HONEYWELL AND BOMBARDIER SIGN LANDMARK AGREEMENT TO DELIVER THE NEXT GENERATION OF AVIATION TECHNOLOGY; HONEYWELL UPDATES 2024 OUTLOOK
Honeywell has signed a strategic agreement with Bombardier to provide advanced technology for current and future aircraft, including avionics, propulsion, and satellite communications technologies. The partnership, valued at $17 billion over its lifetime, will focus on developing Honeywell Anthem avionics and next-generation HTF7K engines. However, due to required investments, Honeywell has updated its 2024 outlook, reducing its sales guidance to $38.2B-$38.4B (down $0.4B), adjusted EPS to $9.68-$9.78 (down $0.47), and free cash flow to $4.6B-$4.9B (down $0.5B). The agreement also resolves all pending litigation between the companies.
Honeywell ha firmato un accordo strategico con Bombardier per fornire tecnologie avanzate per aerei attuali e futuri, inclusi avionica, propulsione e tecnologie di comunicazione satellitare. La partnership, valutata 17 miliardi di dollari nel suo complesso, si concentrerà sullo sviluppo dell'avionica Honeywell Anthem e dei motori di nuova generazione HTF7K. Tuttavia, a causa degli investimenti richiesti, Honeywell ha aggiornato le sue previsioni per il 2024, riducendo la sua guida alle vendite a 38,2 miliardi - 38,4 miliardi di dollari (in calo di 0,4 miliardi), l'EPS rettificato a 9,68 - 9,78 dollari (in calo di 0,47) e il flusso di cassa libero a 4,6 miliardi - 4,9 miliardi di dollari (in calo di 0,5 miliardi). L'accordo risolve inoltre tutte le contese legali pendenti tra le aziende.
Honeywell ha firmado un acuerdo estratégico con Bombardier para proporcionar tecnología avanzada para aviones actuales y futuros, incluidas las tecnologías de aviónica, propulsión y comunicaciones por satélite. La asociación, valorada en 17 mil millones de dólares a lo largo de su duración, se centrará en el desarrollo de la aviónica Honeywell Anthem y de los motores de próxima generación HTF7K. Sin embargo, debido a las inversiones requeridas, Honeywell ha actualizado su pronóstico para 2024, reduciendo su guía de ventas a 38.2 mil millones - 38.4 mil millones de dólares (una disminución de 0.4 mil millones), el EPS ajustado a 9.68 - 9.78 dólares (una baja de 0.47) y el flujo de caja libre a 4.6 mil millones - 4.9 mil millones de dólares (una disminución de 0.5 mil millones). El acuerdo también resuelve todos los litigios pendientes entre las empresas.
하니웰은 Bombardier와 현재 및 미래 항공기를 위한 첨단 기술을 제공하는 전략적 협정을 체결했습니다. 여기에는 항공 전자기기, 추진력 및 위성 통신 기술이 포함됩니다. 이 파트너십은 전체 170억 달러의 가치가 있으며, 하니웰 앤섬 항공 전자기기 및 차세대 HTF7K 엔진 개발에 초점을 맞춥니다. 그러나 필요한 투자로 인해 하니웰은 2024년 전망을 업데이트 하여 매출 가이드를 382억~384억 달러로 줄였고 (400억 달러 감소), 조정된 EPS는 9.68~9.78 달러로 (0.47 달러 감소) 그리고 자유 현금 흐름은 46억~49억 달러로 (5억 달러 감소) 조정했습니다. 이 계약은 또한 양사 간의 모든 미결 소송을 해결합니다.
