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Honeywell Delivers Strong Earnings With 370 Basis Points Of Operating Margin Expansion And 180 Basis Points Of Segment Margin Expansion; Raises 2019 Full-Year Earnings And Margin Guidance(1)

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CHARLOTTE, N.C., Oct. 17, 2019 /PRNewswire/ -- Honeywell (NYSE:HON) today announced its financial results for the third quarter of 2019 and raised its full-year segment margin and adjusted earnings per share financial guidance1, narrowed its sales guidance and reaffirmed its cash flow guidance.

"We continue to deliver strong results and returns for our shareowners, even with the ongoing uncertainty in the macroeconomic environment," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "We delivered adjusted earnings per share2 of $2.08, up 9%, excluding the impact of the spin-offs2, which was above the high end of our third-quarter guidance range. Organic sales growth of 3% was driven by strength across Aerospace, continued demand for commercial fire products in Building Technologies, and broad-based growth in Process Solutions. In addition, Honeywell Connected Enterprise drove double-digit connected software growth, continuing our transformation into a premier software industrial company. Our productivity rigor and the favorable impact of the 2018 spin-offs also contributed to our strong results and expanded segment margin, which was up 180 basis points to 21.2% in the quarter."

"We remain on track to meet our cash flow commitments for the year, and we continued to execute on our capital deployment strategy in the third quarter. We repurchased $1.0 billion in Honeywell shares, bringing total repurchases in the first nine months of 2019 to $3.7 billion. We also acquired TruTrak Flight Systems, made three strategic investments within Honeywell Ventures, and announced a 10% dividend increase, the tenth consecutive double-digit dividend increase. Additionally, during the quarter, we issued $2.7 billion of senior notes to refinance October debt maturities at attractive rates, further strengthening our balance sheet," said Adamczyk.

"Overall, we had a strong third quarter, which was a continuation of very strong performance year-to-date. We are well positioned in attractive end markets with multiple levers for value creation heading into 2020. We remain committed to delivering outstanding returns for our customers, shareowners, and employees over the long-term," concluded Adamczyk.

As a result of the company's performance in the first three quarters and management's outlook for the remainder of the year, Honeywell updated its full-year financial guidance1. Organic sales growth is now expected to be in the range of 4% to 5%; segment margin1 is now expected to be 20.9% to 21.0%, up 20 basis points from the low end of the prior guidance range; and adjusted earnings per share1 is now expected to be $8.10 to $8.15, up fifteen cents from the low end of the prior guidance range.

A summary of the company's full-year guidance changes can be found in Table 1.

Third-Quarter Performance

Honeywell sales for the third quarter were down 16% on a reported basis and up 3% on an organic basis. The difference between reported and organic sales primarily relates to the spin-offs of the Transportation Systems business (formerly in Aerospace) and the Homes and ADI Global Distribution business (formerly in Honeywell Building Technologies) as well as the impact of foreign currency translation. The third-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the third quarter were up 10% on an organic basis driven by continued double-digit growth in the Defense and Space business, strength in the commercial aftermarket, and original equipment demand across air transport and business aviation. Segment margin expanded 350 basis points to 25.6%, primarily driven by commercial excellence, productivity, net of inflation, and the favorable impact from the spin-off of the Transportation Systems business in 2018.

Honeywell Building Technologies sales for the third quarter were up 3% on an organic basis driven by continued demand for commercial fire and building management products, and building projects across the Americas. Segment margin expanded 390 basis points to 21.0% driven by the favorable impact from the spin-off of the Homes and ADI Global Distribution business in 2018.

Performance Materials and Technologies sales for the third quarter were up 3% on an organic basis driven by robust demand for services, gas products, and automation projects in Process Solutions, double-digit software growth driven by demand for Honeywell Forge for Industrial, and strength in licensing and refining catalysts in UOP. This was partially offset by lower gas processing sales in UOP and declines in Advanced Materials, which was impacted by continued illegal imports of hydrofluorocarbons (HFCs) into Europe. Segment margin expanded 60 basis points to 21.8%, primarily driven by productivity, net of inflation, and commercial excellence.

Safety and Productivity Solutions sales for the third quarter were down 8% on an organic basis driven by distributor destocking that resulted in lower sales volumes in productivity products and the impact of major systems project timing in Intelligrated, which more than offset continued demand for gas sensing and detection products. Segment margin contracted 320 basis points to 13.4%, primarily driven by lower sales volumes in productivity products and higher sales of lower margin products.

Conference Call Details

Honeywell will discuss its third-quarter results and updated full-year guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. To participate on the conference call, please dial (800) 239-9838 (domestic) or (323) 794-2551 (international) approximately ten minutes before the 8:30 a.m. EDT start. Please mention to the operator that you are dialing in for Honeywell's third-quarter 2019 earnings call or provide the conference code HON3Q19. 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 (www.honeywell.com/investor). Investors can hear a replay of the conference call from 12:30 p.m. EDT, October 17, until 12:30 p.m. EDT, October 24, by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international). The access code is 7673176.

TABLE 1: FULL-YEAR 2019 GUIDANCE1



Previous Guidance


Current Guidance

Sales


$36.7B - $37.2B


$36.7B - $36.9B

Organic Growth


4% - 6%


4% - 5%

Segment Margin


20.7% - 21.0%


20.9% - 21.0%

Expansion


Up 110 - 140 bps


Up 130 - 140 bps

Expansion Ex-Spins3


Up 30 - 60 bps


Up 50 - 60 bps

Adjusted Earnings Per Share4


$7.95 - $8.15


$8.10 - $8.15

Earnings Growth Ex-Spins


8% - 10%


~ 10%

Operating Cash Flow


$6.2B - $6.5B


$6.2B - $6.5B

Adjusted Free Cash Flow5


$5.7B - $6.0B


$5.7B - $6.0B

Conversion


98% - 100%


98% - 100%

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS



3Q 2018


3Q 2019


Change

Sales


10,762


9,086


(16)%

Organic Growth






3%

Segment Margin


19.4%


21.2%


180 bps

Operating Income Margin


15.6%


19.3%


370 bps

Reported Earnings Per Share


$3.11


$2.23


(28)%

Adjusted Earnings Per Share Ex-Spins6


$1.90


$2.08


9%

Cash Flow from Operations


1,878


1,471


(22)%

Adjusted Free Cash Flow7


1,809


1,286


(29)%

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

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