Honeywell International Inc. · NASDAQ:HON
Honeywell International — Q4 2023 Earnings Presentation
35 slides from Honeywell International's earnings presentation, Feb 1, 2024
Slide 1: Fourth Quarter 2023 Earnings and 2024 Outlook
FOURTH QUARTER 2023 EARNINGS AND 2024 OUTLOOK FEBRUARY 1, 2024
Slide 2: Forward Looking Statements; 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: Leadership Announcements
LEADERSHIP ANNOUNCEMENTS KAPUR TO ADD CHAIRMAN TITLE AYER TO BECOME LEAD INDEPENDENT DIRECTOR VIMAL KAPUR WILLIAM S. AYER • President and CEO since June 2023 • Named Lead Director, effective May 2024 • Board member since March 2023 • Independent Director since December 2014; Chair of Corporate Gover
Slide 4: Strategic Priorities
STRATEGIC PRIORITIES 1 2 3 ACCELERATE EVOLVE ACCELERATOR OPTIMIZE ORGANIC GROWTH OPERATING SYSTEM PORTFOLIO • Innovation playbook • Integrated operating company • Bolt-on acquisitions • High growth regions • Enhancing growth, margins, • Divest non-core / simplify • Monetize installed base and and ca
Slide 5: Portfolio Strategy Unfolding
PORTFOLIO STRATEGY UNFOLDING CARRIER ACCESS QUANTINUUM CAPITAL RAISE: ACCELERATING SOLUTIONS ACQUISITION $5B VALUATION CAPITAL DEPLOYMENT $4.95B ~13x ~$700M • First equity fundraise closed, securing $300M of 2024 capital at a pre-money valuation of $5B 2023 $8B Purchase 2023E 2023E • Anchored by str
Slide 6: Commercial Proof Points
COMMERCIAL PROOF POINTS ALIGNED TO THREE KEY MEGATRENDS RECENT WINS ACROSS PORTFOLIO AUTOMATION Advanced Avionics • United selected Honeywell avionics technology for its next • Supply chain diversification, reshoring, and resiliency fleet expansion. • Labor shortages, focus on IoT and AI • This part
Slide 7: 2023 Results
2023 RESULTS FY 2023 4Q 2023 4Q 2023 2023 HIGHLIGHTS ACTUAL ACTUAL GUIDANCE ADJUSTED $9.16 $2.60 • Organic sales growth of 4% within our long-term 4% - 7% framework EARNINGS Up 5% YoY Up 3% YoY $2.53 - $2.63 led by long-cycle strength (e.g., Aero), 5% drag from lower SPS sales PER SHARE Up 11% YoY e
Slide 8: 2024 Outlook
2024 OUTLOOK VERTICAL OUTLOOK HONEYWELL OUTLOOK Growth: Fleet growth and Automation tailwinds drive • Long-cycle businesses, software, and aftermarket services momentum replenishment, defense growth, infrastructure investment cycle investments • Focus on new products and high growth regions to enabl
Slide 9: 1Q and FY 2024 Outlook
1Q AND FY 2024 OUTLOOK 1Q GUIDANCE FY GUIDANCE SALES SEGMENT MARGIN SALES SEGMENT MARGIN $8.9B - $9.2B 21.9% - 22.2% $38.1B - $38.9B 23.0% - 23.3% Flat - Up 3% Organically Down 10 - Up 20 bps Up 4% - 6% Organically Up 30 - 60 bps NET BELOW THE ADJUSTED EPS ADJUSTED EPS FREE CASH FLOW LINE IMPACT $2.
