Greg Lewis
Senior Vice-President and Chief Financial Officer at Honeywell International
Thank you, Vimal, and good morning, everyone. I'll begin on Slide 5. We navigated through a challenging operational environment in the 3rd-quarter, delivering segment margin and adjusted earnings per share above the high-end of our guidance range and 10% increased cash-flow despite coming in below our sales guidance. The main driver of the sales miss was performance below our prior expectations in Industrial Automation as our revenues were sequentially flat across the portfolio. We were also impacted by some discrete manufacturing disruptions in September, including Hurricane Helene and a separate fire at one of our aerospace technology plants. All in, this led to 3rd-quarter organic sales growth of 3% year-over-year with three segments remaining in positive territory and double-digit growth in defense and space and commercial aviation original equipment in aerospace. This was the first full-quarter of impact from the acquisition of Access Solutions, and we're pleased with the performance of that business in the early days of integration.
We also saw approximately one month of impact in aerospace from the CAES and Civitanavi acquisitions. On orders, we grew 2% organically year-over-year with a book-to-bill of $1.1, led by double-digit growth in Energy and Sustainability Solutions and Building Automation. This order strength drove a 10% year-over-year improvement in backlog to a record $34 billion. Excluding the impact of M&A, backlog grew 6% year-over-year and 4% sequentially. Although sales came in below our expectations, profit remained resilient as we leveraged our Honeywell Accelerator operating system and cost management capabilities to protect our bottom-line.
Segment profit grew 6% year-over-year, led by double-digit growth in aerospace. Segment margin remained flat at 23.6%, 30 basis-points above the high-end of our guidance as expansion in industrial automation, building automation, and energy and sustainability solutions was offset by higher corporate costs year-over-year, mainly due to our investment in our digital infrastructure. Earnings per share for the 3rd-quarter was $2.16, down 5% year-over-year and adjusted earnings per share was $2.58, up 8% year-over-year and above the high-end of our guidance range, driven primarily by segment profit growth and lower interest expense due to timing of M&A deal closures. We took a charge in the quarter as a result of our decision to exit the PPE business in Industrial Automation. A bridge for adjusted EPS from 3Q '23 to 3Q '24 can be found in the appendix of this presentation.
Free-cash flow-in the quarter was $1.7 billion, up 10% year-over-year due to stronger operational income and higher collections. On capital deployment, we put $3.1 billion to work in the 3rd-quarter with $2.1 billion in M&A, $700 million in dividends and $300 million in high-return capital expenditures. As Vimal highlighted, we made significant progress this quarter and are on-track to deploy over $14 billion in capital this year and our work is not yet done as we continue to leverage our balance sheet into 2025 reshaping the portfolio.
Now let's spend a few minutes on the 3rd-quarter performance by business. In Aerospace Technologies, sales were up 10% organically year-over-year, the ninth consecutive quarter of double-digit growth. Sales were led by double-digit growth in defense and space, where we continue to unlock volume from our robust backlog through sustained global demand. In commercial aviation, we saw another quarter of double-digit growth in original equipment sales as shipset deliveries increased with particular strength in business and general aviation. Commercial aftermarket saw continued growth as global flight activity continues to rise. Despite some discrete supply chain disruptions in September that impacted our Air Transport OE business, output improved 13% in the quarter as we made sequential progress in supply-chain, the ninth consecutive quarter of double-digit output growth.
Segment margin remained flat year-over-year at 27.7% in the 3rd-quarter as commercial excellence and productivity actions were offset by cost inflation and mix pressure within original equipment. Industrial Automation sales were flat sequentially, but decreased 5% organically in the quarter, primarily due to lower volumes in warehouse and workflow solutions and short-cycle safety and sensing technologies. Process solutions sales grew 2% year-over-year and 1% sequentially in the quarter, driven by strength in our aftermarket services and Compressor Controls businesses, partially offset by demand softness in Smart Energy and Thermal Solutions as well as some delays in our projects businesses.
Sensing and Safety Technologies sales declined year-over-year and sequentially, but the sensing business delivered modest sequential growth for the second consecutive quarter. In Productivity Solutions and Services, orders and organic sales grew double-digits year-over-year when excluding the impact of the Zebra license and settlement payments that ended in the first-quarter of this year. Industrial Automation segment margin expanded 60 basis-points to 20.3% due to productivity actions and commercial excellence, partially offset by cost inflation and volume leverage. In Building Automation, sales grew 14% year-over-year and 11% sequentially, thanks to a full-quarter of the Access Solutions acquisition and acceleration in the Fire business.