Honeywell a signé un accord stratégique avec Bombardier pour fournir des technologies avancées pour les avions actuels et futurs, y compris l'avionique, la propulsion et les technologies de communication par satellite. Le partenariat, d'une valeur de 17 milliards de dollars sur sa durée de vie, se concentrera sur le développement de l'avionique Honeywell Anthem et des moteurs de nouvelle génération HTF7K. Cependant, en raison des investissements nécessaires, Honeywell a mis à jour ses prévisions pour 2024, réduisant ses prévisions de ventes à 38,2 milliards - 38,4 milliards de dollars (une baisse de 0,4 milliard), son EPS ajusté à 9,68 - 9,78 dollars (une baisse de 0,47) et son flux de trésorerie libre à 4,6 milliards - 4,9 milliards de dollars (une baisse de 0,5 milliard). L'accord met également fin à tous les litiges en cours entre les entreprises.
Honeywell hat eine strategische Vereinbarung mit Bombardier unterzeichnet, um fortschrittliche Technologien für aktuelle und zukünftige Flugzeuge bereitzustellen, einschließlich Avionik, Antrieb und Satellitenkommunikationstechnologien. Die Partnerschaft hat einen Wert von 17 Milliarden Dollar über ihre Laufzeit und wird sich auf die Entwicklung von Honeywell Anthem Avionik und der nächsten Generation von HTF7K-Motoren konzentrieren. Aufgrund der erforderlichen Investitionen hat Honeywell jedoch seinen Ausblick für 2024 aktualisiert und die Umsatzprognose auf 38,2 bis 38,4 Milliarden Dollar (ein Rückgang um 0,4 Milliarden), den bereinigten EPS auf 9,68 bis 9,78 Dollar (ein Rückgang um 0,47) und den freien Cashflow auf 4,6 bis 4,9 Milliarden Dollar (ein Rückgang um 0,5 Milliarden) gesenkt. Das Abkommen beseitigt außerdem alle anhängigen Rechtsstreitigkeiten zwischen den Unternehmen.
- Strategic partnership valued at $17 billion over lifetime
- Development of next-generation aviation technologies
- Resolution of all pending litigation with Bombardier
- Reduced 2024 sales guidance by $0.4B
- Decreased adjusted EPS guidance by $0.47
- Lowered free cash flow guidance by $0.5B
- Q4 2024 organic growth revised down to -2% to flat from previous 2-4%
Insights
This landmark agreement marks a significant strategic shift with substantial financial implications. The
- Revenue reduction of
$400 million - Segment margin decline of
0.8% - EPS reduction of
$0.47 - Free cash flow decrease of
$500 million
While the short-term financial impact appears negative, the long-term strategic value and revenue potential significantly outweigh these initial investments. The resolution of pending litigation also removes a key risk factor.
This partnership represents a major shift in aviation technology integration, particularly through three key areas: advanced Anthem avionics, next-gen HTF7K engines and satellite communications. The collaboration on JetWave X certification for Global and Challenger aircraft families opens significant aftermarket opportunities. The agreement's scope suggests Honeywell is positioning itself as the primary technology provider for Bombardier's future aircraft developments, effectively locking in a major market share in the business jet segment. This strategic positioning in the high-end business aviation market aligns perfectly with industry trends toward more connected, efficient aircraft systems.
- Agreement includes collaborative research and development centered on Honeywell Anthem avionics, selection of more powerful engines, and next-generation satellite communications technologies for Bombardier aircraft
- Aftermarket offerings and new technologies provide Honeywell revenue potential of up to
$17 billion - All legacy pending litigation between the companies has been resolved
The collaboration will advance new technology to enable a host of high-value upgrades for the installed Bombardier operator base, as well as lay innovative foundations for future aircraft. Honeywell estimates the value of this partnership to the company at
"This is a tremendous opportunity to co-innovate and advance next generation technologies, including Anthem avionics and engines," said Vimal Kapur, Chairman and CEO of Honeywell. "Growing our long-term collaborative relationship with Bombardier is directly connected to Honeywell's focus on compelling megatrends -- automation, the future of aviation, and energy transition."