Slide 10: Long-Term Financial Growth Algorithm
LONG-TERM FINANCIAL GROWTH ALGORITHM MEGATRENDS ORGANIC SEGMENT SHARE M&A ADJUSTED EPS SALES MARGIN REPURCHASES Accretive bolt-on GROWTH acquisitions Automation GROWTH EXPANSION Minimum 1% per year 4% - 7% 40 – 60 bps The Future of Aviation Adj. EPS Adj. EPS Segment Profit and Adj. EPS Growth Growth
Slide 11: Long-Term Financial Progression
LONG-TERM FINANCIAL PROGRESSION ORGANIC GROWTH GROSS MARGIN SEGMENT MARGIN ADJ. FCF MARGIN ADJ. EPS GROWTH Long- Term Mid- 4% - 7% 40%+ 25%+ 8% - 12% Target Teens+ 2024 Guidance 4% - 6% 37.3%1 23.0% - 23.3% ~15% 7% - 10%2 2023 4% 37.3% 22.7% 14%3 11%4 Results ‘17 - ‘22 Average5 5% 36.4% 20.5% 15% 9%
Slide 12: Summary
SUMMARY • Met or exceeded initial 2023 guidance; 2024 outlook in line with long-term framework • Aligned to compelling megatrends, all underpinned by digitalization, enabling next phase of transformation • Portfolio actions unfolding; capital deployment to accelerate in 2024 Strong Foundation in Pla
Slide 13: Appendix
Appendix 4Q 2023 Earnings - February 1, 2024 12
Slide 14: 4Q 2023 Financial Summary
4Q 2023 FINANCIAL SUMMARY SALES SEGMENT MARGIN ADJUSTED EPS FREE CASH FLOW Up 2% Organic Up 60 bps Up 3% Up 22% 23.5% Up 8% ex. Pension Headwind $9.4B 22.9% $2.60 $2.52 $1.9B $9.0B 23.5% $2.60 $9.4B 22.9% $1.6B $2.6B $2.52 $9.2B $2.1B $1.36 Reported $1.74 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 4Q22 4Q23 + Do
Slide 15: 4Q 2023 Segment Results
4Q 2023 SEGMENT RESULTS SEGMENT MARGIN SALES CHANGE (BPS) COMMENTARY ($M) • 11th consecutive quarter of double-digit growth in commercial aviation, original equipment up over 20% AERO $3,673 28.0% • 5% organic growth for defense and space in the quarter despite supply chain challenges Up 15% Organic
Slide 16: 4Q and FY 2023 Sales Growth
4Q AND FY 2023 SALES GROWTH 4Q Reported 4Q Organic FY Reported FY Organic AEROSPACE 15% 15% 15% 15% Commercial Aviation Original Equipment 25% 25% 15% 15% Commercial Aviation Aftermarket 19% 19% 22% 22% Defense and Space 6% 5% 8% 8% HONEYWELL BUILDING TECHNOLOGIES (1%) (1%) 1% 2% Building Products (
Slide 17: 4Q 2023 Earnings Per Share Bridge
4Q 2023 EARNINGS PER SHARE BRIDGE $0.07 ($0.07) $0.06 Up 8% ($0.13) $0.15 YoY Up 3% ($0.49) + Lower ‒ 18.6% vs. + 661M vs. YoY repositioning 16.3% 677M + Pricing and other $2.73 ‒ Higher net + Productivity interest $2.60 $2.52 ‒ Inflation expense ($0.19) $1.91 4Q22 Segment Below the Adjusted Effecti
Slide 18: FY 2023 Earnings Per Share Bridge
FY 2023 EARNINGS PER SHARE BRIDGE $0.21 ($0.55) Up 11% $0.04 ($0.01) YoY $0.71 + Lower repo ‒ 20.9% vs. + 668M vs. 20.8% 683M spend $9.71 ($0.49) + Reduced Up 5% asbestos YoY charges ‒ Higher net interest expense ($0.01) ($0.19) + Higher volumes $9.16 $8.76 + Pricing and productivity ‒ Inflation $8.
Slide 19: FY 2023 Guidance Progression
FY 2023 GUIDANCE PROGRESSION ORIGINAL GUIDE PREVIOUS GUIDE PREVIOUS GUIDE PREVIOUS GUIDE (AS OF 4Q22 (AS OF 1Q23 (AS OF 2Q23 (AS OF 3Q23 2023 ACTUALS EARNINGS CALL) EARNINGS CALL) EARNINGS CALL) EARNINGS CALL) SALES $36.0B - $37.0B $36.5B - $37.3B $36.7B - $37.3B $36.8B - $37.1B $36.7B Organic Growt
Slide 20: FY 2023 Segment Results
FY 2023 SEGMENT RESULTS SEGMENT MARGIN SALES CHANGE (BPS) COMMENTARY ($M) • Commercial aviation up 20% year over year on increased flight hours and build rates AERO $13,624 27.5% • Return to growth in defense and space, book-to-bill ratio of approximately 1.2x provides momentum into Up 15% Organic U
Slide 21: 2024 Earnings Per Share Bridge
2024 EARNINGS PER SHARE BRIDGE Guidance Ranges: $0.60 - $0.85 ($0.12) - ($0.07) ~$0.73 ~($0.10) ~$0.17 Up Midpoint Midpoint ~($0.01) 7% - 10% Adjusted - Higher net interest - ~21% vs. 20.9% + 656M vs. 668M expense $9.80 - + Higher volumes $10.10 $9.16 + Productivity, net of inflation FY23 Adjusted S
