Honeywell reports 2Q2013 financial highlights

19-Jul-2013

Strong Productivity Driving EPS Growth Of 12%, Up 8% Using Expected Full-Year Tax Rate
• Continued Proactive Funding Of Repositioning To Align With Global Growth Outlook
• Increasing Proforma EPS Guidance To $4.85 - $4.95, From $4.80 - $4.95

MORRIS TOWNSHIP, N.J., July 19, 2013 -- Honeywell (NYSE: HON) today announced its results for the second quarter of 2013:

Total Honeywell

($ Millions, except Earnings Per Share)	2Q 2012	2Q 2013	Change
Sales	9,435	9,693	3%
Segment Margin	15.80%	16.10%	30 bps
Operating Income Margin	13.60%	14.30%	70 bps
Earnings Per Share	$1.14	$1.28	12%
Cash Flow from Operations	973	1,256	29%
Free Cash Flow *	1,040	1,142	10%

* Free Cash Flow (cash flow from operations less capital expenditures) prior to any NARCO Trust establishment
payments and cash pension contributions

"Honeywell had another good quarter and a strong first half of 2013," said Honeywell Chairman and CEO Dave Cote. "Despite operating in a slow growth macro environment, we saw good organic growth in ACS's Energy, Safety and Security business and in Turbo Technologies, both of which continue to outgrow the key end markets in which they compete. Our long-cycle businesses, including Commercial Aerospace, Process Solutions, and UOP, also continue to perform well, benefitting from favorable macro-trends, winning new contracts, and maintaining a strong backlog, which currently stands at $15.5B. We remain focused on seed planting, funding cost savings initiatives across the portfolio, and remaining flexible given the continued uncertain global economic outlook. And, as a result of our first half performance, we are raising the low-end of our 2013 guidance by $0.05 with the expectation of modestly improved organic growth and continued margin expansion in the second half outlook."

Second quarter 2013 earnings per share (EPS) reflect a 23.1% effective tax rate compared to 26.0% last year. Using the 2012 actual / 2013 expected full-year tax rate of 26.5% before any pension mark-to-market adjustment, EPS growth would have been 8%.

The company is updating its full-year 2013 guidance and now expects:

Full-Year Guidance

	2013	2013	Change
	Prior Guidance	Revised Guidance	vs. 2012
Sales	$38.8 - $39.3B	$38.9 - $39.3B	3 - 4%
Segment Margin	15.9 - 16.2%	16.0 - 16.2%	40 - 60 bps
Operating Income Margin1	14.3 - 14.6%	14.5 - 14.7%	90 - 110 bps
Earnings Per Share1	$4.80 - $4.95	$4.85 - $4.95	8% - 11%
Free Cash Flow2	~$3.7B	~$3.7B	~ Flat

1. Proforma, V% / BPS exclude any pension mark-to-market adjustment
2. Free Cash Flow (cash flow from operations less capital expenditures) prior to any NARCO Trust establishment payments and cash pension contributions

Second Quarter Segment Performance

Aerospace

($ Millions)	2Q 2012	2Q 2013	% Change
Sales	3,027	2,997	(1%)
Segment Profit	562	583	4%
Segment Margin	18.60%	19.50%	90 bps

• Sales were down (1%) compared with the second quarter of 2012 driven by an (8%) decline in Defense & Space sales as a result of planned ramp downs and program delays, largely offset by Commercial growth. Commercial OE sales were up 8% in the quarter driven by continued strong OE build rates and favorable platform mix. Commercial Aftermarket growth of 3% was driven by improved flight hour growth and spares sales, partially offset by lower maintenance events.
• Segment profit was up 4%, and segment margins expanded 90 bps to 19.5%, driven by commercial excellence and productivity net of inflation, partially offset by lower Defense & Space sales.

Automation and Control Solutions

($ Millions)	2Q 2012	2Q 2013	% Change
Sales	3,962	4,065	3%
Segment Profit	525	585	11%
Segment Margin	13.30%	14.40%	110 bps

• Sales were up 3% on both a reported and organic basis compared with the second quarter of 2012. All three businesses experienced growth driven by new product introductions, stronger services and software uptake, and improved residential end market conditions, partially offset by non-residential end markets, which remain suppressed.
• Segment profit was up 11% and segment margins were up 110 bps to 14.4% driven by commercial excellence and productivity net of inflation.

Performance Materials and Technologies

($ Millions)	2Q 2012	2Q 2013	% Change
Sales	1,546	1,684	9%
Segment Profit	350	320	(9%)
Segment Margin	22.60%	19.00%	(360) bps

• Sales were up 9% reported, approximately flat organically, compared with the second quarter of 2012, driven by higher UOP petrochemical catalyst shipments and equipment sales, and the favorable impact of the Thomas Russell acquisition, partially offset by lower production volume in Advanced Materials and the unfavorable impact of unseasonably cool weather on Fluorine Products refrigerant volume.
• Segment profit was down (9%) and segment margins decreased (360) bps to 19.0%, primarily driven by the impact of lower UOP licensing sales compared to prior year, lower Advanced Materials volumes, investments for growth, inflation, and the dilutive impact of the Thomas Russell acquisition.

Transportation Systems

($ Millions)	2Q 2012	2Q 2013	% Change
Sales	900	947	5%
Segment Profit	114	126	11%
Segment Margin	12.70%	13.30%	60 bps

• Sales were up 5% on both a reported and organic basis, compared with the second quarter of 2012, driven by higher turbo gas penetration in all regions, strong growth from new platform launches, and improving China commercial vehicle sales, partially offset by the impact of an approximately (1%) decline in European light vehicle production volumes.
• Segment profit was up 11% and segment margins increased 60 bps to 13.3% primarily driven by strong productivity and volume leverage, partially offset by unfavorable price, and ongoing projects to drive operational improvement in the Friction Materials business.

Refer to full documentation in attachments box, located at the top left, below the headline.