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Honeywell Delivers Q4 Results, Full Year Operating Cash Flow and Free Cash Flow Above Initial Guidance
by Daniel Newman | February 4, 2022

The News: CHARLOTTE, N.C., February 3, 2022 — Honeywell (NASDAQ: HON) today announced results for the fourth quarter and full year 2021 that met or exceeded the company’s guidance despite an extremely challenging operating environment. The company also provided its outlook for 2022. Full the full Q3 numbers read the press release here.

Here’s how they did:

  • Fourth Quarter Sales of $8.7 Billion at Midpoint of Previous Guidance
  • Fourth Quarter EPS of $2.05 and Adjusted EPS2 of $2.09, Above Midpoint of Previous Guidance
  • Full Year EPS of $7.91 and Adjusted EPS5 of $8.06, Above High End of Initial Guidance
  • Deployed $8.5 Billion in Capital to Share Repurchases, Dividends, Capital Expenditures, and Acquisitions in 2021
  • Expect 2022 Sales Growth of 4% – 7% Organically

Analyst Take: Over the last 12-months, Futurum Research has had significant access to Honeywell’s key executives to understand the company better. The objective has been less about looking at the Industrial giant’s legacy business and more about gathering a better view of the company’s innovation and investments to maintain relevance in the era of digital transformation.

While known for its diverse industrial businesses, Honeywell’s story is evolving. The company is on a multi-year pivot to transition to more software-focused solutions, tapping into its rich industry data and benefiting from the secular trends of Edge computing and IoT are tailwinds for the business. The Q4 and full-year 2021 numbers published today represent another data point on this multi-year journey to transform the business. Against stiff macroeconomic headwinds and lingering hangovers from the pandemic, Honeywell could exit 2021 well placed for the years ahead. For our most recent interview with Adamczyk, click here.

While the headline from the earning call will be that The company reported a fourth-quarter year-over-year sales decline of 3%, down 2% on an organic basis, due to supply-related constraints, this doesn’t tell the whole story. Looking beyond the headline, Q4 was a tough comparison versus 2020 due to lower COVID mask volumes and six fewer days in the quarter, both of which aren’t material for future performance. The fourth quarter and full-year 2021 largely met or exceeded the company’s guidance despite headwinds and an extremely challenging operating environment.

Key Indicators Remain Solid

According to statements by the company, the outlook for demand remains strong, with orders up high-single digits. As we look ahead, an encouraging metric to value the business is that the closing backlog was $28 billion, up 7% year over year. The company is focused on tight control of margins. Despite the extreme, one could argue that once in a generation headwinds delivered a fourth-quarter operating margin decline of only 130 basis points to 17.5%. Segment margin expanded 30 basis points to 21.4% Honeywell also had fourth-quarter adjusted earnings per share of $2.09. This result represents a beat as it was above the midpoint of the company’s guidance. For the full year ending December, sales increased 5%, or 4%, based upon organic revenue growth. The company reported full-year adjusted earnings per share of $8.06, above the high end of its initial guidance of $7.60 to $8.00.

Summary

Honeywell posted a robust finish to what turned out to be a challenging year. The company proved remarkably resilient, and the company’s continued focus on operational excellence ensured the company was able to deliver on previous guidance. The company continues to focus on bringing differentiated solutions to the market. This focus drove double-digit organic sales growth in 2021 in warehouse and workflow solutions, productivity solutions and services, business and aviation, advanced materials, and perhaps most crucially, the recurring connected software businesses.

The company needs to stay focused on disciplined cost management and swift pricing actions to stay ahead of inflation to continue delivering robust margins. The full-year adjusted earnings per share increased by 14% year over year. Through continued focus on the details that Honeywell continues on its trajectory and solid stock performance, it will be through continued focus.

I believe that Honeywell demonstrates the correct response to the challenging macroeconomic environment and economic headwinds with resolute execution. The company took swift action to mitigate supply chain challenges and inflation by focusing on supply chain efforts, redesigning parts, and implementing pricing actions.

While not a highlight of this quarter’s ER, I follow Honeywell closely because of its more aggressive bets on software, data, and ESG. Three areas that I see as significant long-term growth catalysts for the company.

Overall, I believe the company is positioned for future success if it remains focused on growth and continues to invest in new markets and technologies such as ESG enablement solutions and the creation of Quantinuum, a standalone quantum computing company.

Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Other insights from Futurum Research:

Honeywell Quantum Solutions and Cambridge Quantum Complete Business Combination

Honeywell Delivers 9% Sales Growth and Expands Operating Margin

Honeywell Q2 Highlighted by Strong Execution and EPS Expansion

Image Credit: CNBC

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio