96 annotations
Our annual 4% to 7% organic sales growth and 40 to 60 basis point of margin expansion alone will deliver 6% to 10% of organic EPS growth.
Some years, one or other of these elements move. But as you've seen, 6% to 10% delivery has been consistent hallmark of Honeywell.
When coupled with 1% to 2% of EPS accretion from both share buyback and consistent M&A execution, we are confident we'll deliver double-digit adjusted EPS growth at the midpoint on a through-cycle basis. The strength of our dividend, currently yielding about 2%, also adds further value to our shareholder returns.
Although there has been some noise in our results, mostly related to below the line, we have delivered 8% segment profit growth and 2% adjusted EPS accretion from the share repurchases on an average during the past 3 years, in line with the long-term financial framework.
Now we are ramping up M&A lever, which should drive incremental benefits.
With that, let's go to the next page to discuss our recent progress on this long-term growth algorithm.
DD EPS growth through the cycle
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2023 Q4
20 Feb 24
positive on productivity solutions and services
positive exot rate on prod solutions end pf 2024
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2023 Q4
16 Feb 24
and productivity solutions and service businesses will benefit as the effects of distributor destocking fade throughout the year
prod solutions will benefit from disributor destocking
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2023 Q4
16 Feb 24
In our Productivity Solutions and Service business, we continue to work through the effects of distributor destocking, but over 30% orders growth in the quarter provides some confidence that we are near the end of that cycle.
productivity solutions and services
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2023 Q4
16 Feb 24
n addition, earlier in January, Quantinuum announced its first equity raise since the merger of Honeywell Quantum Solutions and Cambridge Quantum Computing in late 2021, securing $300 million at a pre-money valuation of $5 billion, demonstrating Quantinuum's leading position on [indiscernible] and quantum computing.
The round was anchored by Quantinuum's strategic partner, JPMorgan Chase, with additional participation from Mitsui & Company, Amgen and Honeywell. This investment brings the total capital raised by Quantinuum since inception to approximately $625 million.
Quantum computing is a key enabler for AI to reach a scale potential, and Quantinuum is a pioneering key breakthrough and expanding use cases across a number of industries. Honeywell remains a majority owner with over 50% equity ownership, and we are committed to demonstrating a path to monetization of our stake within the next 18 months.
Quantinuum fnd rausing values it at $5 billion
Transcript
2023 Q4
16 Feb 24
But as we mentioned in our earlier conversation, the SPS orders in Q3, we had a book-to-bill of 1. And we see similar trends continuing in Q4, which means we are in a recovery cycle in this business moving forward, starting Q4, and we'll see that in 2024.
Margin expansion will certainly help there because the volume growth will help in margin expansion.
We have re-baselined our cost base, aligned to the new revenue scale.
So overall, we should see a recovery from this on onwards.
sps book to nill now 1
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2023 Q3
3 Nov 23
First, it is 60% products, 40% solution. And within the 40% solution, more than half is aftermarket.
So by very mix, it's a short cycle-oriented business.
The second point is the products we have. They are critical to the buildings, and that's why they are higher margin, and that explains our constant margin improvement in the segment. And finally, our exposure in building this combination of real estate, but also infrastructure. And all that put together, explains our results of 2022, where we grew double digits and this year, we'll grow low single digits.
To your question of 2024, we remain confident HBT will grow by our guidance.
Our backlog is growing in our solutions business. And of course, the swing factor remains here the short cycle position.
HBT colour -- has short cycle businesses so senstive to economy
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2023 Q3
3 Nov 23
afety and Productivity Solutions,
sps
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2023 Q3
3 Nov 23
Performance Materials and Technologies,
pmt
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2023 Q3
3 Nov 23
Our already robust backlog grew to a new record of $31.4 billion in third quarter, up 8% year-over-year and 3% sequentially due to strength in aero and other long-cycle businesses. Orders grew double digit in the quarter due to tremendous demand generation in aero, where orders were up 30% year-over-year. Honeywell Building Technologies and Safety and Productivity Solutions ended with quarter with flat year-over-year orders, with book-to-bill up around 1, an indication that we are seeing a short-cycle end markets beginning to stabilize.
aero strength in orders
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2023 Q3
3 Nov 23
Intelligrated was another positive indicator in the third quarter as we converted on a robust pipeline to drive double-digit year-over-year orders growth and over 50% sequential orders growth. PMT was down mid-single digits on unfavorable comparisons to last year's peak in advanced materials orders.
inrelligrated dd orders groewth
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2023 Q3
3 Nov 23
In Building Technologies, we were prudent with our posture at the start of the year as we face unprecedented central bank tightening cycle and uncertain demand environment.
While the operating backdrop remains difficult, we are encouraged by the sequential order progression we saw each month throughout 3Q, including double-digit products orders growth in the month of September.
For the fourth quarter, we expect modest sequential sales improvement from our 2Q and 3Q levels, with growth continuing to be led by our long-cycle Building Solutions business. The supply chain is improving each quarter, and we expect to make further progress on converting our past-due backlog into sales.
