Honeywell International Inc.

Thank you for standing by and welcome to the Honeywell third quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Mecham, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Honeywell's third quarter 2023 earnings conference call. On the call with me today are Chief Executive Officer Vimal Kapoor and Senior Vice President and Chief Financial Officer Greg Lewis. This webcast and the presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website. From time to time, we post new information that may be of interest or material to our investors on this website. Our discussion today includes forward-looking statements that are based on our best view of the world and of our businesses as we see them today, and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we will review our financial results for the third quarter, share our guidance for the fourth quarter and full year 2023, and provide some preliminary thoughts on 2024. As always, we'll leave time for your questions at the end. With that, I'll turn the call over to our CEO, Vimal Kapoor.

Thank you, Sean, and good morning, everyone. Let's begin on slide two. First off, we are saddened by recent events in the Middle East. We are deeply upset by the loss of innocent lives. Our number one priority continues to be safety and security of our employees and partners in the region and responding to their immediate needs. Coming to the third quarter, it was another strong quarter one for Honeywell in which we delivered all of our financial commitments. we delivered adjusted earnings per share of $2.27, two cents above the high end of our guidance range. That was up 1% year-over-year or up 7%, excluding a 14-cent non-cash pension headwind. Disciplined execution of our rigorous operating principles in the face of ongoing macroeconomic challenges continues to serve us and our stakeholders well. Third quarter sales were up 2% year-over-year, driven by double-digit growth in our commercial aviation, defense in space, and process solutions. Our aerospace business continues to be a bright spot in our portfolio, driving meaningful commercial success. Our already robust backlog grew to a new record of $31.4 billion in third quarter, up 8% year-over-year and 3% sequentially. due to strength in Aero and other long-cycle businesses. Orders grew double-digit in the quarter due to tremendous demand generation in Aero, where orders were up 30% year-over-year. Honeywell building technology and safety and productivity solution ended with quarter with flat year-over-year orders with book-to-bill of around one, an indication that we are seeing a short-cycle end market beginning to stabilize. Intelligrated was another positive indicator in the third quarter, as we converted on a robust pipeline to drive double-digit year-over-year orders growth and over 50% sequential orders growth. PMT was down mid-single digits on unfavorable comparisons to last year's peak in advanced materials orders. Our segment margin expanded 80 basis points year-over-year, achieving the high end of our guidance range, led by HPT up 110 basis points. We continue to see business mix improvement due to strong growth in our higher margin aerospace business, as well as ongoing gains from productivity. Free cash flow was $1.6 billion in third quarter, with over 100% cash conversion and 17% free cash flow margin in line with our expectations. Greg will walk you through the free cash flow drivers in more detail in a few minutes. We remain committed to our capital deployment strategy, and we put our robust balance sheet to work in the third quarter by deploying $2 billion to dividends, M&A, growth capex, and share repurchases. We bought back 5.3 million shares in the quarter, reducing our weighted average share count to 667 million, a step up due to highly attractive valuation and our ongoing confidence in Honeywell's performance. We remain on track with our commitment to deploy capital to high return categories and generate compelling value for Honeywell shareholders. As always, we continue to execute on our proven value creation framework, effectively managing through ongoing external difficulties and delivering on our commitments. Looking forward, our consistent adherence to our rigorous operating principles underpinned by our accelerated operating system Continued strength in our long cycle end markets and our technologically differentiated portfolio of solutions should provide investors with comfort that we will remain highly resilient, perform in all economic cycles, and drive shareholder value for years to come. Next, let's turn to slide three to review some of our exciting recent wins. Before I hand it off to Greg, let me briefly highlight some recent announcements that demonstrate our innovation across our portfolio. In aero, we recently won a key new customer in the air transport space that will increase our APU and avionics installed based on roughly 200 new aircraft over the next five years. This win helps demonstrate the strength in our aerospace portfolio, regardless of the market conditions. In energy space, we announced a partnership with SKENS to deploy our UOP carbon capture technology at a natural gas power plant in Korea. Our technology will help enable the capture of greater than 95% of the carbon dioxide produced in the plant. We remain excited about the win rates across our sustainable technology solution business as we help pave the way for the world's great energy transition. Finally, our force for building software was recently implemented in Van, Bangkok, the city's largest integrated district. This partnership with Fraser's and TCC Technologies will foster an expanding adoption of our software offerings across business sectors as we support the achievement of sustainability goals. Our core focus as a company continues to be on aerospace, sustainability, and automation. Our recent wins are closely aligned to these initiatives and are proof that we continue to drive innovation across our portfolio. We not only see profitable market outcomes, but also position Honeywell to address the world's toughest challenges. Now let me turn it over to Greg on slide four to discuss our third quarter results in more detail, as well as provide our views on guidance.