Honeywell International Inc. · NASDAQ:HON
Honeywell International — Q2 2024 Earnings Presentation
29 slides from Honeywell International's earnings presentation, Jul 25, 2024
Slide 1: Second Quarter 2024 Earnings Release
SECOND QUARTER 2024 EARNINGS RELEASE JULY 25, 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: 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 4: Recent Acquisition Updates
RECENT ACQUISITION UPDATES ANNOUNCED APD LNG ANNOUNCED CAES CLOSED ACCESS SOLUTIONS • Air Products’ LNG business enhances • Supplements our defense technology • Positions Honeywell as a leading provider ESS’s existing portfolio to create an end-to- across land, sea, air, and space with new of securi
Slide 5: Capital Deployment Accelerating
CAPITAL DEPLOYMENT ACCELERATING 2023 - 2025 TARGET PROGRESS TOWARD COMMITMENT M&A $36B - $39B APPROXIMATELY $10B ANNOUNCED SINCE 2023 Available Cash and Automation Future of Aviation Energy Transition Additional Debt Capacity AIR PRODUCTS Capacity $11B - $14B LNG Share Repurchases and M&A $13B+ Re-u
Slide 6: 2Q 2024 Results
2Q 2024 RESULTS 2Q 2024 Actual 2Q 2024 Guidance 2Q 2024 HIGHLIGHTS ADJUSTED • Orders growth of 4% with double-digit growth in Building Automation EARNINGS $2.49 $2.35 - $2.45 and Energy and Sustainability Solutions PER SHARE • Organic sales growth of 4%, including 1% volume growth, led by continued
Slide 7: 3Q and FY 2024 Outlook
3Q AND FY 2024 OUTLOOK 3Q GUIDANCE FY GUIDANCE SALES SEGMENT MARGIN SALES SEGMENT MARGIN $9.8B - $10.0B 23.0% - 23.3% $39.1B - $39.7B 23.3% - 23.5% Up 4% - 6% Organically Down (60) - (30) bps Up 5% - 6% Organically Down (20) – Flat bps NET BELOW THE ADJUSTED EPS ADJUSTED EPS FREE CASH FLOW LINE IMPA
Slide 8: 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 5% - 6% 37.6%1 23.3% - 23.5% 14% - 15% 6% - 8%2 2023 4% 37.3% 23.5% 14%3 10%4 Results ‘17 - ‘22 Average5 5% 36.4% 21.5% 15
Slide 9: Summary
SUMMARY • Met or exceeded all guided metrics in the second quarter with organic growth in three of four segments • Recent momentum supportive of second half revenue acceleration • Portfolio strategy unfolding: $10B in acquisitions since 2023; investing in all three megatrends Confident in Strong Sec
Slide 10: Appendix
Appendix 2Q 2024 Earnings – July 25, 2024 9
Slide 11: 2Q 2024 Financial Summary
2Q 2024 FINANCIAL SUMMARY SALES SEGMENT MARGIN ADJUSTED EPS FREE CASH FLOW Down Up 4% Organic Up 8% Down (1%) (10 bps) 23.1% 23.0% $2.49 $9.6B $1.1B $1.1B $2.30 $9.1B $1.36 Reported $1.74 2Q23 2Q24 2Q23 2Q24 2Q23 2Q24 2Q23 2Q24 + Double-digit organic growth in + Segment profit growth of 4% + Higher
Slide 12: 2Q 2024 Segment Results
2Q 2024 SEGMENT RESULTS SEGMENT MARGIN SALES CHANGE (BPS) COMMENTARY ($M) • 13th consecutive quarter of double-digit growth in commercial aviation; aftermarket up 17% $3,891 27.2% • 19% sales growth in defense and space on further supply unlock AT Up 16% Organic Down (60) bps • Margin contraction as
Slide 13: 2Q 2024 Sales Growth
2Q 2024 SALES GROWTH 2Q Reported 2Q Organic AEROSPACE TECHNOLOGIES 16% 16% Commercial Aviation Original Equipment 10% 10% Commercial Aviation Aftermarket 17% 17% Defense and Space 19% 19% INDUSTRIAL AUTOMATION (8%) (8%) Process Solutions 2% 1% Productivity Solutions and Services (10%) (9%) Sensing a
Slide 14: 2Q 2024 Earnings Per Share Bridge
2Q 2024 EARNINGS PER SHARE BRIDGE $0.06 ($0.10) Up 8% YoY $0.02 $0.01 $2.49 $0.10 ($0.03) + 654M vs. + 21.1% vs. 670M + Lower 21.2% repositioning and other ‒ Higher net interest $2.36 expense + Pricing $2.30 + Productivity ‒ Inflation 2Q23 Segment Below the Adjusted Effective Share 2Q24 Amortization
Slide 15: Additional 2024 Inputs
ADDITIONAL 2024 INPUTS 2Q24 3Q24E 2024E COMMENTARY Pension / $144M ~$150M ~$550M • Pension income roughly flat to prior year OPEB • Retaining capacity for high-return projects to support cost management Repositioning ($27M) ($30M - $70M) ($150M - $225M) and productivity initiatives Other Below the (
Slide 16: FY 2024 Guidance Progression
