Honeywell International Inc. · NASDAQ:HON
Honeywell International — Q3 2023 Earnings Presentation
27 slides from Honeywell International's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Earnings Release
THIRD QUARTER 2023 EARNINGS RELEASE OCTOBER 26, 2023
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
Forward Looking Statements We describe many of the trends and other factors that drive our business and future results in this presentation. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Fo
Slide 3: 3Q 2023 Overview
3Q 2023 OVERVIEW 3Q 2023 3Q 2023 3Q 2023 Highlights Actual Guidance • Delivered on organic sales growth, segment margin $2.27 expansion, and adjusted earnings per share Adjusted Earnings Per Share $2.41 Excluding $2.15 - $2.25 Pension Headwind commitments • Orders were up 10% year over year and back
Slide 4: Recent Announcements
RECENT ANNOUNCEMENTS APU and Avionics Win Carbon Capture Win Forge for Buildings Win • Overturned an incumbent in the air • Announced that SK E&S will deploy • Implemented Honeywell Forge for transport space on selectable APUs and Honeywell carbon capture technology to Buildings at One Bangkok, the
Slide 5: 3Q 2023 Financial Summary
3Q 2023 FINANCIAL SUMMARY Sales Segment Margin Adjusted EPS Free Cash Flow Up 1% Up 2% Up 80 Up 7% ex. Down Organic bps Pension 18% Headwind 22.6% $2.25 $2.27 $9.2B 21.8% $1.9B $9.0B $1.6B $1.36 Reported $1.74 3Q22 3Q23 3Q22 3Q23 3Q22 3Q23 3Q22 3Q23 + Double-digit organic growth in + Margin expansio
Slide 6: 4Q and FY 2023 Outlook
4Q AND FY 2023 OUTLOOK 4Q Guidance FY Guidance Sales Segment Margin Sales Segment Margin $9.6B - $9.9B 22.9% - 23.2% $36.8B - $37.1B 22.5% - 22.6% Up 3% - 7% Organically Flat - Up 30 bps Up 4% - 5% Organically Up 80 - 90 bps Prior: $36.7B - $37.3B, Up 4% - 6% Prior: 22.4% - 22.6%, Up 70 - 90 bps Net
Slide 7: Preliminary Thoughts on 2024
PRELIMINARY THOUGHTS ON 2024 Vertical Outlook Honeywell Outlook Growth: Fleet growth and Automation tailwinds drive • Long-cycle businesses, aftermarket services momentum replenishment, defense growth, infrastructure investment cycle investments • Focus on new products and high growth regions to ena
Slide 8: Long-Term Financial Progression
LONG-TERM FINANCIAL PROGRESSION Organic Growth Gross Margin Segment Margin FCF Margin Highlights • Our markets and Long-Term Mid- offerings underpin a 4% - 7% 40%+ 25%+ robust multi-year Target Teens+ outlook • Honeywell will 2023 22.5% - 14% - 4% - 5% 38.0%2 continue to execute Guidance1 22.6% 15%3
Slide 9: Summary
SUMMARY • Met or exceeded all guided metrics in the third quarter • Double-digit orders growth supporting record high backlog of $31.4B • External environment remains challenging for short cycle • Continuing to execute on $25B+ capital deployment commitment • Aligned to key megatrends, providing str
Slide 10: Appendix
Appendix 3Q 2023 Earnings - October 26, 2023 9
Slide 11: 3Q 2023 Segment Results
3Q 2023 SEGMENT RESULTS Segment Margin ($M) Sales Change (bps) Commentary • 10th consecutive quarter of double-digit growth in commercial aviation, aftermarket up over 20% $3,499 27.5% Aero • Defense and space sales up 18%, supply chain improvement enabling greater volumes Up 18% Organic Flat bps •
Slide 12: 3Q 2023 Sales Growth
3Q 2023 SALES GROWTH 3Q Reported 3Q Organic Aerospace 18% 18% Commercial Aviation Original Equipment 5% 5% Commercial Aviation Aftermarket 22% 22% Defense and Space 18% 18% Honeywell Building Technologies 0% 0% Products (2%) (3%) Building Solutions 4% 4% Performance Materials And Technologies 5% 3%
Slide 13: 3Q 2023 Earnings Per Share Bridge
3Q 2023 EARNINGS PER SHARE BRIDGE $0.15 $0.00 $0.04 Up 7% ($0.14) ($0.03) YoY ‒ Higher net interest ‒ 23.0% vs 22.1% + 667M vs. 680M expense $2.41 + Lower repositioning Up 1% and other YoY + Pricing $2.25 + Productivity $2.27 ‒ Inflation 3Q22 Segment Below the Adjusted Effective Share 3Q23 Adj. EPS
Slide 14: FY 2023 Guidance Progression
FY 2023 GUIDANCE PROGRESSION Original Guidance Previous Guidance Previous Guidance Updated Guidance (as of 4Q22 Earnings Call) (as of 1Q23 Earnings Call) (as of 2Q23 Earnings Call) Sales $36.0B - $37.0B $36.5B - $37.3B $36.7B - $37.3B $36.8B - $37.1B Organic Growth Up 2% - 5% Up 3% - 6% Up 4% - 6% U