Organically, BA sales were up 3%, supported by another quarter of solid performance in Building Solutions. Solutions grew 8% in the quarter, driven by another double-digit growth performance in projects and sequential growth in services. Product sales declined slightly year-over-year, but saw sequential improvement organically for the second straight quarter, thanks to strength in fire. Building automation orders continue to be a bright spot, led by 25% year-over-year growth in Building Solutions on continued strong demand in data centers, healthcare, and energy. Segment margin expanded 30 basis-points to 25.9% due to the impact of a full-quarter from Access Solutions and commercial excellence, partially offset by cost inflation.
Energy and Sustainability Solutions sales grew 1% organically in the 3rd-quarter. Advanced Materials grew 3% year-on-year due to further improvement in specialty chemicals and materials, particularly in Spectra and continued growth in fluorine products. UOP sales declined 2% as growth in aftermarket services and catalyst was offset by softness due to project timing. Orders in UOP were up over 50% in the quarter to a record $1 billion with strength in core process technologies and a record of more than $200 million in sustainable technology solutions. This marks the third consecutive quarter with ESS book-to-bill at 1.2.
Segment margin expanded 10 basis-points to 24.5% due to commercial excellence net of inflation. Overall, our accelerated playbook continues to serve us well as we once again demonstrated our ability to protect margins even in a lower-growth environment. Healthy orders, record backlog, and accretive growth rates across the M&A deals we have closed this year give us confidence in our ability to drive improved organic growth in the future. With that, let's turn to Slide 6 and we can talk about our 4th-quarter and updated full-year outlook.
Due to the incrementally more challenging end-market backdrop, we are revising our full-year sales guidance range while increasing the midpoint of our segment margin guidance. We are narrowing our adjusted EPS guidance to the high-end of the prior range due to that margin outlook combined with favorable adjustment to our effective tax-rate. While our pace of sales has not degraded, we have not seen the short-cycle acceleration, which we anticipated by this point in the year and it's appropriate to reflect that as well as the energy-related and aero output pushouts in our outlook. Our demand profile remains healthy with book-to-bill of 1.1 and record backlog, and we're confident in our ability to accelerate growth within our long-term framework in the coming quarters.
We now expect full-year sales to be in the range of $38.6 billion to $38.8 billion, representing organic growth of 3% to 4%, down from 5% to 6% previously. The lower guide reflects the lower 3rd-quarter results, a slower recovery in Industrial Automation and more tempered expectations in pockets of aerospace and energy markets in the 4th-quarter.
As a reminder, our guidance includes the impact of all four acquisitions, Access Solutions, Civitanavi, CAES, and LNG now all closed. Collectively, they will add approximately $800 million in sales in 2024, consistent with prior communications. For the 4th-quarter, we anticipate sales in the range of $10.2 billion to $10.4 billion, up 2% to 4% organically. Sales should increase sequentially across the portfolio, led by aerospace as we experienced additional supply-chain unlock as well as continued growth in flight hours and shipset deliveries.
Turning to segment margins, our strong result in the 3rd-quarter and our commercial excellence and productivity playbook are supporting our bottom-line. As a result, we're narrowing our overall segment margin guidance towards the high-end, now expecting to end the year between 23.4% and 23.5%, flat to 10 basis-points from 2023. That said, the dynamics we highlighted last quarter still hold. Delays in short-cycle improvement are leading our long-cycle project and original equipment businesses to a larger percentage of our mix, driving margin headwinds. In the long-term, this provides us an expanded installed-base to leverage for high-margin aftermarket projects. We now expect overall segment profit dollars to grow between 5% and 6% for the year. At a segment level, Building Automation and Energy and Sustainability Solutions will lead the group in margin expansion. For the 4th-quarter, we anticipate overall segment margin in the range of 23.8% to 24.2%, up sequentially, but down 20 to 60 basis-points year-over-year as a result of mix within original equipment and aerospace and volume deleverage in Industrial Automation.
