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Honeywell meets earnings estimates in 'challenging' 2022; CEO expects some economic i Charlotte Business Journal Honeywell meets earnings estimates in 'challenging' 2022; CEO expects some economic improvement aheadBy John Downey – Senior Staff Writer, Charlotte Business JournalCEO Darius Adamczyk described 2022 as “another challenging year” but Honeywell International Inc. managed earnings for the fourth quarter and full year in line with analysts’ expectations. “We delivered outstanding results above the high end of our initial guidance for segment margin and adjusted earnings per share, despite approximately $2 billion in year-over-year top-line headwinds and constantly shifting macroeconomic conditions,” Adamczyk told analysts as he opened the company’s earnings call today. For the fourth quarter, Honeywell (NASDAQ: HON) reported net income attributable to shareholders of $1.02 billion, or $1.51 per diluted share, on revenue totaling $9.19 billion. That compares with net income of $1.43 billion, or $2.05 per diluted share, in the fourth quarter of 2021, when revenue totaled $8.66 billion. Discounting one-time gains and losses, including significant pension expenses and the impact of a $1.3 billion asbestos settlement in the quarter, adjusted earnings per diluted share reached $2.52. That's slightly above the $2.51 per share that analysts on average had projected for Honeywell in the quarter. Revenue was short of analysts’ average estimate of $9.25 billion. Economic outlook improving, but pace is unclearAdamczyk told analysts the company generally sees improving economic conditions but warned that some headwinds remain. “As a headline I would say that inflation is moderating, but it’s not going away,” he said. “On a trend basis, there is some deflation in some commodities, but labor costs are high (and) energy costs are kind of more on a standstill basis.” There are clearer improvements in the supply chain, he told analysts. Disruptions in the supply chain had been a significant problem for Honeywell in 2021 and 2022, many related to Covid and exacerbated by the Russian invasion of Ukraine. But some areas are recovering more quickly than others. “For semiconductors, it is definitely getting better … and we see that sort of really moderating towards a normal state towards the end of this year,” Adamczyk said. “In Aero(space), it’s also improving, but the pace is likely going to be slower than what it was in semiconductors” he continued. “So, we see a slow and steady improvement as we move throughout the year. That’s sort of our expectation for the supply chain.” Higher organic sales for most of Honeywell's business segmentsGrowth in organic sales of 15% in both its Home Building Technologies and Performance Materials Technology divisions led the strong finish for Honeywell. Its Aerospace division also grew 11%, based largely on strong numbers in its commercial aviation business. Honeywell's Safety and Productivity Solutions division was the only unit to see sales drop year over year, down 5%. Despite that, the segment produced its most profitable quarter ever, Chief Operating Officer Vimal Kapur told analysts. For all of 2022, Honeywell reported net income attributable to shareholders of $4.97 billion, or $7.27 per share, on $35.47 billion in revenue. For 2021, Honeywell had reported $5.54 billion in net income attributable to shareholders, or $7.91 per diluted share, with revenue totaling $34.39 billion. Adjusted earnings per diluted share, again accounting for one-time gains and charges, reached $8.76 for the full year. That was in line with an average projection by analysts of $8.75 per diluted share. Analysts had expected revenue would be higher than reported, projecting $35.53 billion. Holding the line on operating costs, but M&A is likelyAdamczyk says the company remains focused on holding the line on costs in the face of continued inflation. And he offered cautious guidance for the current year. “Similar to last year, we believe the first half of the year will be slower as supply chains improve sequentially throughout the year and potential headwinds from the reversal of zero Covid policies in China,” CFO Greg Lewis told analysts. “For the year, we expect earnings per share of $8.80 to $9.20, flat to up 5%, despite an approximately 55-cent headwind from lower pension income. Excluding this impact, our adjusted EPS range would’ve been $9.35 to $9.75, up 7% to 11% adjusted.” The company however remains committed to growth, both internally and through acquisitions. And there could be some deals made this year, Adamczyk said. “We are interested in doing more M&A, smart M&A, in 2023,” he said. “I think you should expect that at some point, but it’s going to be thoughtful. It’s going to be acquired at a price where we have a lot of confidence in generating shareholder value, and it’s going to be something that’s truly strategic and fits what we do as a company.” |
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