"This new partnership creates unprecedented opportunities for Bombardier," said Eric Martel, President and Chief Executive Officer of Bombardier. "Honeywell's differentiated technology is the key reason we decided to collaboratively build a bright future with them."
Honeywell and Bombardier will collaborate on the development of Honeywell avionics to provide unparalleled adaptability to specific mission requirements, enabling exceptional situational awareness and enhanced safety. In addition, the collaboration's propulsion-based workstreams will focus on evolutions of power, reliability and maintainability, led by the next-generation model of Honeywell's HTF7K engine.
"Working together, we will generate significant value for Bombardier's operator base by providing the latest technologies to enable safe and efficient flight," said Jim Currier, President and CEO of Honeywell Aerospace Technologies. "We are committed to investing in these key technologies with Bombardier, which will not only drive substantial growth for Honeywell, but lead the industry further into the future of aviation."
As part of the partnership, Bombardier and Honeywell will work together to certify and offer JetWave X for the Bombardier Global and Challenger families of aircraft for both new production and aftermarket installations. Bombardier will also have access to Honeywell's full suite of next generation L-Band satellite communications products and antennas that will provide future safety services capabilities.
Additionally, all legacy pending litigation between the companies has been resolved.
Honeywell Updates 2024 Outlook
While the commercial agreement impacts near-term Honeywell financials, the company is confident it will lead to long-term value creation for Honeywell shareowners.
Given the required investments associated with this agreement, Honeywell has updated its full-year sales, segment margin2, adjusted earnings per share2,3, and free cash flow guidance1. A summary is provided in the table below.
TABLE 1: FULL-YEAR 2024 GUIDANCE | |||||
Previous Guidance | Impact of Agreement | Updated Guidance | |||
Sales | ( | ||||
Organic1 Growth | ~( | ~ | |||
Segment Margin2 | (0.8 %) | ||||
Expansion2 | Down 10 - Flat bps | (80 bps) | Down 90 - 80 bps | ||
Adjusted Earnings Per Share2,3 | ( | ||||
Adjusted Earnings Growth2,3 | (5 %) | ||||
Operating Cash Flow | ( | ||||
Free Cash Flow1 | ( | ||||
TABLE 2: FOURTH QUARTER 2024 GUIDANCE | |||||
Previous Guidance | Impact of Agreement | Updated Guidance | |||
Sales | ( | ||||
Organic1 Growth | (4 %) | ( | |||
Segment Margin2 | (2.9 %) | ||||
Expansion2 | Down 60 - 20 bps | (290 bps) | Down 350 - 310 bps | ||
Adjusted Earnings Per Share2,3 | ( | ||||
Adjusted Earnings Growth2,3 | (17 %) | ( | |||
1 | See additional information at the end of this release regarding non-GAAP financial measures. | |
2 | Segment margin and adjusted EPS are non-GAAP financial measures. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from certain items excluded from segment margin or adjusted EPS. We therefore, do not present a guidance range, or a reconciliation to, the nearest GAAP financial measures of operating margin or EPS. | |
3 | Adjusted EPS and adjusted EPS V% guidance excludes items identified in the non-GAAP reconciliation of adjusted EPS at the end of this release, including the impact of amortization expense for acquisition-related intangible assets and other acquisition-related costs, and any potential future items that we cannot reliably predict or estimate such as pension mark-to-market. |
Bombardier, Global and Challenger are trademarks of Bombardier Inc. or its subsidiaries.
Honeywell is an integrated operating company serving a broad range of industries and geographies around the world. Our business is aligned with three powerful megatrends - automation, the future of aviation, and energy transition - underpinned by our Honeywell Accelerator operating system and Honeywell Connected Enterprise integrated software platform. As a trusted partner, we help organizations solve the world's toughest, most complex challenges, providing actionable solutions and innovations that help make the world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.
Honeywell uses our Investor Relations website, www.honeywell.com/investor, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media.
