Honeywell International Inc HON reported first-quarter 2015 net income of $1,116 million or $1.41 per share, compared with $1,017 million or $1.28 per share in the year-ago quarter. The reported earnings beat the Zacks Consensus Estimate of $1.39. The increase in earnings was driven by improved cost management.
Revenues
Revenues in first-quarter 2015 decreased 5.0% year over year to $9,213 million. Reported revenues missed the Zacks Consensus Estimate of $9,569 million. The decrease in revenues was due to unfavorable foreign currency impact and Friction Material divestiture. During the reported quarter, Honeywell delivered 2% organic sales growth. The increase in organic sales growth was driven by investments in new products and technologies.
Operating margins were up 340 bps year over year to 17.6% in the reported quarter.
Segment Performance
Aerospace segment sales were down 6% year over year at $3,607 million in the reported quarter. Revenues for the segment were down owing to the unfavorable impact of foreign exchange and the Friction Materials divestiture. However, sales were up on an organic basis.
Segment profit was up 7.0% year over year to $752 million, while margins expanded 250 bps year over year to 20.8%. The increase in profit was driven by productivity net of inflation and commercial excellence.
Automation and Control Solutions segment sales were down 3.0 % year over year to $3,264 million in the reported quarter. The decrease was driven by the unfavorable impact of foreign exchange. However, sales were up on an organic basis owing to volume growth in Scanning & Mobility and continued strength in Americas Distribution.
Moreover, segment profit rose 10.0% to $516 million, while margins for the segment were up 180 bps year over year to 15.8%. Growth in profits was attributable to higher volumes, partially offset by continued investments for growth.
Performance Materials and Technologies segment sales were down 5% year over year to $2,342 million in the reported quarter, driven by the unfavorable impact of foreign exchange and raw materials pricing in Resins & Chemicals. However, sales were up on an organic basis owing to higher UOP gas processing growth and higher sales in Fluorine Products and Specialty Products, partially offset by lower volumes in Resins & Chemicals and Process Solutions.
Segment profit increased 6.0% to $503 million, driven by commercial excellence and higher volumes, partially offset by continued investments for growth. Margins in the segment rose 230 bps year over year to 21.5%.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Mar 31, 2015 were $6,575 million versus $6,959 million as of Dec, 31, 2014. Long-term debt as of Mar 31, 2015 stood at $5,661 million versus $6,046 million as of Dec, 31, 2014. Net cash provided by operating activities for three months ended Mar 31, 2015 stood at $421 million, compared with $688 million in the prior-year period. Free cash flow stood at $256 million as of Mar 31, 2015, compared with $496 million in the prior-year period.
Outlook
Honeywell revised its full-year 2015 guidance. The company expects sales in the range of $39.0 billion–$39.6 billion from its prior guidance of $40.5 billion –$41.1 billion. The company raised the lower end of its earning per share guidance to $6.00–$6.15 from its prior guidance of $5.95–$6.15. Operating margin is expected to be in the range of 17.4%–17.7% from its prior guidance of 16.7%–17.0%. Free cash flow is expected to be in the range of $4.2 billion to $4.3 billion.
Going forward, Honeywell intends to continue investing in new products and technologies, and increase its footprint in high-growth markets The company believes that its balanced portfolio mix of short- and long-cycle businesses are well positioned to deliver its 2015 commitments.
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