HONEYWELL INTERNATIONAL INC (HON) Q4 2024 Earnings Summary

Executive Summary

Honeywell’s Q4 2024 delivered $10.09B in sales (+7% YoY; +2% organic) and adjusted EPS of $2.47; both exceeded prior internal guidance despite a Bombardier agreement that reduced sales by ~$0.4B, net income by ~$0.3B, and cash flow by ~$0.5B .
Operating margin expanded 50 bps YoY to 17.3% while segment margin contracted to 20.9% (Bombardier and mix headwinds), and backlog hit a record $35.3B (+11% YoY) .
2025 guidance: sales $39.6–$40.6B (organic +2–5%), segment margin 23.2–23.6%, adjusted EPS $10.10–$10.50, OCF $6.7–$7.1B, FCF $5.4–$5.8B; Q1 2025 sales guided to $9.5–$9.7B with segment margin 22.5–22.9% and a 22% tax rate .
Strategic catalyst: Board approved intent to separate Automation and Aerospace (and previously announced spin of Advanced Materials), creating three pure-play public companies; separation targeted in H2 2026, tax-free to shareholders .

What Went Well and What Went Wrong

What Went Well

Commercial aftermarket strength: Aerospace aftermarket up 17% organically; defense and space +14% organically; building solutions grew double digits, with >50% growth in Middle East and mid-teens in North America .
Exceeded guidance and operating execution: Q4 sales and adjusted EPS exceeded prior guidance; operating margin expanded to 17.3%; backlog reached $35.3B (+11% YoY) .
Portfolio actions and strategic clarity: Announced separation into Automation and Aerospace plus Advanced Materials spin; management emphasizes tailored strategies, capital allocation flexibility, and strong investment-grade ratings for the two main entities .

What Went Wrong

Segment margin compression: Total segment margin fell 350 bps YoY to 20.9%, with Aerospace down 780 bps to 20.3% due to Bombardier impact, cost inflation, and OE mix; Industrial Automation margin contracted 200 bps; ESS margin down 180 bps .
Cash flow headwinds: Q4 OCF $2.28B and FCF $1.89B declined 23% and 27% YoY, respectively, largely reflecting Bombardier-related cash contributions .
Near-term macro and short-cycle softness: Management guided cautiously for 2025 given muted short-cycle demand in automation and regional headwinds (Europe, China), with no tariff impacts included in guidance .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Billions)	$9.577	$9.728	$10.088
Organic Sales Growth (%)	4%	3%	2%
Reported EPS ($)	$2.36	$2.16	$1.96
Adjusted EPS ($)	$2.49	$2.58	$2.47
Operating Income Margin (%)	20.7%	19.1%	17.3%
Segment Profit Margin (%)	23.0%	23.6%	20.9%
Revenue Consensus (SPGI)	N/A – unavailable	N/A – unavailable	N/A – unavailable
EPS Consensus (SPGI)	N/A – unavailable	N/A – unavailable	N/A – unavailable

Estimates disclaimer: Wall Street consensus (S&P Global) was unavailable at time of request.

Segment breakdown (Q4 YoY):

Segment	Sales Q4 2023 ($MM)	Sales Q4 2024 ($MM)	Segment Profit Q4 2023 ($MM)	Segment Profit Q4 2024 ($MM)	Segment Margin Q4 2023	Segment Margin Q4 2024
Aerospace Technologies	$3,673	$3,986	$1,031	$811	28.1%	20.3%
Industrial Automation	$2,596	$2,566	$560	$503	21.6%	19.6%
Building Automation	$1,504	$1,798	$365	$482	24.3%	26.8%
Energy & Sustainability Solutions	$1,660	$1,733	$444	$431	26.7%	24.9%

KPIs

KPI	Q2 2024	Q3 2024	Q4 2024
Operating Cash Flow ($MM)	$1,371	$1,997	$2,281
Free Cash Flow ($MM)	$1,112	$1,718	$1,888
Backlog ($B)	—	—	$35.3

Non-GAAP note: Bombardier agreement reduced Q4 sales by ~$0.4B, net income by ~$0.3B, and cash flow by ~$0.5B; adjusted EPS excludes amortization of acquisition-related intangibles and other items per reconciliation .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales ($B)	FY 2025	N/A	$39.6–$40.6	New
Organic Growth (%)	FY 2025	N/A	2%–5%	New
Segment Margin (%)	FY 2025	N/A	23.2%–23.6% (+60–100 bps)	New
Adjusted EPS ($)	FY 2025	N/A	$10.10–$10.50	New
Operating Cash Flow ($B)	FY 2025	N/A	$6.7–$7.1	New
Free Cash Flow ($B)	FY 2025	N/A	$5.4–$5.8	New
Sales ($B)	Q1 2025	N/A	$9.5–$9.7	New
Segment Margin (%)	Q1 2025	N/A	22.5%–22.9%	New
Tax Rate (%)	Q1 2025	N/A	22%	New

