Honeywell International Inc. (HON, Financial) released its fourth-quarter results before the opening bell on Jan. 29. Both the top and bottom line exceeded analysts' expectations.
The industrial conglomerate recorded adjusted earnings per share of $2.07, which increased 0.5% from the prior-year quarter and beat estimates by 7 cents. Quarterly revenue declined 6.3% on a year-over-year basis to $8.90 billion. Analysts had predicted revenue of $8.36 billion.
CEO Darius Adamczyk had the following to say:
"Honeywell's strong balance sheet put us in a good position to weather the challenges of 2020 while investing for future growth. We invested in high-return capital expenditures, repurchased $3.7 billion of Honeywell shares, completed three acquisitions, made six new investments within Honeywell Ventures, and announced our 11th consecutive dividend increase. Even with this level of cash deployment, we ended 2020 with $15.2 billion of cash and short-term investments on hand."
Segment details
Revenue for the aerospace segment plunged roughly 19% to $2.98 billion in the fourth quarter. Sales on an organic basis also declined 19% reflecting lower volume in the aviation original equipment business, which was partially negated by growth in the defense and space business. The segment's margin expanded 150 basis points courtesy of "productivity actions and commercial excellence."
Sales at Honeywell Business Technology tumbled 2.5% to $1.43 billion. Organic sales were down 4% due to poor performance of the commercial fire and building management products. As a result of "commercial excellence and productivity measures," the segment's margins soared 110 basis points to 21.4%.
In the Performance Materials and Technologies segment, revenue fell 11% to $2.56 billion. Organic sales were down 12%, while the segment's margin fell 380 basis points to roughly 19%, which was mainly driven by lower volume and sales mix.
Safety and productivity solutions sales amounted to $1.94 billion in the reported quarter, which reflected a growth of 28% year over year. Organic sales grew 27% due to double-digit growth in intelligrated and respiratory personal protective equipment, which was partially offset by lower demand for gas sensing. Margins expanded 260 basis points to 15.3%.
Looking forward
Honeywell anticipates commercial aerospace and oil and gas demand to go down rapidly due to the ongoing economic crisis. This will have an adverse impact on the company's overall revenue.
Honeywell projects sales to be in the $33.4 billion to $34.4 billion range, reflecting organic growth of 1% to 4%. Adjusted earnings for the same period are estimated to grow between 7% and 13%. The company's operating cash flow guidance is around $5.7 billion to $6.1 billion, while free cash flow is expected to be in the range of $5.1 billion to $5.5 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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