Stock Analysis on Net

Honeywell International Inc. (NASDAQ:HON)

Analysis of Income Taxes

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Income Tax Expense (Benefit)

Honeywell International Inc., income tax expense (benefit), continuing operations

US$ in millions

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12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
U.S. Federal 475  (21) 2,061  869 
U.S. State 79  43  89  62  97 
Non-U.S. 768  1,099  1,177  787  559 
Current 1,322  1,150  1,245  2,910  1,525 
U.S. Federal 234  332  396  39  38 
U.S. State 39  63  132  17 
Non-U.S. (448) (216) (990) 2,123  21 
Deferred (175) 179  (586) 2,294  76 
Tax expense 1,147  1,329  659  5,204  1,601 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Honeywell International Inc. current decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Honeywell International Inc. deferred increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.
Tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Honeywell International Inc. tax expense increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Effective Income Tax Rate (EITR)

Honeywell International Inc., effective income tax rate (EITR) reconciliation

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Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
U.S. federal statutory income tax rate 21.00% 21.00% 21.00% 35.00% 35.00%
Taxes on non-U.S. earnings -0.80% -0.50% 0.20% -12.90% -8.00%
U.S. state income taxes 1.30% 1.10% 1.60% 1.40% 1.10%
Reserves for tax contingencies -2.60% 2.00% 0.30% 1.60% 1.20%
Employee share-based payments -1.20% -1.20% -0.70% -2.90% -2.00%
Reduction of certain receivables 2.00% 0.00% 0.00% 0.00% 0.00%
Reduction of taxes on unremitted earnings 0.00% 0.00% -14.20% 0.00% 0.00%
Separation tax costs 0.00% 0.00% 5.50% 0.00% 0.00%
All other items, net -0.60% -1.20% 0.90% -1.20% -2.50%
Effective income tax rate, before U.S. Tax Cuts and Jobs Act 19.10% 21.20% 14.60% 21.00% 24.80%
U.S. Tax Cuts and Jobs Act 0.00% -3.60% -5.80% 54.40% 0.00%
Effective income tax rate 19.10% 17.60% 8.80% 75.40% 24.80%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Effective income tax rate, before U.S. Tax Cuts and Jobs Act Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Honeywell International Inc. effective income tax rate, before U.S. Tax Cuts and Jobs Act increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Components of Deferred Tax Assets and Liabilities

Honeywell International Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Pension —  —  —  —  411 
Postretirement benefits other than pensions 85  111  120  177  262 
Asbestos and environmental 508  531  589  325  471 
Employee compensation and benefits 180  205  262  218  418 
Lease liabilities 197  —  —  —  — 
Other accruals and reserves 110  279  336  376  765 
Net operating and capital losses 779  652  688  632  669 
Tax credit carryforwards 219  246  154  510  206 
Gross deferred tax assets 2,078  2,024  2,149  2,238  3,202 
Valuation allowance (766) (656) (689) (663) (621)
Deferred tax assets 1,312  1,368  1,460  1,575  2,581 
Pension (548) (469) (40) (40) — 
Property, plant and equipment (437) (469) (422) (439) (560)
Right-of-use asset (184) —  —  —  — 
Intangibles (898) (1,296) (1,553) (1,326) (1,843)
Unremitted earnings of foreign subsidiaries (398) (419) (616) (2,151) (43)
Other asset basis differences (169) (136) (110) (210) (231)
Other (31) (163) (50) (67) (43)
Deferred tax liabilities (2,665) (2,952) (2,791) (4,233) (2,720)
Net deferred tax asset (liability) (1,353) (1,584) (1,331) (2,658) (139)

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Honeywell International Inc. gross deferred tax assets decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Honeywell International Inc. deferred tax assets decreased from 2018 to 2019 and from 2019 to 2020.
Net deferred tax asset (liability) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Honeywell International Inc. net deferred tax asset (liability) decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

Deferred Tax Assets and Liabilities, Classification

Honeywell International Inc., deferred tax assets and liabilities, classification

US$ in millions

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Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Deferred tax assets 760  86  382  236  347 
Deferred tax liabilities 2,113  1,670  1,713  2,894  486 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Honeywell International Inc. deferred tax assets decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.
Deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Honeywell International Inc. deferred tax liabilities decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Adjustments to Financial Statements: Removal of Deferred Taxes

Honeywell International Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Adjustment to Total Assets
Total assets (as reported) 64,586  58,679  57,773  59,387  54,146 
Less: Noncurrent deferred tax assets, net 760  86  382  236  347 
Total assets (adjusted) 63,826  58,593  57,391  59,151  53,799 
Adjustment to Total Liabilities
Total liabilities (as reported) 46,789  39,966  39,408  41,943  34,596 
Less: Noncurrent deferred tax liabilities, net 2,113  1,670  1,713  2,894  486 
Total liabilities (adjusted) 44,676  38,296  37,695  39,049  34,110 
Adjustment to Total Honeywell Shareowners’ Equity
Total Honeywell shareowners’ equity (as reported) 17,549  18,494  18,180  17,276  19,369 
Less: Net deferred tax assets (liabilities) (1,353) (1,584) (1,331) (2,658) (139)
Total Honeywell shareowners’ equity (adjusted) 18,902  20,078  19,511  19,934  19,508 
Adjustment to Net Income Attributable To Honeywell
Net income attributable to Honeywell (as reported) 4,779  6,143  6,765  1,655  4,809 
Add: Deferred income tax expense (benefit) (175) 179  (586) 2,294  76 
Net income attributable to Honeywell (adjusted) 4,604  6,322  6,179  3,949  4,885 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).


