Why Is Honeywell Stock Taking A Hit Today?

Honeywell International Inc HON reported fourth-quarter fiscal 2023 sales of $9.44 billion, up 3% year-over-year on a reported basis and +2% on an organic basis, missing the consensus of $9.70 billion.

The sales increase was attributed to double-digit organic sales growth in commercial aviation. Adjusted EPS was $2.60 (+3% Y/Y), beating the consensus of $2.59.

Sales by Segments: Aerospace $3.67 billion (+14.6% Y/Y), Honeywell Building Technologies $1.50 billion (-0.66% Y/Y), Performance Materials and Technologies $3.03 billion (+5.9% Y/Y) and Safety and Productivity Solutions $1.23 billion (-23.6% Y/Y).

Operating margin contracted by 297 bps to 16.8%, and segment margin expanded by 60 bps to 23.5%, driven by Performance Materials and Technologies and Aerospace expansion.

Net cash provided by operating activities for the quarter was $2.96 billion (+25% Y/Y), and Free cash flow was $2.59 billion (+22% Y/Y); free cash flow margin expanded 430 bps to 27.4%.

The backlog increased to $31.8 billion, up 8% Y/Y. The company stated that the long-cycle markets remain robust while the short-cycle recovery will further boost its results.

Honeywell held cash and equivalents of ~$8 billion as of Dec. 31, 2023. The company deployed $8.3 billion of capital to share repurchases, dividends, capital expenditures, and M&A in fiscal 2023.

The company has also disclosed that CEO Vimal Kapur will take on the additional role of chairman when current executive chairman Darius Adamczyk retires from the board as of June 7, 2024.

The company also named William Ayer to succeed Scott Davis as independent lead director beginning as of the company’s annual meeting on May 14, 2024. 

“As we look toward 2024, our portfolio is well positioned to accelerate both our top line and earnings growth, underpinned by three compelling megatrends — automation, the future of aviation, and energy transition,” commented Kapur.

2024 Outlook: Honeywell expects sales of $38.1 billion-$38.9 billion versus the consensus of $39.01 billion; segment margin expansion of 30-60 basis points.

HON sees an adjusted EPS of $9.80-$10.10 versus consensus $9.96; anticipates operating cash flow of $6.7 billion-$7.1 billion and free cash flow of $5.6 billion-$6 billion.

1Q24 Outlook: Honeywell sees adjusted EPS of $2.12-$2.22 (consensus $2.24) and sales of $8.9 billion-$9.2 billion (consensus $9.248 billion).

Price Action: HON shares are trading lower by 4.4% at $193.22 on the last check Thursday.

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