We're also encouraged by the resiliency we are seeing in verticals such as airports, government and education, and expect institutional demand to provide support amid commercial softness. We project HPT sales to be up low single digits for the year, with commercial and operational excellence, enabling HPT to be our largest margin expander in 2023.
hbt guidance up lsd fy
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2023 Q3
1 Nov 23
Honeywell Building Technologies. Sales were flat year-over-year in the quarter.
Our long-cycle Building Solutions business continues to outpace our short-cycle building products. Building Solutions grew 4% organically, led by high single-digit growth in building projects, driven by strong execution, particularly in energy projects.
Orders for building projects were also substantial in the quarter, up nearly 20% year-over-year and resulting in a book-to-bill ratio of approximately 1.2.
On the product side, sales decreased modestly as a result of relatively soft demand for security products. Segment profit remained a bright spot for the business, continuing to grow as a result of productivity actions and commercial excellence. All in, HBT's segment margin expanded 110 basis points to 25.2%.
hbt
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2023 Q3
1 Nov 23
So I'll start with HBT, turn to Greg for respond to SPS question.
I think HBT from a geographic perspective, Europe continues to be where we want have better outcome.
I think that's a bit of a drag at this point. The strength is in high growth regions. We see strength in Middle East, India and China in buildings and North America is more of, I would say, sequentially no change within the business.
So that's kind of our overall dynamic.
On the channel side, I mean, the channel demand will be determined by the end market demand.
So we -- it's a very short-cycle business.
So we don't see any dynamics of channels having less or more inventory at the in the HBT business. Maybe Greg, do you want to respond to SPS question.
Greg Lewis
Yes.
So, SPS is likely to be down in the fourth quarter.
So I would say it's not going to be flattish, it's going to be probably more like down.
I think 3Q and 2Q are going to look pretty similar to one another, and then we'll get a little bit of a normal seasonal bump in the fourth quarter.
So, that's the way I would think about the progression for SPS top line overall.
sps will be down in q4, hbt strength in high gr9wth regions not Europe
Transcript
2023 Q2
29 Aug 23
Sure. So I would say if we take IGS first, our order rates are down meaningfully as we've talked about as -- but when we look at overall pipeline, we're starting to see the pipeline are build back to a little bit better levels. That may not occur immediately, but we see if there is a chance that we've maybe growing again in 2024 that will really be dictated by how the back half orders really come in. But we are starting to see a little bit more strength in the pipeline, which I think is a positive.
As it relates to the short-cycle businesses, what we talk about, it's down year-on-year because the first half of the year was particularly high, but we're seeing stabilization in the last two to three quarters have been either going up sequentially or staying roughly flat.
So, I think we've reached this stabilization point on a short-cycle. And as and when some of those markets begin to recover then we'll see some growth.
sps -- stabilizaton in short cycle, pipeline building
Transcript
2023 Q2
29 Aug 23
Looking ahead for Safety and Productivity Solutions, our outlook continues to be impacted by the decline in CapEx for new warehouse capacity.
However our short-cycle businesses appear to be stabilizing as we awaited demand acceleration in the coming quarters.
For the third quarter, we expect this to lead to organic sales declines similar to Q2.
However, we anticipate another quarter of strong growth in the aftermarket services portion of our Intelligrated business and sensing and safety technologies should return to growth.
intelligrated aftermaret services v good
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2023 Q2
29 Aug 23
Vimal, couple of small things here. One, I mean, you guys are spending a couple of $100 million a year on quantum. Vimal, do you have a kind of an evolved vision of where this business goes and how you can monetize it, when you can monetize it, if is it can the cash flow bleed go down a little bit over time or some kind of positive endgame that you see here?
Vimal Kapur
So, Scott, I mean, we have publicly stated that we would like to monetize value of the quantum investment we have made in Quantinuum. And as the markets are more ready for IPO, which probably are here for a while, we are getting prepared for that.
So, we are doing everything towards that endgame, and the strategy hasn't changed to create more value for our shareholders at appropriate time through an IPO for that business.
quantuum?? ipo?
Transcript
2023 Q2
29 Aug 23
Yes. So Steve, we are conscious of our margin rates in HBT and make careful selection of our projects which have adequate margins and strong service.
So, I think given that choice we make, you can see impact of that in margin expansion of Building Technologies, and that comes to a certain degree at the organic growth rate.
So, it's a choice to be made, and we want to deliver both an ideal word but we remain biased more towards growth in margin expansion versus the top line growth.
hbt -- going fror margin not top line growth
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2023 Q2
29 Aug 23
Given these dynamics we still expect HBT sales for the year to grow low-single-digit organically and we see potential for growth acceleration as we exit ‘23.
hbt maintain, but short cycle weakness
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2023 Q2
28 Aug 23
With the SPS portfolio bouncing along the bottom of the cycle we now expect full year sales to be down low-double-digits in 2023.
sps downgrade
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2023 Q2
28 Aug 23