Slide 15: Additional 2023 Inputs
ADDITIONAL 2023 INPUTS 3Q23 4Q23E FY23E Commentary Pension / • Significant increase in interest rates resulting in lower $137M ~$140M ~$550M pension income year over year OPEB • Retaining capacity for high-return projects to support cost Repositioning ($58M) ($45M - $85M) ($260M - $300M) management
Slide 16: Honeywell Portfolio Realignment
HONEYWELL PORTFOLIO REALIGNMENT Current Structure New Structure as of 1Q24 Energy and Performance Sustainability Aerospace Materials and Solutions 17% Technologies Aerospace Technologies 30% 33% 33% SALES SALES MIX MIX 33% 20% 17% 17% Industrial Building Safety and Honeywell Automation Automation Pr
Slide 17: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this presentation to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with
Slide 18: Reconciliation of Organic Sales % Change
RECONCILIATION OF ORGANIC SALES % CHANGE 3Q23 Honeywell Reported sales % change 3% Less: Foreign currency translation —% Less: Acquisitions, divestitures and other, net 1% Organic sales % change 2% Aerospace Reported sales % change 18% Less: Foreign currency translation —% Less: Acquisitions, divest
Slide 19: Reconciliation of Organic Sales % Change
RECONCILIATION OF ORGANIC SALES % CHANGE 2014 2015 2016 2017 2018 2019 2021 2022 Honeywell Reported sales % change 3% (4)% 2% 3% 3% (12)% 5% 3% Less: Foreign currency translation —% (4)% (1)% —% 1% (1)% 1% (3)% Less: Acquisitions, divestitures and other, net —% —% 4% (1)% (4)% (16)% —% —% Organic sa
Slide 20: Reconciliation of Operating Income to Segment Profit
RECONCILIATION OF OPERATING INCOME TO SEGMENT PROFIT AND CALCULATION OF OPERATING INCOME AND SEGMENT PROFIT MARGINS ($M) 3Q22 4Q22 3Q23 2022 Operating income $ 1,742 $ 1,813 $ 1,926 $ 6,427 Stock compensation expense (1) 50 25 39 188 Repositioning, Other (2,3) 128 233 100 942 Pension and other postr
Slide 21: Reconciliation of Operating Income to Segment Profit
RECONCILIATION OF OPERATING INCOME TO SEGMENT PROFIT AND CALCULATION OF OPERATING INCOME AND SEGMENT PROFIT MARGINS ($M) 2014 2015 2016 2017 2018 2019 2021 Operating income $ 5,622 $ 6,238 $ 6,051 $ 6,303 $ 6,705 $ 6,851 $ 6,200 Stock compensation expense (1) 187 175 184 176 175 153 217 Repositionin
Slide 22: Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE ($M) 3Q22 3Q23 Income before taxes $ 1,981 $ 1,967 Russian-related charges (16) — Gain on sale of Russian entities (10) — Adjusted income before taxes $ 1,955 $ 1,967 Income tax expense $ 432 $ 452 Russian-related charges — — Gain o
Slide 23: Reconciliation of EPS to Adjusted EPS and Excluding Pension Headwind
RECONCILIATION OF EPS TO ADJUSTED EPS AND ADJUSTED EPS EXCLUDING PENSION HEADWIND 3Q22 4Q22 3Q23 FY2022 4Q23E 2023E Earnings per share of common stock - diluted (1) $ 2.28 $ 1.51 $ 2.27 $ 7.27 $2.53 - $2.63 $9.09 - $9.19 Pension mark-to-market expense (2) — 0.65 — 0.64 No Forecast No Forecast Expens
Slide 24: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW ($M) 3Q22 3Q23 Cash provided by operating activities $ 2,083 $ 1,809 Capital expenditures (184) (249) Garrett cash receipts — — Free cash flow $ 1,899 $ 1,560 We define free cash flow as cash provided by operating activities l
Slide 25: Reconciliation of Operating Cash Flow to Free Cash Flow and Margin
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW AND CALCULATION OF FREE CASH FLOW MARGIN ($M) 2014 2015 2016 2017 2018 2019 2021 2022 Cash provided by operating activities $ 5,080 $ 5,519 $ 5,498 $ 5,966 $ 6,434 $ 6,897 $ 6,038 $ 5,274 Capital expenditures (1,094) (1,073) (
Slide 26: Reconciliation of Expected Operating Cash Flow to Expected Free Cash Flow
RECONCILIATION OF EXPECTED CASH PROVIDED BY OPERATING ACTIVITIES TO EXPECTED FREE CASH FLOW AND EXPECTED FREE CASH FLOW EXCLUDING IMPACT OF SETTLEMENTS 2023E($B) Cash provided by operating activities ~$4.9 - $5.3 Capital expenditures ~(1.0) Garrett cash receipts — Free cash flow ~$3.9 - $4.3 Impact
Slide 27: 3Q 2023 Earnings - October 26, 2023
3Q 2023 Earnings - October 26, 2023 26
Honeywell International — Q3 2023 Earnings Presentation on 6ix