Slide 22: 2024 Free Cash Flow Bridge
2024 FREE CASH FLOW BRIDGE ~$0.2B ~($0.1B) ~$0.4B Up ($0.2B) - $0.0B range 6% - 13% $1.0B $0.1B - $0.3B range $0.3B - $0.5B range $5.3B $5.6B - $6.0B $4.3B FY23 Removal of FY23 Excluding Net Income Working Capital Capital 2024 Guidance Settlement Settlements Growth / Other Spending Payments Net Inco
Slide 23: Additional 2024 Inputs
ADDITIONAL 2024 INPUTS 2023 2024E 1Q24E COMMENTARY Pension / $557M ~$550M ~$145M • Pension income roughly flat to prior year OPEB • Retaining capacity for high-return projects to support cost management Repositioning ($285M) ($200M - $300M) ($60M - $100M) and productivity initiatives Other Below the
Slide 24: Credibility of Our Financial Algorithm
CREDIBILITY OF OUR FINANCIAL ALGORITHM PRIOR CURRENT 2021 2022 2023 KEY METRICS LONG-TERM LONG-TERM COMMENTARY RESULTS RESULTS RESULTS TARGETS TARGETS Strong multi-year performance ORGANIC SALES GROWTH 3% - 5% 4% 4% - 7% 6% 4% • Organic sales in line with long-term commitments, opportunity to accele
Slide 25: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this presentation to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with
Slide 26: Reconciliation of Operating Income to Segment Profit
RECONCILIATION OF OPERATING INCOME TO SEGMENT PROFIT AND CALCULATION OF OPERATING INCOME AND SEGMENT PROFIT MARGINS ($M) 4Q22 4Q23 1Q23 2022 2023 Operating income $ 1,813 $ 1,583 $ 1,692 $ 6,427 $ 7,084 Stock compensation expense (1) 25 54 59 188 202 Repositioning, Other (2,3) 233 569 180 942 952 Pe
Slide 27: Reconciliation of Operating Income to Segment Profit (2014-2021)
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 28: Reconciliation of Organic Sales Percent Change
RECONCILIATION OF ORGANIC SALES PERCENT CHANGE 4Q23 2023 Honeywell Reported sales % change 3% 3% Less: Foreign currency translation 1% (1)% Less: Acquisitions, divestitures and other, net —% —% Organic sales % change 2% 4% Aerospace Reported sales % change 15% 15% Less: Foreign currency translation
Slide 29: Reconciliation of Organic Sales Percent Change (2014-2022)
RECONCILIATION OF ORGANIC SALES PERCENT 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)% —% —% Orga
Slide 30: Reconciliation of EPS to Adjusted EPS
RECONCILIATION OF EPS TO ADJUSTED EPS AND ADJUSTED EPS EXCLUDING PENSION HEADWIND 4Q22 4Q23 1Q23 2022 2023 1Q24E 2024E Earnings per share of common stock - diluted (1) $ 1.51 $ 1.91 $ 2.07 $ 7.27 $ 8.47 $2.12 - $2.22 $9.80 - $10.10 Pension mark-to-market expense (2) 0.65 0.19 — 0.64 0.19 No Forecast
Slide 31: Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE ($M) 4Q22 4Q23 2022 2023 Income before taxes $ 1,189 $ 1,506 $ 6,379 $ 7,159 Pension mark-to-market expense 523 153 523 153 Expense (benefit) related to UOP Matters (5) — 45 — Russian-related charges 4 (2) 295 (3) Gain on sale of Ru
Slide 32: Reconciliation of Operating Cash Flow to Free Cash Flow
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW AND FREE CASH FLOW EXCLUDING IMPACT OF SETTLEMENTS AND CALCULATION OF FREE CASH FLOW MARGIN EXCLUDING IMPACT OF SETTLEMENTS ($M) 4Q23 2023 Cash provided by operating activities $ 2,955 $ 5,340 Capital expenditures (364) (1,039
Slide 33: Reconciliation to Adjusted Free Cash Flow
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW AND CALCULATION OF ADJUSTED 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
Slide 34: 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 2024E($B) Cash provided by operating activities ~$6.7 - $7.1 Capital expenditures ~(1.1) Garrett cash receipts — Free cash flow ~$5.6 - $6.0 Impact
Slide 35: 4Q 2023 Earnings - February 1, 2024
4Q 2023 Earnings - February 1, 2024 34
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