Honeywell International Inc. · NASDAQ:HON
Honeywell International — Q2 2023 Earnings Presentation
27 slides from Honeywell International's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Earnings Release
SECOND QUARTER 2023 EARNINGS RELEASE JULY 27, 2023
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: 2Q 2023 Overview
2Q 2023 OVERVIEW 2Q 2023 2Q 2023 2Q 2023 Highlights Actual Guidance • Delivered on organic sales growth, segment margin $2.23 expansion, and adjusted earnings per share Adjusted Earnings Per Share $2.38 Excluding $2.15 - $2.25 Pension Headwind commitments • Organic sales growth of 3% driven by doubl
Slide 4: Honeywell Aerospace CEO Announcement
HONEYWELL AEROSPACE CEO ANNOUNCEMENT EFFECTIVE 8/1/2023 MIKE MADSEN JIM CURRIER BUILT BEST-IN-CLASS AERO FRANCHISE RIGHT PERSON TO LEAD NEXT STAGE Honeywell Aerospace • Aerospace veteran retiring • 17 years of deep knowledge about after 37 years of tenure with Honeywell’s Aerospace businesses, end 1
Slide 5: Portfolio Updates
PORTFOLIO UPDATES Compressor Controls Corporation SCADAfence Aero Technology Assets from Saab • Completed acquisition of CCC for • Announced acquisition of SCADAfence, an • Reached an agreement with Saab to acquire approximately $700M, a leading provider of Israel-based company that provides best-in
Slide 6: 2Q 2023 Financial Summary
2Q 2023 FINANCIAL SUMMARY Sales Segment Margin Adjusted EPS Free Cash Flow Up 6% Up 3% Up 150 Up 13% ex. Up 34% Organic bps Pension Headwind $9.1B 22.4% $9.0B $2.23 $1.1B 20.9% $2.10 $0.8B $1.36 Reported $1.74 2Q22 2Q23 2Q22 2Q23 2Q22 2Q23 2Q22 2Q23 + Higher segment profit + Margin expansion in SPS,
Slide 7: 3Q and FY 2023 Outlook
3Q AND FY 2023 OUTLOOK 3Q Guidance FY Guidance Sales Segment Margin Sales Segment Margin $9.1B - $9.3B 22.3% - 22.6% $36.7B - $37.3B 22.4% - 22.6% Up 1% - 4% Organically Up 50 - 80 bps Up 4% - 6% Organically Up 70 - 90 bps Prior: $36.5B - $37.3B, Up 3% - 6% Prior: 22.3% - 22.6%, Up 60 - 90 bps Net B
Slide 8: Long-Term Financial Progression
LONG-TERM FINANCIAL PROGRESSION Organic Growth Gross Margin Segment Margin FCF Margin Highlights • Our markets and Long-Term Mid- offerings underpin a 4% - 7% 40%+ 25%+ robust multi-year Target Teens+ outlook • Honeywell will 2023 22.4% - 14% - 4% - 6% 37.8%2 continue to execute Guidance1 22.6% 15%3
Slide 9: Summary
SUMMARY • Met or exceeded all guided metrics in the second quarter, strong cash flow generation • Executed on M&A strategy, enhancing portfolio by investing in new technologies and adjacencies • Backlog remains at record high; robust sales growth in Aerospace and PMT • Raised full-year sales, segmen
Slide 10: Appendix
Appendix 2Q 2023 Earnings - July 27, 2023 9
Slide 11: 2Q 2023 Segment Results
2Q 2023 SEGMENT RESULTS Segment Margin ($M) Sales Change (bps) Commentary • Commercial aviation sales up over 20% organically, nine consecutive quarters of double-digit growth $3,341 27.7% Aero • Second consecutive quarter of growth for defense and space Up 16% Organic Up 120 bps • Margin expansion
Slide 12: 2Q 2023 Sales Growth
2Q 2023 SALES GROWTH 2Q Reported 2Q Organic Aerospace 15% 16% Commercial Aviation Original Equipment 15% 16% Commercial Aviation Aftermarket 27% 27% Defense and Space 3% 3% Honeywell Building Technologies (1%) 0% Products (2%) (1%) Building Solutions (1%) 2% Performance Materials And Technologies 6%
Slide 13: 2Q 2023 Earnings Per Share Bridge
