government services business, continued weakness in the business aviation market impacting original equipment sales, and unfavorable foreign currency translation. However, the commercial aftermarket sales showed positive growth driven by increased repair and overhaul activities.

As of June 30, 2017, Honeywell had $3.1 billion remaining under its previously approved $5 billion share repurchase program. The company intends to continue repurchasing shares from time to time to offset the dilutive impact of employee stock-based compensation plans and manage its capital structure.