Honeywell Intl Half-yearly Report
July 18 2014 - 8:34AM
UK Regulatory
TIDMHON
Honeywell Reports Second Quarter 2014 Sales Up 6% To $10.3 Billion; EPS Of
$1.38 Per Share; Raising 2014 EPS Guidance
=- Organic Sales Growth 3%; Strong Execution Across The Portfolio
=- EPS Up 8% Reported, Up 12% Using Normalized Tax Rate
=- Raising Low-End Proforma EPS Guidance To $5.45 - $5.55, From $5.40 - $5.55
MORRIS TOWNSHIP, N.J., July 18, 2014 -- Honeywell (NYSE: HON)
today announced its results for the second quarter of 2014:
Total Honeywell
($ Millions, except Earnings Per Share) 2Q 2013 2Q 2014 Change
Sales 9,693 10,253 6%
Segment Margin 16.1% 16.7% 60 bps
Operating Income Margin 14.3% 15.4% 110 bps
Earnings Per Share $1.28 $1.38 8%
Earnings Per Share (At 26.5% Tax Rate) $1.22 $1.37 12%
Cash Flow from Operations 1,256 1,341 7%
Free Cash Flow * 1,060 1,112 5%
* Cash Flow from Operations Less Capital Expenditures
"Honeywell had another terrific quarter and a very good first half of 2014,"
said Honeywell Chairman and CEO Dave Cote. "Strong execution across our
businesses and continued momentum across the portfolio helped us to deliver
stronger than expected earnings. We saw 6% sales growth and margin expansion in
every business as our key growth and productivity initiatives continue to make
a difference. Our short-cycle businesses, particularly Energy, Safety and
Security, and Turbo Technologies, are benefiting from improving end markets,
new product introductions, and geographic expansion, while our long-cycle
businesses are growing robust backlogs supported by favorable macro trends and
strong win rates. Our recently announced closing of the sale of Friction
Materials was a significant step in our effort to align the Honeywell portfolio
around Great Positions in Good Industries. We believe that our portfolio is
well positioned for continued growth. As a result of our first half
performance, we are raising the low end of our 2014 proforma EPS guidance by
$0.05 with the expectation of improved organic growth and continued margin
expansion in the second half of the year."
The company is updating its full-year 2014 guidance and now expects:
Full-Year Guidance
2014 2014 Change
Prior Guidance Revised Guidance(3) vs. 2013
Sales $40.3 - $40.7B $40.2 - $40.4B 3% - 4%
Segment Margin 16.6% - 16.9% 16.8% - 17.0% 50 - 70 bps
Operating Income Margin(1) 15.2% - 15.5% 15.4% - 15.6% 120 - 140 bps
Earnings Per Share(1) $5.40 - $5.55 $5.45 - $5.55 10% - 12%
Free Cash Flow(2) $3.8 - $4.0B $3.8 - $4.0B 15%
1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment
2. Cash Flow from Operations Less Capital Expenditures
3. Reflects Absence Of ($300M) Friction Materials Sales in 2H 2014
On July 14, Honeywell announced that it will realign its Transportation Systems
business segment with its Aerospace business segment to better take advantage
of the engineering and technology similarities and the shared business models
between these two business segments. Under the realigned segment reporting
structure, the Company will have three business segments: Aerospace, Automation
and Control Solutions, and Performance Materials and Technologies. This
realignment has no impact on the Company's historical consolidated financial
position, results of operations or cash flows. Effective with the reporting of
third quarter 2014 results, the Company will report its financial performance
based on the inclusion of Transportation Systems in Aerospace. To provide
historical information on a basis consistent with its new reporting structure,
the Company will make available during the third quarter of 2014 certain
historical segment results recast to conform to the new reporting structure.
The recasted financial information will not represent a restatement of
previously issued financial statements.