Honeywell International Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Honeywell International Inc., adjusted financial ratios

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Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net Profit Margin
Reported net profit margin 14.64% 16.73% 16.18% 4.08% 12.24%
Adjusted net profit margin 14.11% 17.22% 14.78% 9.74% 12.43%
Total Asset Turnover
Reported total asset turnover 0.51 0.63 0.72 0.68 0.73
Adjusted total asset turnover 0.51 0.63 0.73 0.69 0.73
Financial Leverage
Reported financial leverage 3.68 3.17 3.18 3.44 2.80
Adjusted financial leverage 3.38 2.92 2.94 2.97 2.76
Return on Equity (ROE)
Reported ROE 27.23% 33.22% 37.21% 9.58% 24.83%
Adjusted ROE 24.36% 31.49% 31.67% 19.81% 25.04%
Return on Assets (ROA)
Reported ROA 7.40% 10.47% 11.71% 2.79% 8.88%
Adjusted ROA 7.21% 10.79% 10.77% 6.68% 9.08%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Honeywell International Inc. adjusted net profit margin ratio improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Honeywell International Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Honeywell International Inc. adjusted financial leverage ratio decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Honeywell International Inc. adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Honeywell International Inc. adjusted ROA improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Honeywell International Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

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Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Honeywell 4,779  6,143  6,765  1,655  4,809 
Net sales 32,637  36,709  41,802  40,534  39,302 
Profitability Ratio
Net profit margin1 14.64% 16.73% 16.18% 4.08% 12.24%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Honeywell 4,604  6,322  6,179  3,949  4,885 
Net sales 32,637  36,709  41,802  40,534  39,302 
Profitability Ratio
Adjusted net profit margin2 14.11% 17.22% 14.78% 9.74% 12.43%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Net profit margin = 100 × Net income attributable to Honeywell ÷ Net sales
= 100 × 4,779 ÷ 32,637 = 14.64%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Honeywell ÷ Net sales
= 100 × 4,604 ÷ 32,637 = 14.11%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Honeywell International Inc. adjusted net profit margin ratio improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Adjusted Total Asset Turnover

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Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net sales 32,637  36,709  41,802  40,534  39,302 
Total assets 64,586  58,679  57,773  59,387  54,146 
Activity Ratio
Total asset turnover1 0.51 0.63 0.72 0.68 0.73
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales 32,637  36,709  41,802  40,534  39,302 
Adjusted total assets 63,826  58,593  57,391  59,151  53,799 
Activity Ratio
Adjusted total asset turnover2 0.51 0.63 0.73 0.69 0.73

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 32,637 ÷ 64,586 = 0.51

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 32,637 ÷ 63,826 = 0.51

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Honeywell International Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Total assets 64,586  58,679  57,773  59,387  54,146 
Total Honeywell shareowners’ equity 17,549  18,494  18,180  17,276  19,369 
Solvency Ratio
Financial leverage1 3.68 3.17 3.18 3.44 2.80
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 63,826  58,593  57,391  59,151  53,799 
Adjusted total Honeywell shareowners’ equity 18,902  20,078  19,511  19,934  19,508 
Solvency Ratio
Adjusted financial leverage2 3.38 2.92 2.94 2.97 2.76

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Financial leverage = Total assets ÷ Total Honeywell shareowners’ equity
= 64,586 ÷ 17,549 = 3.68

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Honeywell shareowners’ equity
= 63,826 ÷ 18,902 = 3.38

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Honeywell International Inc. adjusted financial leverage ratio decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Honeywell 4,779  6,143  6,765  1,655  4,809 
Total Honeywell shareowners’ equity 17,549  18,494  18,180  17,276  19,369 
Profitability Ratio
ROE1 27.23% 33.22% 37.21% 9.58% 24.83%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Honeywell 4,604  6,322  6,179  3,949  4,885 
Adjusted total Honeywell shareowners’ equity 18,902  20,078  19,511  19,934  19,508 
Profitability Ratio
Adjusted ROE2 24.36% 31.49% 31.67% 19.81% 25.04%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROE = 100 × Net income attributable to Honeywell ÷ Total Honeywell shareowners’ equity
= 100 × 4,779 ÷ 17,549 = 27.23%

2 Adjusted ROE = 100 × Adjusted net income attributable to Honeywell ÷ Adjusted total Honeywell shareowners’ equity
= 100 × 4,604 ÷ 18,902 = 24.36%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Honeywell International Inc. adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Honeywell 4,779  6,143  6,765  1,655  4,809 
Total assets 64,586  58,679  57,773  59,387  54,146 
Profitability Ratio
ROA1 7.40% 10.47% 11.71% 2.79% 8.88%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Honeywell 4,604  6,322  6,179  3,949  4,885 
Adjusted total assets 63,826  58,593  57,391  59,151  53,799 
Profitability Ratio
Adjusted ROA2 7.21% 10.79% 10.77% 6.68% 9.08%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROA = 100 × Net income attributable to Honeywell ÷ Total assets
= 100 × 4,779 ÷ 64,586 = 7.40%

2 Adjusted ROA = 100 × Adjusted net income attributable to Honeywell ÷ Adjusted total assets
= 100 × 4,604 ÷ 63,826 = 7.21%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Honeywell International Inc. adjusted ROA improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.