Honeywell International Inc. (NASDAQ:HON)

The analysis of the financial activity ratios over the reported periods reveals several notable trends affecting operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio shows a consistent decline from approximately 4.85 to around 3.6 over the analyzed periods. This trend indicates a gradual slowdown in inventory movement, suggesting that stock is held for longer durations before being sold.

Receivables Turnover

The receivables turnover fluctuates moderately, generally oscillating between 4.5 and 5.04, with no clear upward or downward trend. This relative stability implies consistent effectiveness in collecting receivables, though slight decreases in later periods may indicate marginally slower collection.

Payables Turnover

The payables turnover ratio demonstrates a slight decline with notable fluctuations, ranging from approximately 3.86 to 3.36, then back to around 3.5. This pattern suggests a modest extension in the time taken to settle suppliers, potentially reflecting changes in payment policies or cash management strategies.

Working Capital Turnover

The working capital turnover ratio exhibits significant volatility, ranging from lows around 3.37 to highs above 8.8, without a consistent directional trend. This variability may indicate fluctuations in sales relative to net working capital, possibly reflecting seasonal effects or shifts in operational efficiency.

Average Inventory Processing Period

The average inventory processing period increases steadily from 75 days to over 100 days, corroborating the downward trend in inventory turnover, and indicating that inventory is being retained for longer periods before sale.

Average Receivable Collection Period

The average receivable collection period remains relatively stable near the mid-70-day range, with slight fluctuations. This suggests generally steady credit and collection policies across the periods.

Operating Cycle

The operating cycle lengthens gradually from 150 days to over 180 days, reflecting the combined effect of increasing inventory holding periods and relatively stable collection times. This elongation may have implications for cash flow timing.

Average Payables Payment Period

The average payables payment period increases slightly from around 95 days to just over 100 days, indicating a trend toward delaying payments to suppliers, potentially as a cash preservation measure.

Cash Conversion Cycle

The cash conversion cycle experiences an upward trend from approximately 51 to nearly 80 days, indicating that the time between cash outlay for inventory and receiving cash from sales is lengthening. This increase suggests a growing need for working capital to finance operations.

In summary, the data points toward a deceleration in operational turnover metrics, particularly inventory management, with more extended holding and payment periods contributing to a longer cash conversion cycle. These trends highlight potential areas for attention in managing operational liquidity and efficiency.

The analysis of the quarterly financial data reveals several notable trends regarding cost of products and services sold, inventories, and inventory turnover ratios over the observed periods.

Cost of products and services sold

The cost fluctuates quarter to quarter but demonstrates an overall increasing trend from March 31, 2021, through September 30, 2025. Early 2021 values range around the mid-5,000 million mark, with occasional decreases seen in early to mid-2022 and early 2023. However, from late 2023 onward, costs rise more consistently, reaching a peak in the third quarter of 2025. The general movement indicates rising expenses related to product and service delivery over the period analyzed.

Inventories

The inventory levels show a steady upward progression throughout the entire timeframe. Beginning near 4,600 million in the first quarter of 2021, inventories gradually increase each subsequent quarter, reaching levels above 7,100 million by the third quarter of 2025. This continuous rise signals accumulating stock, potentially reflecting higher production input or slower inventory turnover.

Inventory turnover ratio

The inventory turnover ratio steadily declines across the series, starting at approximately 4.85 in March 2021 and dropping to around 3.6 by the third quarter of 2025. This consistent decrease suggests that the frequency with which inventory is sold and replaced diminishes over time. The falling ratio could indicate slower sales or increasing inventory holding periods, warranting further investigation into demand dynamics and operational efficiency.

Overall, the data indicate rising costs alongside growing inventory balances, coupled with a declining inventory turnover ratio. These patterns may reflect changes in market conditions, increased production or procurement activities, or shifts in management of inventory and resources, which could impact liquidity and operational efficiency.

The analysis of the quarterly financial data reveals several notable trends in net sales, accounts receivable, and receivables turnover over the periods examined.

Net Sales

Net sales exhibit a generally upward trajectory with some fluctuations. Starting from approximately 8.45 billion USD in the first quarter of 2021, sales increased moderately, peaking at over 10 billion USD by the fourth quarter of 2024. There are intermittent decreases, notably in early 2022 and again in early 2025, but the overall trend demonstrates growth, indicating a positive sales performance over the medium term.

Accounts Receivable, Less Allowances

The accounts receivable balance generally shows an increasing pattern, starting from about 6.68 billion USD in early 2021 and rising to nearly 8.9 billion USD by the third quarter of 2025. While incremental increases are mostly steady, occasional declines appear, such as in the fourth quarter of 2023. The rise in receivables could reflect expanding sales volumes or changes in credit terms extended to customers.

Receivables Turnover Ratio

The receivables turnover ratio displays a slight decreasing trend over the period analyzed. Beginning around 4.89 at the start of 2021, the ratio fluctuates between approximately 4.45 and 4.94 but generally moves downward toward the later quarters, finishing near 4.56 in the third quarter of 2025. This suggests that the company may be collecting receivables somewhat more slowly as time progresses, potentially influenced by lengthening credit terms or slower customer payments, despite rising net sales.