We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events, or developments that management intends, expects, projects, believes, or anticipates will or may occur in the future and include statements related to the proposed spin-off of the Company's Advanced Materials business into a stand-alone, publicly traded company. They are based on management's assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments, and other relevant factors, many of which are difficult to predict and outside of our control. They are not guarantees of future performance, and actual results, developments, and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties, including ongoing macroeconomic and geopolitical risks, such as lower GDP growth or recession, supply chain disruptions, capital markets volatility, inflation, and certain regional conflicts, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this release can or will be achieved. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K, and our other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.
This release contains financial measures presented on a non-GAAP basis. Honeywell's non-GAAP financial measures used in this release are as follows:
- Segment profit, on an overall Honeywell basis;
- Segment profit margin, on an overall Honeywell basis;
- Organic sales growth;
- Free cash flow; and
- Adjusted earnings per share.
Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.
Appendix
Non-GAAP Financial Measures
The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP).
Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. Management believes the change to adjust for amortization of acquisition-related intangibles and certain acquisition- and divestiture-related costs provides investors with a more meaningful measure of its performance period to period, aligns the measure to how management will evaluate performance internally, and makes it easier for investors to compare our performance to peers. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Other companies may calculate these non-GAAP measures differently, limiting the usefulness of these measures for comparative purposes.
Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Investors are urged to review the reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate Honeywell's business.
Honeywell International Inc.
Definition of Organic Sales Percent Change
We define organic sales percentage as the year-over-year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided for forward-looking measures of organic sales percent change because management cannot reliably predict or estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and divestiture transactions, all of which could significantly impact our reported sales percent change.
Honeywell International Inc. | |||
Three Months Ended | Twelve Months Ended | ||
2023 | 2023 | ||
Operating income | $ 1,583 | $ 7,084 | |
Stock compensation expense1 | 54 | 202 | |
Repositioning, Other2,3 | 569 | 952 | |
Pension and other postretirement service costs3 | 17 | 66 | |
Amortization of acquisition-related intangibles | 76 | 292 | |
Acquisition-related costs4 | 1 | 2 | |
Segment profit | $ 2,300 | $ 8,598 | |
Operating income | $ 1,583 | $ 7,084 | |
÷ Net sales | $ 9,440 | $ 36,662 | |
Operating income margin % | 16.8 % | 19.3 % | |
Segment profit | $ 2,300 | $ 8,598 | |
÷ Net sales | $ 9,440 | $ 36,662 | |
Segment profit margin % | 24.4 % | 23.5 % | |
1 | Included in Selling, general and administrative expenses. | |
2 | Includes repositioning, asbestos, environmental expenses, equity income adjustment, and other charges. | |
3 | Included in Cost of products and services sold and Selling, general and administrative expenses. | |
4 | Includes acquisition-related fair value adjustments to inventory. |
We define operating income as net sales less total cost of products and services sold, research and development expenses, impairment of assets held for sale, and selling, general and administrative expenses. We define segment profit, on an overall Honeywell basis, as operating income, excluding stock compensation expense, pension and other postretirement service costs, amortization of acquisition-related intangibles, certain acquisition- and divestiture-related costs and impairments, and repositioning and other charges. We define segment profit margin, on an overall Honeywell basis, as segment profit divided by net sales. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.
A quantitative reconciliation of operating income to segment profit, on an overall Honeywell basis, has not been provided for all forward-looking measures of segment profit and segment profit margin included herein. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment profit, particularly pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. The information that is unavailable to provide a quantitative reconciliation could have a significant impact on our reported financial results. To the extent quantitative information becomes available without unreasonable effort in the future, and closer to the period to which the forward-looking measures pertain, a reconciliation of operating income to segment profit will be included within future filings.
Acquisition amortization and acquisition- and divestiture-related costs are significantly impacted by the timing, size, and number of acquisitions or divestitures we complete and are not on a predictable cycle, and we make no comment as to when or whether any future acquisitions or divestitures may occur. We believe excluding these costs provides investors with a more meaningful comparison of operating performance over time and with both acquisitive and other peer companies.
