- Organic Sales Growth 1%, Up 3% Excluding Defense & Space
- EPS Up 6% Year-Over-Year Reported, Up 10% Using Normalized Tax Rate
- $0.10 EPS Gain Funding $0.11 EPS Restructuring And Other Actions
- Increasing Proforma EPS Guidance To $5.40 – $5.55, From $5.35 – $5.55
Honeywell (NYSE: HON) today announced its results for the first quarter of 2014:
| Total Honeywell | |||
| ($ Millions, except Earnings Per Share) | 1Q 2013 | 1Q 2014 | Change |
| Sales | 9,328 | 9,679 | 4% |
| Segment Margin | 16.20% | 16.50% | 30 bps |
| Operating Income Margin | 14.10% | 14.20% | 10 bps |
| Earnings Per Share | $1.21 | $1.28 | 6% |
| Earnings Per Share (At 26.5% Tax Rate) | $1.16 | $1.28 | 10% |
| Cash Flow from Operations | 341 | 688 | 102% |
| Free Cash Flow * | 193 | 496 | 157% |
| * Cash Flow from Operations Less Capital Expenditures | |||
“Honeywell had a good start to the year with strong margin expansion driving better than expected earnings,” said Honeywell Chairman and CEO Dave Cote. “We saw 3% organic sales growth ex-Defense & Space, with strong execution across each of the businesses driving earnings above the high-end of our guidance. We remain cautiously optimistic on the macro environment, even with some nice momentum exiting the quarter in our short-cycle and long-cycle businesses driving organic sales growth acceleration as we progress through the year. As a result of the first quarter performance and overall favorable outlook for our key end markets, we’re raising the low-end of our 2014 Proforma EPS outlook by $0.05 and our new guidance range is $5.40-$5.55. We are also increasing our cash flow forecast for the year given the strong first quarter working capital performance. We remain confident in our outlook and intend to perform better than our peers driven by our diversity of opportunity, relentless seed planting in new products and technologies, continued penetration of High Growth Regions (HGRs), and growing traction on key process initiatives. We’ve also proactively redeployed non-operating gains and operational earnings to fund smart new repositioning projects benefiting 2015 and beyond. Our recently announced organizational changes demonstrate the strength of our organization, add further evidence to the effectiveness of the Honeywell operating model, and reaffirm our belief that the best is yet to come for Honeywell.”
The company is updating its full-year 2014 guidance and now expects:
| Full-Year Guidance | |||
| 2014 | 2014 | Change | |
| Prior Guidance | Revised Guidance | vs. 2013 | |
| Sales | $40.3 – $40.7B | $40.3 – $40.7B | 3% – 4% |
| Segment Margin | 16.6% – 16.9% | 16.6% – 16.9% | 30 – 60 bps3 |
| Operating Income Margin1 | 15.2% – 15.5% | 15.2% – 15.5% | 100 – 130 bps |
| Earnings Per Share1 | $5.35 – $5.55 | $5.40 – $5.55 | 9% – 12% |
| Free Cash Flow2 | $3.5 – $3.7B | $3.8 – $4.0B | ~15% |
| 1. Proforma, V% / bps Exclude Pension Mark-to-Market Adjustment | |||
| 2. Cash Flow from Operations Less Capital Expenditures; Definition of Free Cash Flow No Longer Excludes NARCO Trust Establishment Payments, Cash Pension Contributions, and Cash Taxes Relating to the Sale of Available for Sale Investments | |||
| 3. Segment Margin ex-M&A up 50 – 80 bps | |||
In April 2014, Honeywell announced the realignment of our Honeywell Process Solutions (HPS) business from Automation and Control Solutions (ACS) into Performance Materials and Technologies (PMT). Effective with the reporting of second quarter 2014 results, Honeywell will report its financial performance based on the inclusion of HPS in PMT. During the second quarter of 2014 Honeywell will make available segment results revised for the new reporting structure to provide financial information on a basis consistent with the new reporting structure.
First Quarter Segment Performance
| Aerospace | |||
| ($ Millions) | 1Q 2013 | 1Q 2014 | % Change |
| Sales | 2,911 | 2,858 | -2% |
| Segment Profit | 551 | 549 | ~Flat |
| Segment Margin | 18.90% | 19.20% | 30 bps |
- Sales were down (2%) compared with the first quarter of 2013 driven by an (8%) decline in Defense & Space sales as a result of planned program ramp downs and delays, as well as lower Government Services, partially offset by Commercial growth. Commercial OE sales were up 1% in the quarter driven by continued strong OE build rates and favorable platform mix, partially offset by lower regional jet sales. Commercial Aftermarket growth of 4% was driven by a 14% increase in spares sales, partially offset by lower maintenance activities.
- Segment profit was approximately flat, and segment margins expanded 30 bps to 19.2%, driven by commercial excellence, productivity net of inflation and favorable aftermarket mix, partially offset by lower volume.
| Automation and Control Solutions | |||
| ($ Millions) | 1Q 2013 | 1Q 2014 | % Change |
| Sales | 3,786 | 4,074 | 8% |
| Segment Profit | 523 | 580 | 11% |
| Segment Margin | 13.80% | 14.20% | 40 bps |
- Sales were up 8% reported, 2% organic, compared with the first quarter of 2013, primarily driven by the favorable impact of acquisitions, growth in Energy, Safety, and Security, particularly Environmental and Combustion Controls (ECC) and Life Safety, with continued strong sales in U.S. residential end markets, new product introductions, and improving non-residential activity, partially offset by anticipated program ramp downs in Scanning & Mobility. ACS also had higher service and software sales in Process Solutions.
- Segment profit was up 11% and segment margins expanded 40 bps to 14.2% driven by higher sales volume, commercial excellence and productivity net of inflation, partially offset by the dilutive impact of acquisitions and continued investments for growth.
| Performance Materials and Technologies | |||
| ($ Millions) | 1Q 2013 | 1Q 2014 | % Change |
| Sales | 1,717 | 1,754 | 2% |
| Segment Profit | 374 | 364 | -3% |
| Segment Margin | 21.80% | 20.80% | (100) bps |
- Sales were up 2% compared with the first quarter of 2013, driven by increased UOP catalyst and gas processing volume and higher volumes in Advanced Materials, partially offset by lower equipment, licensing and service sales, and pricing headwinds in Fluorine Products and Resins & Chemicals, which are expected to moderate over the remainder of the year.
- Segment profit was down (3%) and segment margins decreased (100) bps to 20.8%, driven by unfavorable petrochemical catalyst shipment mix versus the prior year, price/raw headwinds in Fluorine Products and Resins & Chemicals, and continued investments for growth, partially offset by productivity net of inflation.
|
Transportation Systems |
|||
| ($ Millions) | 1Q 2013 | 1Q 2014 | % Change |
| Sales | 914 | 993 | 9% |
| Segment Profit | 111 | 154 | 39% |
| Segment Margin | 12.10% | 15.50% | 340 bps |
- Sales were up 9% reported, 7% organic, compared with the first quarter of 2013, driven by continued growth from new platform launches, higher global turbo gas penetration and light vehicle production, and increased commercial vehicle demand globally.
- Segment profit was up 39% and segment margins increased 340 bps to 15.5% 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 first quarter 2014 investor conference call or provide the conference code HONQ114. 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, April 17, until 11:59 p.m. EDT, April 24, by dialing (800) 839-1162 (domestic) or (402) 220-0398 (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 operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other filings with the Securities and Exchange Commission.