Now, let's spend a moment on our outlook by business. Looking ahead for Aerospace Technologies, we still expect low double-digit growth in 2024 organic sales with double-digit growth in both commercial aviation and defense and space. In the 4th-quarter, we expect sales growth of mid-to-high single-digits with particular strength in commercial aftermarket. As previously noted, segment margin in the 3rd-quarter outperformed our expectations on better-than-anticipated mix, but we still see modest year-over-year segment margin contraction as discrete supply-chain disruptions from the 3rd-quarter are resolved and we see a corresponding recovery in commercial original equipment volumes. Moving to Industrial Automation, we're lowering our 2024 outlook for year-over-year organic sales to a decline in the high single-digit range as slower-than-expected short-cycle demand recovery alongside project pushouts and process solutions dampened our outlook for full-year organic growth. For the 4th-quarter, we expect sales down low single digits with modest growth in projects and aftermarket services, offset primarily by softness in Sensing and Safety Technologies and Smart Energy. Margins will be down overall this year for Industrial Automation, but up when excluding the impact of the license and settlement payments that ended in the first-quarter. In-Building Automation, we still expect full-year organic growth in the low single-digit range, led by continued strength in Building Solutions and high-growth regions, particularly in India and Saudi Arabia. 4th-quarter sales will be up year-over-year and flat-to-up sequentially as we see volume improvement led by fire products. Margins should hit their high point for the year in the 4th-quarter as improvement in fire and the impact of Access Solutions support positive mix. For Energy and Sustainability Solutions, the organic growth outlook for the year is still low-single digits with typical strong sequential improvement in the 4th-quarter, driven by catalyst shipment seasonality. We're still expecting full-year margin expansion with the 4th-quarter at the highest-margin rate due to favorable business mix associated with catalyst reloads. We will also see a lift from the first-quarter of sales and our newly-acquired LNG business. Moving to other key guided metrics, net below-the-line is now expected to be between negative $650 million and negative $700 million for the full-year. For the 4th-quarter, net below-the-line is expected to be between negative $250 million and negative $300 million. We now expect pension income to be approximately $600 million for 2024, up $50 million from our prior guide due to a one-time item that was pushed out from the 4th-quarter into 2025. This guidance includes repositioning spend between $150 million and $190 million for the year and between $60 million and $100 million for the 4th-quarter as we invest in high-return projects to support future growth and productivity.
We expect the adjusted effective tax-rate to be around 20% for the full-year and 17% for the 4th-quarter. The reduction in expected tax-rate is a result of favorable adjustments to income tax contingencies and taxable income mix. We anticipate average share count to be around 655 million shares for the full-year and around 653 million shares for the 4th-quarter, and we maintain balance sheet capacity to deploy additional capital to achieve the highest shareholder returns. We now expect the year-over-year impact to 2024 adjusted EPS from the four acquisitions closed this year will be approximately neutral, a bit better than we communicated last quarter. Slight delays to the closing of the case in LNG deals, reduced some of the interest expense and planned integration costs in 2024 and as we get our arms around the business, we're refining our near-term expectations. We continue to expect 1% to 2% EPS accretion in 2025 from these deals. A summary of the 2024 M&A impact on our financials is included in the appendix of this presentation.
As a result of all these inputs, we expect full-year adjusted earnings per share to be in the upper half of our prior range, now between $10.15 to $10.25, up 7% to 8% year-on-year. We expect 4th-quarter adjusted earnings per share between $2.73 and $2.83, up 1% to 5% year-on-year. On cash, we're reducing our guidance and now expect free-cash flow-in the range of $5.1 billion to $5.4 billion, down 4% to up 2%, excluding the impact of prior year settlements. Slower progress in inventory, mainly in aerospace and slowing payment cycles in certain high-growth regions has impacted our performance and our expectations. We continue to work on the multi-year unwind of working capital and we will fund high-return CapEx projects focused on creating uniquely innovative technologies for the company. Overall, while we remain cautious on the macroeconomic environment in the short-term, our acquisitions are progressing in line with our expectations. Our backlog remains at record highs and we are driving expansion of our installed-base. Our rigorous operating principles give us confidence in our ability to execute on our long-term growth algorithm.
Now, let me turn it back to Vimal on Slide 7 for some closing thoughts.
