Honeywell International Inc. (NASDAQ:HON) shares are trading lower after the company reported fourth-quarter results and disclosed the separation of the Automation and Aerospace business.
Revenue grew 7% year-over-year (Y/Y, organic: +2% Y/Y) to $10.09 billion, beating the consensus of $9.83 billion.
The sales increase was attributed to double-digit organic sales growth in defense and space and building solutions businesses.
Sales by Segments: Aerospace Technologies $3.99 billion (+9% Y/Y), Industrial Automation $2.57 billion (-1% Y/Y), Building Automation $1.80 billion (+20% Y/Y) and Energy and Sustainability Solutions $1.73 billion (+4% Y/Y).
Operating margin expanded by 50 bps Y/Y to 17.3%, and Segment margin contracted by 350bps Y/Y at 20.9% in the quarter.
Adjusted EPS was $2.47 (-8% Y/Y), beating the consensus of $2.32.
Operating cash flow stood at $2.28 billion and, free cash flow was $1.89 billion. Honeywell held cash and equivalents of about $10.9 billion as of December 31, 2024.
The company deployed $14.6 billion of capital in 2024, including acquisitions worth $8.9 billion.
FY25 Outlook: The company expects sales guidance of $39.6 billion – $40.6 billion vs. consensus of $38.3 billion, with organic sales growth of 2% – 5%.
Honeywell targets adjusted EPS of $10.10 – $10.50 vs. consensus of $9.78.
Excluding the impact of the Bombardier agreement, the company projects organic sales growth of 1% – 4%, segment margin down 10 to up 30 basis points Y/Y, and adjusted EPS down 2% to up 2% Y/Y.
The company anticipates operating cash flow of $6.7 billion – $7.1 billion, with free cash flow of $5.4 billion – $5.8 billion.
Honeywell chairman and CEO Vimal Kapur said, “In 2024, we also made significant progress optimizing Honeywell’s portfolio. We completed four strategic bolt-on acquisitions representing $9 billion in capital deployed and announced two key divestitures in alignment with our portfolio simplification strategy, including the planned spin of our Advanced Materials business.”
Business Split: Honeywell disclosed that its Board of Directors planned the separation of Automation and Aerospace businesses.
Along with the previously planned spin-off of Advanced Materials, this move will create three publicly traded companies – Honeywell Automation, Honeywell Aerospace and Advanced Materials.
The separation is expected to be completed in the second half of 2026 and structured to be tax-free for Honeywell shareholders.
Honeywell is on track to surpass its commitment of deploying at least $25 billion toward high-return capital expenditures, dividends, share repurchases, and accretive acquisitions by 2025.
Investors can gain exposure to the stock via Gabelli Commercial Aerospace and Defense ETF (NYSE:GCAD) and Amplify CWP Enhanced Dividend Income ETF (NYSE:DIVO).
Price Action: HON shares are down 2.41% at $217.00 premarket at the last check Thursday.
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