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Honeywell Delivers $1.80 Earnings Per Share; Sales of $10.1 Billion Exceeds Guidance

"Honeywell's strong performance continued through the second quarter, with over 3% organic sales growth that exceeded the high end of our guidance range, and 50 basis points of segment margin expansion, resulting in second-quarter earnings per share of $1.80," said Darius Adamczyk, President and Chief Executive Officer of Honeywell. "Earnings came in at the high end of our guidance range, up 10% year-over-year. We continued our investments to enhance future profitable growth through new product introductions, additions to the sales organization, and more than $115 million of restructuring funding in the quarter, made possible by a lower-than-planned tax rate. Quarterly free cash flow of $1.2 billion was impacted by the timing of cash tax payments, and our first-half performance remained strong with nearly 40% growth in free cash flow year-over-year."

"Previous investments in production capacity are driving top-line growth. For example, our newly completed facilities within Performance Materials and Technologies are contributing to double-digit growth for our Solstice® line of low-global-warming products and strong orders, sales, and backlog growth in UOP," continued Adamczyk. "We are also pleased with the continued strength in Aerospace Commercial Aftermarket and in Safety and Productivity Solutions, where we continue to see strong demand for safety products and voice-enabled workflow solutions."

"We expect continued momentum in organic sales growth throughout 2017, supported by strong order rates and a growing backlog across many of our businesses," said Adamczyk. "Our focus on delivering organic growth while maintaining productivity rigor and aggressively deploying capital, combined with our efforts to evolve as a world-class software-industrial company, is delivering results for our shareowners."

"We are increasing our full-year reported and organic sales guidance and raising the low end of our full-year earnings guidance by 10 cents. We now anticipate 2017 earnings per share to be between $7.00 and $7.10, up 8%-10%, excluding divestitures, any pension mark-to-market adjustments, and 2016 debt refinancing charges. We also now expect full-year sales to be between $39.3 billion and $40.0 billion, up 2%-4% organic," Adamczyk concluded.

Honeywell will discuss the results during its investor conference call today starting at 9:30 a.m. Eastern Daylight Time.

Second Quarter Performance

Honeywell sales for the second quarter were up over 3% on an organic basis and up 1% on a reported basis. The difference between reported and organic sales is the impact of foreign currency translation, the 2016 spin-off of the former Resins and Chemicals business in Performance Materials and Technologies, and the 2016 divestiture of the Aerospace government services business, partially offset by the Intelligrated acquisition in Safety and Productivity Solutions. The second-quarter financial results can be found in Tables 1 and 2, and updated full-year guidance can be found in Table 3, below.

Aerospace sales for the second quarter were up 2% on an organic basis driven by strength in Commercial Aftermarket, growth in U.S. defense, and a continuing recovery in commercial vehicles in Transportation Systems. Segment margin expanded 140 bps to 22.3%, primarily driven by higher volumes, productivity net of inflation, and the favorable impact of the 2016 divestiture of the government services business.

Home and Building Technologies sales for the second quarter were up 4% on an organic basis driven by Smart Energy program roll-outs, air and water product sales in China, and continued growth in the Distribution business. Segment margin was unchanged at 15.4%, driven by restructuring benefits and productivity net of inflation, offset by the unfavorable impact of higher sales from lower margin products and investments for growth.

Performance Materials and Technologies sales for the second quarter were up 6% on an organic basis driven by continued strength in Solstice® sales in Advanced Materials and double-digit growth in modular gas processing in UOP. Segment margin expanded 200 bps to 23.4%, primarily driven by productivity net of inflation, the favorable impact from the spin-off of the former Resins and Chemicals business, and commercial excellence.

Safety and Productivity Solutions sales for the second quarter were up 1% on an organic basis as a result of higher volumes in industrial safety products, sensing controls, and voice-enabled workflow solutions. Segment margin contracted 70 bps to 15.0%, primarily driven by acquisition amortization and integration costs, and investments for growth. Excluding the impact of acquisitions, segment margin expanded 90 bps driven primarily by restructuring benefits and productivity net of inflation.

To participate in today's conference call, please dial (800) 263-0877 (domestic) or (719) 457-1036 (international) approximately ten minutes before the 9:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's second quarter 2017 earnings call or provide the conference code HON2Q17. The live webcast of the investor call as well as related presentation materials will be available through the "Investor Relations" section of the company's Website (www.honeywell.com/investor). Investors can hear a replay of the conference call from 1:30 p.m. EDT, July 21, until 1:30 p.m. EDT, July 28, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 8469822.

TABLE 1: SUMMARY OF FINANCIAL RESULTS – TOTAL HONEYWELL


2Q 2016

2Q 2017

Change

Sales

9,991

10,078

1%

Organic



3%

Segment Margin

18.5%

19.0%

50 bps

Operating Income Margin

18.4%

18.3%

(10) bps

Earnings Per Share




Reported

$1.70

$1.80

6%

Ex-Divestitures & Additional 2Q17 Restructuring, Normalized for Tax

$1.64

$1.80

10%

Cash Flow From Operations

1,583

1,447

(9%)

Free Cash Flow2,3

1,302

1,214

(7%)





TABLE 2: SUMMARY OF FINANCIAL RESULTS – SEGMENTS









AEROSPACE

2Q 2016

2Q 2017

Change

Sales

3,779

3,674

(3%)

Organic



2%

Segment Profit

791

819

4%

Segment Margin

20.9%

22.3%

140 bps









HOME AND BUILDING TECHNOLOGIES








Sales

2,676

2,736

2%

Organic



4%

Segment Profit

412

420

2%

Segment Margin

15.4%

15.4%

Flat









PERFORMANCE MATERIALS AND TECHNOLOGIES




Sales

2,434

2,239

(8%)

Organic



6%

Segment Profit

520

524

1%

Segment Margin

21.4%

23.4%

200 bps













SAFETY AND PRODUCTIVITY SOLUTIONS




Sales

1,102

1,429

30%

Organic



1%

Segment Profit

173

214

24%

Segment Margin

15.7%

15.0%

(70) bps

Ex-M&A



90 bps









TABLE 3: 2017 FULL-YEAR GUIDANCE


Previous Guidance

Current Guidance

Change vs. 2016

Sales

$38.6 - $39.5

$39.3 - $40.0

Flat – 2%

Organic



2% - 4%

Segment Margin

19.0% - 19.4%

19.0% - 19.4%

70 - 110 bps

Earnings Per Share
(Ex-Divestitures, 2016 Debt Refinancing, And Pension MTM)

$6.90 - $7.10

$7.00 - $7.10

8% - 10%

Free Cash Flow

$4.6B - $4.7B

$4.6B - $4.7B

5% - 7%

Honeywell (www.honeywell.com) is a Fortune 100 software-industrial company that delivers industry specific solutions that include aerospace and automotive products and services; control technologies for buildings, homes, and industry; and performance materials globally. Our technologies help everything from aircraft, cars, homes and buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current economic and industry conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.

Earnings per share variance excludes 2016 divestitures and $90 million additional 2Q17 restructuring funding enabled by a lower than planned...


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