FY 2024 GUIDANCE PROGRESSION ORIGINAL GUIDE PREVIOUS GUIDE PREVIOUS GUIDE CURRENT GUIDE (Incl. Access Solutions (From 4Q23 Earnings Call) (From 1Q24 Earnings Call) (From 2Q24 Earnings Call) and Reporting Change) SALES $38.1B - $38.9B $38.1B - $38.9B $38.5B - $39.3B $39.1B - $39.7B Organic Growth Up
Slide 17: Long-Term Financial Growth Algorithm
LONG-TERM FINANCIAL GROWTH ALGORITHM MEGATRENDS ORGANIC SEGMENT SHARE M&A ADJUSTED EPS SALES MARGIN REPURCHASES Accretive bolt-on GROWTH acquisitions Automation GROWTH EXPANSION Minimum 1% per year 4% - 7% 40 - 60 bps The Future of Aviation Adj. EPS Adj. EPS Segment Profit and Adj. EPS Growth Growth
Slide 18: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this presentation to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with
Slide 19: Reconciliation of Operating Income to Segment Profit
RECONCILIATION OF OPERATING INCOME TO SEGMENT PROFIT AND CALCULATION OF OPERATING INCOME AND SEGMENT PROFIT MARGINS ($M) 2Q23 3Q23 2Q24 2023 Operating income $ 1,883 $ 1,926 $ 1,978 $ 7,084 Stock compensation expense1 50 39 55 202 Repositioning, Other2,3 103 100 58 952 Pension and other postretireme
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) 2014 2015 2016 2017 2018 2019 2021 2022 Operating income $ 5,622 $ 6,238 $ 6,051 $ 6,303 $ 6,705 $ 6,851 $ 6,200 $ 6,427 Stock compensation expense1 187 175 184 176 175 153 217 18
Slide 21: Reconciliation of Organic Sales Percent Change
RECONCILIATION OF ORGANIC SALES PERCENT CHANGE 2Q24 Honeywell Reported sales % change 5% Less: Foreign currency translation —% Less: Acquisitions, divestitures and other, net 1% Organic sales % change 4% Aerospace Technologies Reported sales % change 16% Less: Foreign currency translation —% Less: A
Slide 22: Reconciliation of Organic Sales Percent Change
RECONCILIATION OF ORGANIC SALES PERCENT CHANGE 2014 2015 2016 2017 2018 2019 2021 2022 2023 Honeywell Reported sales % change 3% (4)% 2% 3% 3% (12)% 5% 3% 3% Less: Foreign currency translation —% (4)% (1)% —% 1% (1)% 1% (3)% (1)% Less: Acquisitions, divestitures and other, net —% —% 4% (1)% (4)% (16
Slide 23: Reconciliation of EPS to Adjusted EPS
RECONCILIATION OF EPS TO ADJUSTED EPS AND ADJUSTED EPS EXCLUDING PENSION HEADWIND 2Q23 3Q23 2Q24 FY2023 3Q24E 2024E Earnings per share of common stock - diluted1 $ 2.22 $ 2.27 $ 2.36 $ 8.47 $2.28 - $2.38 $9.48 - $9.68 Pension mark-to-market expense2 — — — 0.19 No Forecast No Forecast Amortization of
Slide 24: Reconciliation of EPS to Adjusted EPS
RECONCILIATION OF EPS TO ADJUSTED EPS 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Earnings per share of common stock - diluted1 $ 4.92 $ 5.33 $ 6.04 $ 6.21 $ 2.00 $ 8.98 $ 8.41 $ 6.72 $ 7.91 $ 7.27 Pension mark-to-market expense2 0.05 0.23 0.06 0.28 0.09 0.04 0.13 0.04 0.05 0.64 Amortization o
Slide 25: Reconciliation of Effective Tax Rate to Adjusted Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE ($M) 2Q23 2Q24 Income before taxes $ 1,904 $ 1,974 Amortization of acquisition-related intangibles 61 85 Acquisition-related costs 1 29 Russian-related charges 1 — Net expense related to the NARCO Buyout and HWI Sale 11 — Adjusted i
Slide 26: 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 THE IMPACT OF SETTLEMENTS AND CALCULATION OF FREE CASH FLOW MARGIN EXCLUDING IMPACT OF SETTLEMENTS ($M) 2Q23 2Q24 2023 Cash provided by operating activities $ 1,360 $ 1,371 $ 5,340 Capital expendit
Slide 27: 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 28: Reconciliation of Expected Operating Cash Flow to Free Cash Flow
RECONCILIATION OF EXPECTED CASH PROVIDED BY OPERATING ACTIVITIES TO EXPECTED FREE CASH FLOW 2024E($B) Cash provided by operating activities ~$6.6 - $7.0 Capital expenditures ~(1.1) Free cash flow ~$5.5 - $5.9 We define free cash flow as cash provided by operating activities less cash for capital exp
Slide 29: 2Q 2024 Earnings – July 25, 2024
2Q 2024 Earnings – July 25, 2024 28
Honeywell International — Q2 2024 Earnings Presentation on 6ix