10-QPeriod: Q2 FY2019

HONEYWELL INTERNATIONAL INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 18, 2019For Securities:HONHONIV

Summary

Honeywell International Inc. reported net sales of $9.24 billion for the third quarter of 2019, a decrease of 15% compared to the same period last year. This decline was primarily driven by the spin-off of its Transportation Systems and Homes and Global Distribution businesses. Despite the revenue decrease, net income attributable to Honeywell rose to $1.54 billion, a 21% increase year-over-year, resulting in diluted earnings per share of $2.10, up from $1.68 in the prior year. The company's financial performance reflects strong operational execution within its core segments, particularly Aerospace and Performance Materials and Technologies, which saw organic growth. The company continues to focus on productivity initiatives and disciplined capital allocation. Significant cash was returned to shareholders through share repurchases and dividends. Honeywell maintained a strong liquidity position with substantial credit facilities available. While facing some headwinds from divestitures and foreign currency translation, the underlying operational performance across key segments demonstrates resilience and a commitment to long-term value creation for shareholders.

Financial Highlights

53 data points
Beta

Revenue

$9.24B

34.1% Gross Margin

Net Income

$1.54B

16.7% Net Margin

EPS (Diluted)

$2.10

Total Assets

$57.75B

Cash & Equivalents

$8.22B

Free Cash Flow

$1.51B

Financial Statements
Beta
Revenue$9.24B
Cost of Revenue$6.09B
Gross Profit$3.15B
SG&A Expenses$1.39B
Net Income$1.54B
EPS (Basic)$2.13
EPS (Diluted)$2.10
Shares Outstanding (Basic)723.20M
Shares Outstanding (Diluted)733.00M

Key Highlights

  • 1Net sales for the third quarter of 2019 were $9.24 billion, down 15% year-over-year, largely due to business divestitures (spin-offs of Transportation Systems and Homes and Global Distribution).
  • 2Net income attributable to Honeywell increased by 21% to $1.54 billion, leading to a diluted EPS of $2.10, up from $1.68 in the prior year's quarter.
  • 3Aerospace segment sales saw a 14% decrease driven by divestitures, but organic growth in Commercial Aviation and Defense & Space remained strong.
  • 4Performance Materials and Technologies segment sales grew 1% due to organic growth in UOP and Process Solutions, partially offset by unfavorable foreign currency translation.
  • 5Safety and Productivity Solutions segment sales decreased 4% due to lower organic sales and currency impacts, despite acquisitions.
  • 6The company repurchased $2.65 billion of its common stock in the six months ended June 30, 2019, with $8.7 billion remaining under its share repurchase authorization.
  • 7Operating cash flow for the six months ended June 30, 2019, was $2.81 billion, a decrease from the prior year primarily due to working capital changes and higher tax payments.

Frequently Asked Questions

The 15% decrease in net sales for the third quarter of 2019 compared to the prior year was primarily due to the spin-off of Honeywell's Transportation Systems business (Garrett Motion Inc.) in October 2018 and its Homes and Global Distribution business (Resideo Technologies, Inc.) in October 2018. These divestitures significantly reduced the company's reported sales figures.

Despite the reported decline in net sales, net income attributable to Honeywell increased by 21% to $1.54 billion. This improvement was driven by several factors, including lower tax expenses, reduced repositioning and other charges, improved operational segment profit in core businesses, and a lower share count due to ongoing share repurchases.

Honeywell has a substantial authorization for share repurchases, with $8.7 billion available as of June 30, 2019. The company intends to continue repurchasing shares to offset the dilutive impact of employee stock-based compensation and to reduce its overall share count opportunistically. Management is balancing investments in core businesses, debt reduction, acquisitions, share repurchases, and dividends.

The company is subject to ongoing litigation, including environmental matters and asbestos-related claims from past business operations (NARCO and Bendix). While Honeywell has recorded significant liabilities for these matters and has insurance receivables, the outcomes of certain legal proceedings, such as the UAW litigation and the SEC investigation into Bendix asbestos claims, remain subject to uncertainty. The company believes these matters, individually or in aggregate, will not have a material adverse effect on its consolidated financial position, but potential liabilities could impact future results of operations or cash flows.