Second Quarter Segment Performance
Aerospace
($ Millions) 2Q 2013 2Q 2014 % Change
Sales 2,997 2,991 Flat
Segment Profit 583 592 2%
Segment Margin 19.5% 19.8% 30 bps
* Sales were approximately flat compared with the second quarter of 2013
driven by 1% Commercial sales growth, offset by a (1%) decline in Defense &
Space. Commercial OE sales were approximately flat in the quarter
reflecting continued growth in OE build rates, offset by higher BGA OEM
payments and engine shipment timing. Commercial Aftermarket growth of 1%
was driven by an increase in spares sales, partially offset by fewer
maintenance events. Defense & Space sales declined (1%) as a result of
lower sales to the U.S. government, partially offset by strong
international growth.
* Segment profit was up 2%, and segment margins expanded 30 bps to 19.8%,
driven by commercial excellence and productivity net of inflation,
partially offset by BGA OEM payments, higher OE mix, and continued
investments for growth.
Automation and Control Solutions
($ Millions) 2Q 2013 2Q 2014 % Change
Sales 3,270 3,607 10%
Segment Profit 467 533 14%
Segment Margin 14.3% 14.8% 50 bps
* Sales were up 10% reported, 3% organic, compared with the second quarter of
2013, primarily driven by the favorable impact of acquisitions net of
divestitures and growth in Energy, Safety, and Security, particularly
Environmental and Combustion Controls and Honeywell Scanning & Mobility.
ACS benefitted from strength in U.S. residential end markets and new
product introductions, as well as continued growth in fire, gas, and the
Americas Distribution business.
* Segment profit was up 14% and segment margins expanded 50 bps to 14.8%
driven by commercial excellence, productivity net of inflation, and higher
volume, partially offset by the dilutive impact of acquisitions and
continued investments for growth.
Performance Materials and Technologies
($ Millions) 2Q 2013 2Q 2014 % Change
Sales 2,479 2,636 6%
Segment Profit 438 475 8%
Segment Margin 17.7% 18.0% 30 bps
* Sales were up 6% compared with the second quarter of 2013, driven by UOP
catalyst and gas processing growth and higher sales in Advanced Materials,
particularly Fluorine Products.
* Segment profit was up 8% and segment margins increased 30 bps to 18.0%,
driven by productivity net of inflation and higher volume, partially offset
by price/raw headwinds in Resins & Chemicals, unfavorable UOP catalyst
shipment mix versus the prior year, and continued investments for growth.
Transportation Systems
($ Millions) 2Q 2013 2Q 2014 % Change
Sales 947 1,019 8%
Segment Profit 126 167 33%
Segment Margin 13.3% 16.4% 310 bps
* Sales were up 8% reported, 4% organic, compared with the second quarter of
2013, driven by continued growth from new platform launches, higher global
automotive production, and increased commercial vehicle demand in Europe.
* Segment profit was up 33% and segment margins increased 310 bps to 16.4%
primarily driven by strong Turbo productivity and volume leverage, and
operational improvements.
Honeywell will discuss its results during its investor conference call today
starting at 9:30 a.m. EDT. To participate, please dial (800) 862-9098
(domestic) or (785) 424-1051 (international) a few minutes before the 9:30 a.m.
EDT start. Please mention to the operator that you are dialing in for
Honeywell's second quarter 2014 investor conference call or provide the
conference code HONQ214. 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 (http://www.honeywell.com/investor
). Investors can access a replay of the conference call from 12:00 p.m. EDT,
July 18, until 11:59 p.m. EDT, July 25, by dialing (800) 757-4768 (domestic) or
(402) 220-7227 (international).
Honeywell (www.honeywell.com) is a Fortune 100 diversified technology and
manufacturing leader, serving customers worldwide with aerospace products and
services; control technologies for buildings, homes, and industry;
turbochargers; and performance materials. Based in Morris Township, N.J.,
Honeywell's shares are traded on the New York, London, and Chicago Stock
Exchanges. For more news and information on Honeywell, please visit
www.honeywellnow.com.
This release contains certain statements that may be deemed "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical fact, that address
activities, events or developments that we or our management intends, expects,
projects, believes or anticipates will or may occur in the future are
forward-looking statements. Such statements are based upon certain assumptions
and assessments made by our management in light of their experience and their
perception of historical trends, current economic and industry conditions,
expected future developments and other factors they believe to be appropriate.
The forward-looking statements included in this release are also subject to a
number of material risks and uncertainties, including but not limited to
economic, competitive, governmental, and technological factors affecting our
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