Honeywell Reports Double-Digit Q3 Orders Growth, Bolsters Record High Backlog

Honeywell International Inc HON reported third-quarter FY23 sales of $9.21 billion, up 3% Y/Y on a reported basis and +2% on an organic basis, missing the consensus of $9.23 billion.

The sales increase was attributed to double-digit organic sales growth in commercial aviation, defense and space, and process solutions.

Adjusted EPS was $2.27, beating the consensus of $2.23.

Sales by Segments: Aerospace $3.49 billion (+18% Y/Y), Honeywell Building Technologies $1.53 billion (flat Y/Y), Performance Materials and Technologies $2.87 billion (+5% Y/Y) and Safety and Productivity Solutions $1.31 billion (-24% Y/Y).

Operating margin expanded by 140 bps to 20.9%, and segment margin expanded by 80 bps to 22.6%, attributed to expansion in Honeywell Building Technologies.

Net cash provided by operating activities for the quarter was $1.81 billion (-13.2% Y/Y), and Free cash flow was $1.56 billion (-17.9% Y/Y).

The backlog increased to $31.4 billion, up 8% Y/Y, and orders increased 10% Y/Y, driven by strength in Aerospace and long-cycle businesses.

HON held cash and equivalents of over $7.77 billion as of Sept. 30, 2023.

The company reports a significant increase in order volumes in Q3, leading to a historically high backlog. It asserts that it is well-positioned for growth in fiscal year 2024.

“We remain committed to our capital deployment strategy and put our robust balance sheet to work in the third quarter by deploying $2.0 billion to dividends, high-return capex, M&A, and share repurchases, including more than doubling our share repurchases sequentially to 5.3 million shares. The result of all these efforts was increased adjusted earnings per share in the face of uncertain macroeconomic dynamics,” commented Vimal Kapur, chief executive officer of Honeywell.

4Q23 Outlook: Honeywell expects sales of $9.6 billion-$9.9 billion versus the consensus of $9.69 billion; Sees Adjusted EPS of $2.53-$2.63 versus the consensus of $2.63; and Segment margin of 22.9%-23.2%.

For FY23, HON raises the midpoint of the segment margin guide while narrowing sales and adj. EPS ranges.

FY23 Outlook, updated: Honeywell now expects sales of $36.8 billion - $37.1 billion (prior $36.7 billion - $37.3 billion) versus the consensus of $36.93 billion.

The company sees adjusted EPS of $ $9.10-$9.20 (prior 9.05 - $9.25) versus the consensus of $9.16.

HON reaffirms guidance for Operating cash flows at $4.9 billion-$5.3 billion and Free Cash Flow at $3.9 billion-$4.3 billion.

Price Action: HON shares are trading higher by 0.53% at $179.04 on the last check Thursday.