Honeywell International Inc. | |||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||
2023 | 2024(E) | 2023 | 2024(E) | ||||
Earnings per share of common stock - diluted1 | $ 1.91 | $ 8.47 | |||||
Pension mark-to-market expense2 | 0.19 | No Forecast | 0.19 | No Forecast | |||
Amortization of acquisition-related intangibles3 | 0.09 | 0.17 | 0.35 | 0.50 | |||
Acquisition-related costs4 | — | 0.02 | 0.01 | 0.10 | |||
Divestiture-related costs5 | — | 0.04 | — | 0.04 | |||
Russian-related charges6 | — | — | — | 0.03 | |||
Net expense related to the NARCO Buyout and HWI Sale7 | — | — | 0.01 | — | |||
Adjustment to estimated future Bendix liability8 | 0.49 | — | 0.49 | — | |||
Indefinite-lived intangible asset impairment9 | — | — | — | 0.06 | |||
Impairment of assets held for sale10 | — | — | — | 0.19 | |||
Adjusted earnings per share of common stock - diluted | $ 2.69 | $ 9.52 | |||||
1 | For the three months ended December 31, 2023, adjusted earnings per share utilizes weighted average shares of approximately 660.9 million. For the twelve months ended December 31, 2023, adjusted earnings per share utilizes weighted average shares of approximately 668.2 million. For the three and twelve months ended December 31, 2024, expected earnings per share utilizes weighted average shares of approximately 653 million and 655 million, respectively. | |
2 | Pension mark-to-market expense uses a blended tax rate of | |
3 | For the three and twelve months ended December 31, 2023, acquisition-related intangibles amortization includes | |
4 | For the three and twelve months ended December 31, 2023, the adjustment for acquisition-related costs, which is principally comprised of third-party transaction and integration costs and acquisition-related fair value adjustments to inventory, is approximately | |
5 | For the three and twelve months ended December 31, 2024, the expected adjustment for divestiture-related costs, which is principally comprised of third-party transaction costs, is approximately | |
6 | For the three and twelve months ended December 31, 2023, the adjustments were a benefit of | |
7 | For the the twelve months ended December 31, 2023, the adjustment was | |
8 | Bendix Friction Materials ("Bendix") is a business no longer owned by the Company. In 2023, the Company changed its valuation methodology for calculating legacy Bendix liabilities. For the three and twelve months ended December 31, 2023, the adjustment was | |
9 | For the twelve months ended December 31, 2024, the expected impairment charge of indefinite-lived intangible assets associated with the personal protective equipment business is | |
10 | For the twelve months ended December 31, 2024, the expected impairment charge of assets held for sale is | |
Note: Amounts may not foot due to rounding. |
We define adjusted earnings per share as diluted earnings per share adjusted to exclude various charges as listed above. We believe adjusted earnings per share is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward-looking information, management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. We therefore do not include an estimate for the pension mark-to-market expense. Based on economic and industry conditions, future developments, and other relevant factors, these assumptions are subject to change.
Acquisition amortization and acquisition- and divestiture-related costs are significantly impacted by the timing, size, and number of acquisitions or divestitures we complete and are not on a predictable cycle and we make no comment as to when or whether any future acquisitions or divestitures may occur. We believe excluding these costs provides investors with a more meaningful comparison of operating performance over time and with both acquisitive and other peer companies.
Honeywell International Inc. | |
Twelve Months | |
Cash provided by operating activities | |
Capital expenditures | ~(1.2) |
Free cash flow | |
We define free cash flow as cash provided by operating activities less cash for capital expenditures.
We believe that free cash flow is a non-GAAP measure that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This measure can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.
Contacts: | |
Media | Investor Relations |
Stacey Jones | Sean Meakim |
(980) 378-6258 | (704) 627-6200 |
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