Honeywell International Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Unaudited results. Amounts are in U.S. dollars; financial statement amounts are in millions except per-share figures. Honeywell realigned its reportable segments in Q1 2024 and recast prior-period segment data.
Business context and results
Honeywell is a diversified industrial company serving aerospace, industrial automation, building automation, and energy and sustainability markets. Net sales rose 3%, primarily from pricing; management reported flat volume and no material contribution from foreign exchange or acquisitions.
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $9,105 | $8,864 |
| Gross margin | 38.7% | 38.0% |
| Income before taxes | $1,871 | $1,782 |
| Net income attributable to Honeywell | $1,463 | $1,394 |
| Diluted EPS | $2.23 | $2.07 |
| Operating cash flow | $448 | $(784) |
| Capital expenditures | $233 | $193 |
Gross margin increased by 70 basis points. Cost of products and services sold rose about 2%, reflecting higher material and labor costs, partly offset by productivity. R&D and SG&A were largely unchanged. Interest and other financial charges increased to $220 from $170. The effective tax rate rose 20 basis points year over year; the filing does not give a clear rate value.
Segments and material changes
| Segment | Sales change | Profit change | Key filing commentary |
|---|---|---|---|
| Aerospace Technologies | +18% to $3,669 | +25% to $1,031 | Growth across commercial aviation aftermarket, defense and space, and commercial aviation OEM; margin rose to 28.1%. |
| Industrial Automation | −12% to $2,478 | −21% to $417 | Lower Warehouse and Workflow Solutions project demand and lower sensing-product demand; margin fell to 16.8%. |
| Building Automation | −4% to $1,426 | −9% to $342 | Lower product demand partly offset by building-solutions project growth; margin fell to 24.0%. |
| Energy and Sustainability Solutions | +4% to $1,525 | +1% to $302 | Advanced Materials demand improved; margin fell to 19.8%. |
Service sales grew to $2,842 from $2,554, while product sales edged down to $6,263 from $6,310. Total segment profit increased to $2,021 from $1,947. Management attributed the diluted EPS increase to higher segment profit, lower repositioning charges, higher interest income, and a lower share count, partly offset by higher interest expense.
Cash, debt, and liquidity
Cash and cash equivalents were $11,756 at March 31, versus $7,925 at year-end; including short-term investments, cash and investments totaled about $12.0 billion. Operating cash flow improved by $1,232 year over year, largely because Q1 2023 included the $1.325 billion NARCO buyout payment. Q1 2024 operating cash flow was also reduced by working-capital outflows, including lower accrued liabilities and accounts payable. Investing cash use was $273.
Total borrowings were $25.3 billion, compared with $20.4 billion at December 31, 2023. Long-term debt rose to $22,183 from $16,562, primarily following Q1 debt issuances. Honeywell issued U.S.-dollar and euro notes and reported $5,710 of long-term debt issuance proceeds in cash flows; management said proceeds were for general corporate purposes, potentially including debt repayment and acquisitions. Commercial paper and other short-term borrowings were $1,819. The company had no borrowings under its $1.5 billion 364-day or $4.0 billion five-year credit agreements. It stated that operating cash flow, cash, committed credit lines, and capital-market access should cover expected needs.
Q1 financing cash flow was $3,696, including debt proceeds, and included $703 of dividends and $671 of share repurchases. The quarterly dividend was $1.08 per share. The company reported $6.4 billion remaining under its share-repurchase authorization at March 31.
Outlook, risks, and unusual items
The filing provides no specific quarterly or full-year revenue or earnings guidance. Management noted moderating material inflation and signs of stabilization in industrial sectors, while warning that slower global growth, regional conflicts, energy-market volatility, and supply-chain shortages could affect results and cash flows. It described supplier diversification, pricing, planning, and other mitigation actions, but said failure to sustain them could have a material adverse effect.
- Honeywell expected its acquisition of Carrier Global’s Global Access Solutions business for $5.0 billion and its proposed acquisition of Civitanavi Systems for approximately €200 million to close by the end of Q3 2024, subject to approvals and other conditions. Neither had closed by the report date.
- Net repositioning and other charges were $93, down from $141. Q1 2024 included $33 of severance related to 1,362 position reductions, partly offset by $15 of reserve adjustments, and a $17 charge related to settling a contractual dispute with a Russian entity.
- Recorded environmental liabilities were $662. The company said ultimate costs and timing are uncertain and could materially affect results or operating cash flows in periods recognized or paid, though it did not expect a material adverse effect on financial position.
- Bendix asbestos liabilities were $1,604, with $205 of recorded insurance recoveries. The estimate depends on claim experience and resolution values; Honeywell recorded a $522 expense in 2023 after changing its valuation look-back period.
- The company is cooperating with an SEC investigation focused primarily on accounting matters involving its former Performance Materials and Technologies segment; it did not expect a material adverse effect. It also noted other lawsuits and contingencies whose outcomes and potential losses beyond accruals cannot be estimated clearly.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. It reported no material changes to the risk factors in its 2023 Form 10-K.
Important facts for investors to verify
- Whether Aerospace strength offsets continued weakness in Industrial Automation and Building Automation, and how segment margins develop.
- How much of the operating-cash-flow improvement reflects underlying operations versus the absence of the prior-year NARCO payment, and whether working capital improves.
- Debt levels, interest costs, and the use of recent bond proceeds as the Carrier acquisition approaches closing.
- Regulatory status, final consideration, and integration plans for the announced Carrier and Civitanavi transactions.
- Developments in Bendix asbestos claims and environmental obligations, including any changes to liabilities, insurance recoveries, or Resideo reimbursements.
- Any significant update to the SEC investigation, Russia-related contingencies, or management’s outlook in subsequent filings.