Honeywell Overdelivers On Sales, Announces Four Acquisitions In The Fourth Quarter; Issues 2021 Guidance

– Reported Fourth Quarter Earnings Per Share of $1.91 and Adjusted EPS¹ of $2.07, Above High End of Guidance

– Delivered Fourth Quarter Operating Cash Flow of $2.8 Billion, Conversion of 205%, and Free Cash Flow of $2.5 Billion, Adjusted Conversion² of 170%

– Completed Three M&A Deals Aligned to Key Growth Vectors and Announced Agreement to Acquire Sparta Systems for $1.3 Billion

– Expect 2021 Earnings Per Share of $7.60 – $8.00, Up 13% – 19%, 7% – 13% Adjusted³

CHARLOTTE, N.C., Jan. 29, 2021 /PRNewswire/ — Honeywell (NYSE: HON) today announced results for the fourth quarter and full year 2020 that exceeded investor expectations, as well as its outlook for 2021.

The company reported a fourth-quarter year-over-year sales decline of 6%, down 7% on an organic basis, and a full-year sales decline of 11% on a reported and organic basis. For the full year, operating margin contracted 120 basis points and segment margin contracted 70 basis points, with earnings per share of $6.72 and adjusted earnings per share⁴ of $7.10, above the high end of our guidance.

“We finished a challenging 2020 with another quarter of sequential improvements in sales growth, margin expansion, and adjusted earnings per share,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Our focus on delivering differentiated solutions drove double-digit organic sales growth in our defense and space, warehouse automation, personal protective equipment, and recurring connected software businesses for the second consecutive quarter. We continued to prudently reduce costs in the quarter, bringing our full-year total fixed cost savings to $1.5 billion. Our fourth quarter adjusted earnings per share was $2.07, flat year-over-year on an adjusted basis¹ and above the high end of our guidance. We also continued our focus on generating cash and achieved 170% adjusted free cash flow conversion² in the quarter. For the year, we generated $6.2 billion in operating cash flow with 130% conversion and $5.3 billion in free cash flow with 105% adjusted free cash flow conversion⁵.

“Honeywell’s strong balance sheet put us in a good position to weather the challenges of 2020 while investing for future growth. We invested in high-return capital expenditures, repurchased $3.7 billion of Honeywell shares, completed three acquisitions, made six new investments within Honeywell Ventures, and announced our 11th consecutive dividend increase. Even with this level of cash deployment, we ended 2020 with $15.2 billion of cash and short-term investments on hand,” Adamczyk said.

The company also announced its outlook for 2021. Honeywell expects sales of $33.4 billion to $34.4 billion, representing year-over-year organic growth of 1% to 4%; segment margin expansion of 30 to 70 basis points; earnings per share of $7.60 to $8.00, up 7% to 13% adjusted³; operating cash flow of $5.7 billion to $6.1 billion, and free cash flow⁶ of $5.1 billion to $5.5 billion. A summary of the company’s 2021 guidance can be found in Table 1.

Adamczyk concluded, “I am very proud of the way Honeywell responded to the crisis in 2020. We quickly focused on liquidity, cost management, and execution, while rapidly innovating and ramping up production of a wide array of offerings to help the world recover, including critical personal protective equipment. We also remained focused on growth and investing in new markets and technologies. We entered 2021 with positive momentum following two quarters of sequential improvement. I am confident we are well-positioned for the economic recovery and will continue to perform for our shareowners, our customers, and our employees in the short and long term.”

Fourth-Quarter Performance
Honeywell sales for the fourth quarter were down 6% on a reported basis and down 7% on an organic basis. The fourth-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the fourth quarter were down 19% on an organic basis driven by lower commercial aftermarket demand due to the ongoing impact of reduced flight hours and lower volumes in commercial original equipment, partially offset by double-digit growth in Defense and Space. Segment margin expanded 150 basis points to 27.6% driven by productivity actions and commercial excellence.

Honeywell Building Technologies sales for the fourth quarter were down 4% on an organic basis driven by timing of Building Solutions projects and lower demand for security products and building management systems, partially offset by growth in commercial fire. Building Solutions orders were up double digits year-over-year, driven by large project bookings in the Americas and Europe. Segment margin expanded 110 basis points to 21.4%. Margin performance was driven by commercial excellence and productivity actions.

Performance Materials and Technologies sales for the fourth quarter were down 12% on an organic basis driven by continued delays in Process Solutions automation projects as well as volume declines in smart energy and thermal solutions, and lower gas processing projects, catalyst shipments, licensing, and engineering due to softness in the oil and gas sector in UOP, partially offset by return to growth in Advanced Materials driven by demand for fluorine products. Segment margin contracted 380 basis points to 18.7% driven by the impact of lower sales volumes and mix, partially offset by productivity actions.

Safety and Productivity Solutions sales for the fourth quarter were up 27% on an organic basis driven by double-digit Intelligrated and personal protective equipment growth as well as strength in productivity solutions and services. Orders were up double digits year-over-year for the fifth straight quarter, driven by strong personal protective equipment and productivity solutions and services orders growth. Backlog remained at a record high. Segment margin expanded 260 basis points to 15.3% driven by productivity actions and higher volumes.

Conference Call Details
Honeywell will discuss its fourth-quarter and full-year results as well as its 2021 outlook during an investor conference call starting at 8:30 a.m. Eastern Standard Time today. To participate on the conference call, please dial (866) 548-4713 (domestic) or (323) 794-2093 (international) approximately ten minutes before the 8:30 a.m. EST start. Please mention to the operator that you are dialing in for Honeywell’s fourth quarter 2020 earnings and 2021 outlook call or provide the conference code HON2021. 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 12:30 p.m. EST January 29 until 12:30 p.m. EST February 5 by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 1005277.

See summary of financial results

Featured Photo Credit: Photo by Scott Graham on Unsplash