18 Jul 08. Honeywell (NYSE: HON) announced second quarter 2008 sales increased 13% to $9.7bn from $8.5bn last year. Earnings were up 23% to $0.96 per share, versus $0.78 per share last year. Cash flow from operations was $1,042m versus $983m in the second quarter of 2007 and free cash flow (cash flow from operations less capital expenditures) was $853 million, compared to $820m last year. Year to date the company has generated cash flow from operations of $1,763m versus $1,561m in the same period last year and free cash flow (cash flow from operations less capital expenditures) of $1,424m, compared to $1,278m in 2007.
“Honeywell delivered a strong second quarter,” said Honeywell Chairman and CEO Dave Cote. “These results reflect our diverse and global business portfolio and the strength of Honeywell’s operating disciplines. Aerospace continued to win significant new contracts, Automation and Control Solutions made acquisitions in key adjacent markets, Transportation Systems added new platform wins to its turbo technologies leadership position, and Specialty Materials had sales growth in all businesses and regions.”
“We expect double digit earnings growth in the second half,” continued Cote. “Our businesses are well positioned with long-term macro trends, such as safety, security, energy efficiency, and energy generation. We believe that our great positions in good industries and continued flawless execution on productivity initiatives – Honeywell Operating System, Velocity Product Development, and Functional Transformation – will help us deliver consistent and profitable growth even in this tough global economic environment.”
Honeywell is increasing its previously stated 2008 sales guidance to $37.6 – 38.2bn and full-year earnings per share to $3.75 – 3.85. EPS guidance does not include the expected gain on the sale of the Consumables Solutions (CS) business. The company expects a gain on the sale of CS in the third quarter, which may be significantly offset by repositioning or other actions.
Second Quarter Segment Highlights
•Sales were up 8%, compared with the second quarter of 2007, driven by 7% growth in Commercial and 11% growth in Defense and Space. Commercial sales reflected growth of 6% in original equipment and 7% growth in aftermarket spares and services. Defense and Space sales included the positive impact of the Dimensions International acquisition and higher sales of certain surface systems.
•Segment profit grew 15%, while segment margin increased by 100 bps to 18.3%, due primarily to increased prices, productivity, and volume growth, partially offset by inflation and higher spending to support new platform growth.
•Aerospace announced a definitive agreement to sell its Consumables Solutions business to B/E Aerospace for $1.05bn in cash and B/E common stock.
•Honeywell was awarded the third option year of a U.S. Army contract to improve performance and extend the life of the AGT1500 turbine engine that powers the M1 Abrams tactical vehicle. The option year is valued at $311m, bringing the total contract value to more than $1bn.