2Q 2023 EARNINGS PER SHARE BRIDGE $0.05 Up 13% ($0.15) $0.06 YoY $0.21 ($0.04) + 670M vs. 685M $2.38 ‒ Higher net + 21.2% vs. 23.4% Up 6% ($0.01) interest YoY expense $2.22 $2.23 + Pricing $2.10 + Productivity ‒ Inflation 2Q22 Segment Below the Adjusted Effective Share 2Q23 Adj. EPS Excl. Pension 2Q
Slide 14: FY 2023 Guidance Progression
FY 2023 GUIDANCE PROGRESSION Original Guidance Previous Guidance Updated Guidance (as of 4Q22 Earnings Call) (as of 1Q23 Earnings Call) Sales $36.0B - $37.0B $36.5B - $37.3B $36.7B - $37.3B Organic Growth Up 2% - 5% Up 3% - 6% Up 4% - 6% Segment Margin 22.2% - 22.6% 22.3% - 22.6% 22.4% - 22.6% Margi
Slide 15: 2023 Segment Outlook
2023 SEGMENT OUTLOOK Primary HON Organic Segment Commentary End Market Growth Rate • Progressive recovery in the aerospace supply chain enabling higher volume output Commercial Aerospace Aero LDD • Continued commercial aviation growth led by higher build rates and flight hours Defense and Space • De
Slide 16: Additional 2023 Inputs
ADDITIONAL 2023 INPUTS 2Q23 3Q23E FY23E Commentary Pension / • Significant increase in interest rates resulting in lower $137M ~$145M ~$550M pension income year over year OPEB • Retaining capacity for high-return projects to support cost Repositioning ($55M) ($40M - $85M) ($225M - $325M) management
Slide 17: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this presentation to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with
Slide 18: Reconciliation of Operating Income to Segment Profit
RECONCILIATION OF OPERATING INCOME TO SEGMENT PROFIT AND CALCULATION OF OPERATING INCOME AND SEGMENT PROFIT MARGINS ($M) 2Q22 3Q22 2Q23 2022 Operating income $ 1,601 $ 1,742 $ 1,883 $ 6,427 Stock compensation expense (1) 53 50 50 188 Repositioning, Other (2,3) 180 128 103 942 Pension and other postr
Slide 19: 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 20: Reconciliation of Organic Sales % Change
RECONCILIATION OF ORGANIC SALES % CHANGE 2Q23 Honeywell Reported sales % change 2% Less: Foreign currency translation (1)% Less: Acquisitions, divestitures and other, net —% Organic sales % change 3% Aerospace Reported sales % change 15% Less: Foreign currency translation (1)% Less: Acquisitions, di
Slide 21: Reconciliation of Organic Sales % Change (2014-2022)
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 22: Reconciliation of EPS to Adjusted EPS
RECONCILIATION OF EPS TO ADJUSTED EPS AND ADJUSTED EPS EXCLUDING PENSION HEADWIND 2Q22 3Q22 2Q23 FY2022 3Q23E 2023E Earnings per share of common stock - diluted (1) $ 1.84 $ 2.28 $ 2.22 $ 7.27 $2.15 - $2.25 $9.05 - $9.25 Pension mark-to-market expense (2) — — — 0.64 No Forecast No Forecast Expense r
Slide 23: Reconciliation of Operating Cash to Free Cash Flow
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW ($M) 2Q22 2Q23 Cash provided by operating activities $ 789 $ 1,360 Capital expenditures (158) (233) Garrett cash receipts 212 — Free cash flow $ 843 $ 1,127 We define free cash flow as cash provided by operating activities les
Slide 24: Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE ($M) 2Q22 2Q23 Income before taxes $ 1,704 $ 1,904 Expense related to UOP Matters 50 — Russian-related charges 124 1 Net expense related to the NARCO Buyout and HWI Sale — 11 Adjusted income before taxes $ 1,878 $ 1,916 Income tax e
Slide 25: Reconciliation of Operating Cash 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 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: 2Q 2023 Earnings - July 27, 2023
2Q 2023 Earnings - July 27, 2023 26
Honeywell International — Q2 2023 Earnings Presentation on 6ix