10-QPeriod: Q1 FY2019

HONEYWELL INTERNATIONAL INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 18, 2019For Securities:HONHONIV

Summary

Honeywell International Inc. reported first-quarter 2019 results showing a decrease in net sales to $8.88 billion from $10.39 billion in the prior year, largely due to the spin-offs of its Transportation Systems and Homes businesses. Despite the sales decline, diluted earnings per share saw a slight increase to $1.92 from $1.89, driven by operational segment profit improvements, lower repositioning charges, and a reduced share count. The company's segment profit also saw a decrease, primarily influenced by divestiture impacts, although organic growth was positive in key segments like Aerospace, Honeywell Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. Cash flow from operations remained stable, but investing activities showed a significant increase in cash usage primarily due to investment in marketable securities. The company continued its share repurchase program, buying back $750 million in stock during the quarter, with $3.0 billion remaining under its authorization. Key financial highlights include a strong gross margin percentage improvement and continued focus on operational efficiency across its segments.

Financial Highlights

53 data points
Beta

Revenue

$8.88B

33.8% Gross Margin

Net Income

$1.42B

15.9% Net Margin

EPS (Diluted)

$1.92

Total Assets

$58.56B

Cash & Equivalents

$8.63B

Free Cash Flow

$993.00M

Financial Statements
Beta
Revenue$8.88B
Cost of Revenue$5.88B
Gross Profit$3.00B
SG&A Expenses$1.36B
Net Income$1.42B
EPS (Basic)$1.94
EPS (Diluted)$1.92
Shares Outstanding (Basic)729.70M
Shares Outstanding (Diluted)738.80M

Key Highlights

  • 1Net sales decreased by 15% to $8.88 billion, primarily due to the divestiture of the Transportation Systems and Homes businesses.
  • 2Diluted Earnings Per Share (EPS) increased slightly to $1.92 from $1.89 in the prior year, driven by operational improvements and share buybacks.
  • 3Gross margin percentage improved to 33.8% from 30.8%, attributed to higher segment margins and lower repositioning charges.
  • 4Aerospace segment sales declined 16% but reported a 6% decrease in segment profit, with organic growth in key areas like Commercial Aviation and Defense.
  • 5Honeywell Building Technologies saw a significant sales drop of 43% due to the Homes divestiture, though organic sales grew by 9%.
  • 6Performance Materials and Technologies reported a 2% increase in sales and a 9% increase in segment profit, driven by organic growth.
  • 7The company repurchased $750 million of its common stock in the quarter, with $3.0 billion remaining under its share repurchase program.

Frequently Asked Questions

The primary driver for the 15% decrease in net sales to $8.88 billion was the spin-off of Honeywell's Transportation Systems business (Garrett Motion Inc.) and its Homes and Global Distribution business (Resideo Technologies, Inc.) in late 2018. These divestitures removed the historical sales of these businesses from the current period's reporting.

Diluted EPS rose to $1.92 from $1.89. This increase was driven by several factors including improved operational segment profit, a reduction in repositioning and other charges, the absence of separation costs compared to the prior year period, and a lower weighted average number of shares outstanding due to ongoing share repurchase programs.

While net sales decreased overall, organic growth was a positive story in several segments. Aerospace, despite a reported sales decline due to divestitures, showed organic growth in commercial aviation and defense. Honeywell Building Technologies experienced a significant sales decrease due to divestitures but still achieved organic growth in its core building technologies. Performance Materials and Technologies delivered solid organic growth in sales and profit. Safety and Productivity Solutions saw strong organic sales growth, though segment profit saw a slight decline due to inflation and specific product line performance.

Honeywell maintained stable cash flow from operations of $1.134 billion. Investing activities showed increased cash usage, mainly due to investments in short-term marketable securities. The company has a strong liquidity position, with access to committed credit lines and the capital markets. They continue to actively manage capital allocation through share repurchases, dividends, and strategic investments.