Management also provided ex-Bombardier FY 2025 framing: organic sales +1–4%, segment margin down 10 to up 30 bps YoY, adjusted EPS down 2% to up 2% YoY .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2, Q-1)	Current Period (Q4 2024)	Trend
AI/Technology (Forge, autonomy)	Positioned on automation/Forge; strength in digitalization	Vision for autonomous facilities; Forge improving productivity; automation to autonomy narrative emphasized	Increasing emphasis
Supply chain	Defense/space growth aided by supply chain improvements	Continued supply unlock in Aero expected; inventory working capital focus	Improving throughput
Tariffs/Macro	Cautious on macro; updated outlook	2025 baseline excludes tariff impacts; Europe/China headwinds; FX headwinds	Cautious
Product performance (Aero aftermarket/OE)	Aftermarket up 17%; OE double-digit; defense strong	Aftermarket +17% organic; defense +14% organic; OE mix pressure on margins	Strong volumes; mix headwinds
Regional trends (Buildings)	Building solutions +14% organic; products softer	Building solutions +11% organic; Middle East >50%; North America mid-teens; Europe returned to growth	Improving breadth
Regulatory/legal	PPE held-for-sale impairment	Separation costs $1.5–$2.0B; pension income down; below-the-line rising	Transition costs ahead
R&D execution	Aero R&D profile highlighted	Aero ~4% Honeywell-funded R&D (7% customer-funded); electrification/Anthem focus; rising portfolio-wide R&D	Scaling investment

Management Commentary

“We delivered a strong end to a successful year, exceeding the high end of our guidance for fourth quarter sales and adjusted earnings per share while navigating a dynamic operating environment” — Vimal Kapur, Chairman & CEO .
“We have decided to pursue a full separation of automation and aerospace technologies…result[ing] in 3 publicly listed industry leaders with distinct strategies” — Vimal Kapur .
“Aerospace…will be one of the largest publicly traded, pure play aerospace suppliers” — Vimal Kapur .
CFO commentary: Bombardier is a $17B lifetime value partnership; lowered reported Q4 but no impact on 2025 performance .

Q&A Highlights

Separation costs and stranded costs: One-time separation costs estimated at $1.5–$2.0B; stranded costs expected to normalize within 18–24 months post-spin .
Segment margin path: Three segments to expand margins in 2025; Aerospace core margins ~27% but diluted by CAES integration in 2025; M&A accretive to segment profit despite near-term margin dilution .
Cash conversion: Targeting ~100% FCF conversion for Aerospace and Automation over 24 months via working capital, particularly inventory reduction in Aero; 2025 FCF guided $5.4–$5.8B .
Macro/tariffs: No tariff impact included; assessing potential implications; muted short-cycle products outlook in Europe/China .
Aero aftermarket/OE: Aftermarket growth to decelerate as flight hours stabilize; OE backlog strong, expected to outgrow aftermarket in 2025 .

Estimates Context

SPGI consensus estimates (EPS, revenue) for Q2–Q4 2024 were unavailable at time of request; company reported Q4 sales and adjusted EPS above its own guidance, suggesting potential upward bias to near-term expectations despite margin compression from Bombardier and mix .
Areas for estimate revision: Segment margins (Aero dilution from CAES; BA expansion), below-the-line expenses (higher net interest; pension income down), FX headwinds (~$0.12 EPS impact), divestiture timing effects (PPE) .

Key Takeaways for Investors

Q4 operational beat vs guidance with record backlog; however, segment margins compressed, largely due to Bombardier and mix — monitor recovery trajectory in Aero margins ex-Bombardier .
2025 outlook is conservative on short-cycle recovery; upside if industrial demand improves; acquisitions (~$2B sales) drive growth but integrate into margins through H2 2025 .
Strategic separation should unlock valuation and focus; expect one-time separation costs and a 18–24 month stranded cost normalization — a medium-term catalyst into 2026 .
Building Automation momentum (solutions strength; regional breadth) and ESS orders (+19%) point to long-cycle resilience; product mix headwinds likely persist near-term .
Cash conversion and working capital actions in Aerospace are central to hitting FCF guidance; watch inventory and supply chain unlocks .
FX and below-the-line pressure (~$0.12 EPS FX; higher net interest) are headwinds to 2025 EPS; sensitivity to rates and FX warrants attention .
Bombardier $17B partnership and electrification/autonomy investments (Anthem, AAM wins) reinforce Aero’s secular growth drivers despite 2025 margin dilution from CAES .