Industrial giant Honeywell International reported a fourth quarter YoY sales decline of 3%, down 2% on an organic basis, due to supply-related constraints, a tough comparison versus 2020 due to lower COVID mask volumes, and six fewer days in the quarter.

Demand remained strong, with orders up high-single digits. Closing backlog was $28 billion, up 7% year over year. Fourth-quarter operating margin declined 130 basis points to 17.5% and segment margin expanded 30 basis points to 21.4% as a result of the company's commercial excellence efforts. Honeywell delivered fourth-quarter adjusted earnings per share of $2.09, above the midpoint of the company's guidance.

For the full year, sales increased by 5%, or 4% on an organic basis, and operating margin expanded 50 basis points with segment margin expanding 60 basis points. The company reported full-year adjusted earnings per share5 of $8.06, above the high end of its initial guidance of $7.60 to $8.00.

"Honeywell had a strong finish to another challenging year. We remained resilient, focusing on operational excellence to deliver the commitments we made to our shareowners," said Darius Adamczyk, Chairman and CEO of Honeywell.

"Our focus on differentiated solutions drove double-digit organic sales growth in 2021 in our warehouse and workflow solutions, productivity solutions and services, business and general aviation, advanced materials, and recurring connected software businesses. Our disciplined cost management, swift pricing actions to stay ahead of the inflation curve, and improved productivity resulted in 60 basis points of segment margin expansion for the year. As a result, our full-year adjusted earnings per share5 increased by 14% year over year. We also were strong cash generators in 2021, delivering $6.0 billion in operating cash flow with 109% conversion and $5.7 billion of free cash flow6 with 102% adjusted conversion and free cash flow margin of 17%."

Adamczyk continued, "Our balance sheet remains strong, and we maintained our focus on executing our capital deployment strategy, including investing in high-return capital expenditures, repurchasing $3.4 billion of Honeywell shares, completing four acquisitions, and increasing the dividend for the 12th time in the past 11 years. We deployed capital in excess of our operating cash flow and will continue to follow this playbook in 2022."

He concluded, "I am proud of the way Honeywell continues to respond to the challenging macroeconomic environment. We quickly took action to mitigate supply chain challenges and inflation by bringing on alternate suppliers, redesigning parts and implementing pricing actions. We also remained focused on growth, investing in new markets and technologies such as our environmental, social and governance (ESG) enablement solutions and the creation of Quantinuum, the world's largest, most advanced integrated standalone quantum computing company. We entered 2022 with positive momentum and a strong backlog, and I am confident we are well positioned to continue to perform for our shareowners, our customers, and our employees in the short and long term."

Honeywell also announced its outlook for 2022. The company expects sales of $35.4 billion to $36.4 billion, representing year-over-year organic growth of 4% to 7%, or 5% to 8% excluding the impact of COVID-driven mask sales declines; segment margin expansion of 10 to 50 basis points, including the (30) basis point impact of its newly combined Quantinuum business; earnings per share5 of $8.40 to $8.70, up 4% to 8% adjusted; operating cash flow of $5.7 billion to $6.1 billion, and free cash flow of $4.7 billion to $5.1 billion.