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Honeywell International Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Honeywell Automation's current segment margin of 23% is supported by a track record of driving continuous improvement in operating efficiency through its Accelerator operating system.
- Honeywell has a strong set of competitive advantages, built and sustained over decades, coupled with cohesive strategic direction and compelling secular growth drivers to support attractive top and bottom line growth.
- Honeywell is well positioned to navigate the near-term challenges and its Accelerator operating system will help alleviate margin pressures from business mix and integration costs.
- Honeywell has a much higher past due backlog in OE. The company is expanding OE and installed base growth, and expects OE to outgrow aftermarket.
- The company is aware of the evolving geopolitical situation, challenging global macroeconomic conditions, and tempered demand expectation in some end markets, which may pressure near-term momentum.
- The company expects sales to be down low-single digits in Q1 due to challenging comps in Fluorine Products.
- The company expects to see more pressure in Europe as well as China.
- The company expects full-year adjusted EPS to be between $10.10 and $10.50, up 2% to 6% YoY, or down 2% to up 2%, excluding Bombardier.
- Organic segment profit growth is expected to add $0.22 per share at the midpoint of guidance, driven by higher volumes and productivity net of inflation.
- Sales for Q1 are expected to be $9.5 billion to $9.7 billion, flat to up 2% organically.
- The company expects to grow into that, between the growth of the company and taking those stranded costs over time inside of probably two years, that should certainly normalize itself.
- The company expects to do margin expansion, doing the balance between price cost and productivity.
Q&A Highlights from Honeywell International Inc Earnings Call Q4 2024
- Analyst asked about the timing of naming management teams for the different pieces of the company and whether there will be an external search for the Aerospace leadership or if it will be filled internally.
- Management teams will be announced as time progresses, and the current Honeywell leadership team is expected to continue. The Board will decide the leadership of RemainCo Honeywell and Honeywell Aerospace, and more information will be provided as prep work is completed over the next 12 to 18 months.
- Management teams will be announced as time progresses, and the current Honeywell leadership team is expected to continue. The Board will decide the leadership of RemainCo Honeywell and Honeywell Aerospace, and more information will be provided as prep work is completed over the next 12 to 18 months.
- Analyst asked about the net impact of M&A in 2025.
- The company expects a 1-2% accretion for the businesses in 2025, and this guidance still holds.
- The company expects a 1-2% accretion for the businesses in 2025, and this guidance still holds.
- Analyst asked about the company's free cash flow guidance of $8.50 per share and its 83% conversion rate, and how it compares to the company's goal of 100% conversion for Automation and Aerospace.
- The company's management clarified that the specific legal structuring of the spin-off has not been determined yet, but they will be separate companies. The management also stated that they are aiming to achieve 100% conversion over the next 24 months, with a focus on reducing and moving WIP and finished goods inventory in Aerospace.
- The company's management clarified that the specific legal structuring of the spin-off has not been determined yet, but they will be separate companies. The management also stated that they are aiming to achieve 100% conversion over the next 24 months, with a focus on reducing and moving WIP and finished goods inventory in Aerospace.
- Analyst asked about the treatment of below-the-line items such as pension income and environmental liability costs in the spin-off.
- The company's management stated that it is too early to comment on the specifics of how below-the-line items will be treated in the spin-off, but they are working with advisers to determine the particularities and will communicate their plans as they progress.
- The company's management stated that it is too early to comment on the specifics of how below-the-line items will be treated in the spin-off, but they are working with advisers to determine the particularities and will communicate their plans as they progress.
- Analyst asked about the return on investment and margin moves in long-term investments in Aerospace.
- Vimal M. Kapur stated that the Bombardier agreement is a long-term agreement and will show in revenue streams in four to five years. He also mentioned that investments in Aero will continue, and the company will remain active in the M&A market if opportunities arise.
- Vimal M. Kapur stated that the Bombardier agreement is a long-term agreement and will show in revenue streams in four to five years. He also mentioned that investments in Aero will continue, and the company will remain active in the M&A market if opportunities arise.
- Analyst asked about the company's capital allocation strategy during the second half of 2026.
- Vimal M. Kapur stated that the company expects to increase its R&D investment, but the percentage will remain the same. He also mentioned that the company's goal is to maintain its margins while preparing each business for growth in the future. The company expects to do $3 billion of share buyback to maintain its share count down by 1%, and it will remain active in the M&A market across all segments. He mentioned that the company has active deals in motion in Automation, Aerospace, and Energy, and it is working hard to get some deals done to position its portfolio for growth in the times ahead.
- Vimal M. Kapur stated that the company expects to increase its R&D investment, but the percentage will remain the same. He also mentioned that the company's goal is to maintain its margins while preparing each business for growth in the future. The company expects to do $3 billion of share buyback to maintain its share count down by 1%, and it will remain active in the M&A market across all segments. He mentioned that the company has active deals in motion in Automation, Aerospace, and Energy, and it is working hard to get some deals done to position its portfolio for growth in the times ahead.
- Analyst asked about the primary driver of the decision to separate Honeywell International Inc's businesses.
- Vimal M. Kapur, CEO of Honeywell International Inc, explained that the decision to separate the businesses was driven by the company's belief that the businesses would perform better as stand-alone entities rather than within the Honeywell conglomerate. He also mentioned that the company has been working on building strategies for each of the three pillars, including organic growth and inorganic actions, such as acquisitions and the spin of PPE business.
- Vimal M. Kapur, CEO of Honeywell International Inc, explained that the decision to separate the businesses was driven by the company's belief that the businesses would perform better as stand-alone entities rather than within the Honeywell conglomerate. He also mentioned that the company has been working on building strategies for each of the three pillars, including organic growth and inorganic actions, such as acquisitions and the spin of PPE business.
- Analyst asked about the factors that drove down ESS margins in the quarter.
- Michael Stepniak, CFO of Honeywell International Inc, clarified that the question was about ESS margins on a sequential or year-over-year basis. He mentioned that the company is still in the process of evaluating the data and will provide more information in the future.
- Michael Stepniak, CFO of Honeywell International Inc, clarified that the question was about ESS margins on a sequential or year-over-year basis. He mentioned that the company is still in the process of evaluating the data and will provide more information in the future.
- Analyst asked about the impact of tariffs on the company's 2025 guide.
- The company's guidance does not include any tariff impact, and they are currently assessing the potential impact of tariffs on their business, particularly in Mexico. The company believes that the tariffs are manageable, and they are working to understand their impact.
- The company's guidance does not include any tariff impact, and they are currently assessing the potential impact of tariffs on their business, particularly in Mexico. The company believes that the tariffs are manageable, and they are working to understand their impact.
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