Overall, net sales have shown robust growth, accompanied by increasing accounts receivable levels. However, the gradual decline in receivables turnover ratio points toward a modest slowdown in collection efficiency. This mixed picture suggests management should monitor credit policies and collection practices closely to sustain healthy cash flow amid growing sales.

The analysis of the quarterly financial data reveals several notable trends and patterns in the cost of products and services sold, accounts payable, and payables turnover ratios over the observed periods.

Cost of Products and Services Sold

This item demonstrates a fluctuating pattern with some periods of decline followed by increases. In early 2021, it started at a level above 5,700 million USD, peaking in June 2021 near 6,000 million USD, then dipping slightly before rising again towards the end of 2021. The first quarter of 2022 saw a decrease to around 5,324 million USD but was followed by rising values through 2022 and 2023, peaking near 6,418 million USD at the end of 2024 and reaching over 6,800 million USD by the third quarter of 2025. The overall trend suggests increasing costs over time, possibly reflecting expanding operations, inflationary pressures, or rising input costs.

Accounts Payable

Accounts payable values also portray upward movement overall but with less volatility compared to the cost of products and services sold. Starting near 5,792 million USD in early 2021, it incrementally increased each quarter, reaching above 7,300 million USD by late 2025. This steady growth indicates increasing outstanding obligations to suppliers, consistent with the rising cost base. The increases in accounts payable levels support the notion of higher procurement or increased credit terms with suppliers during the period.

Payables Turnover Ratio

The payables turnover ratio shows a declining trend from 3.86 in the first quarter of 2021 to a low near 3.36 towards the end of 2023. Following this, the ratio fluctuates moderately around the mid-3.5 range up to 2025. This downward movement in turnover ratio suggests that the company is taking longer to pay its suppliers on average, possibly indicative of extended payment terms or cash management strategies aiming to conserve liquidity during that timeframe.

In summary, the data illustrates that the company’s cost of products and services and accounts payable amounts have been trending upward, while the payables turnover ratio has decreased, indicating longer payment periods. These dynamics are consistent with increasing operational scale and potentially evolving supplier credit arrangements over the analyzed period.

The analysis of the quarterly financial data reveals notable fluctuations and trends in working capital, net sales, and working capital turnover ratios over the observed periods.

Working Capital

Working capital exhibited considerable variability throughout the timeline, beginning with a high level near 7,637 million USD and experiencing a decline towards the end of 2021 and early 2022, reaching troughs around 3,900 to 4,400 million USD. Afterwards, intermittent recoveries and decreases occurred, with the highest point observed in the first quarter of 2024 at approximately 10,946 million USD. Despite this peak, the metric showed a tendency to fluctuate rather than maintain a consistent growth trend, ending the latest period near 8,108 million USD. Such volatility suggests changes in current assets and liabilities management or operational factors influencing liquidity positions.

Net Sales

Net sales demonstrated a more stable and generally upward trending pattern. Initial values were around 8,454 million USD and gradually increased over time, with minor fluctuations in some quarters. The data shows a consistent rise peaking above 10,000 million USD in several recent quarters, indicative of steady revenue growth. This positive progression indicates strengthening sales performance or market demand.

Working Capital Turnover

The working capital turnover ratio revealed significant oscillations throughout the periods. Early periods featured moderate ratios around 4.27 to 5.94, followed by sharp increases reaching values above 8.0 in some quarters in 2022 and 2024. However, several quarters also showed steep declines, including a notable drop to 3.37, reflecting potential inefficiencies or shifts in asset utilization relative to sales volumes. The ratio ended at 5.02, indicating a moderate level of efficiency in converting working capital into sales. The variability in this ratio suggests intermittent operational shifts or differing capital management strategies impacting turnover efficiency.

Overall, the company's net sales growth contrasts with the less consistent patterns in working capital and its turnover, implying that while revenue generation strengthened, the management of working capital experienced periodic challenges affecting liquidity and operational efficiency.

Inventory Turnover Trend

The inventory turnover ratio shows a clear declining trend over the observed periods. Starting at 4.85 in March 2021, the ratio gradually decreases to a low of 3.53 by June 2025. This downward movement suggests that the company is turning over its inventory less frequently, indicating either slower sales or increased inventory levels relative to cost of goods sold over time.

Average Inventory Processing Period

The average inventory processing period, expressed in days, demonstrates an increasing trend throughout the same timeframe. It begins at 75 days in March 2021 and lengthens to a peak of 103 days in September 2025, then slightly moderates to 101 days by the end of the period. The increase in days reflects slower inventory movement, consistent with the declining inventory turnover ratio.

Correlation and Implications

There is a strong inverse relationship observed between the inventory turnover ratio and the average inventory processing period, as expected. As inventory turnover declines, the time taken to process inventory correspondingly increases. This pattern may imply challenges in sales velocity or possibly overstocking issues that could impact working capital efficiency and potentially profitability if sustained.

Summary

Overall, the data suggests a gradual deterioration in inventory management efficiency over the analyzed quarters. The company experiences longer holding periods for inventory and reduced turnover rates. This trend warrants further investigation into sales performance, supply chain effectiveness, and inventory control strategies to mitigate potential negative financial impacts.

The analysis of the receivables turnover ratio and the average receivable collection period over the observed quarters reveals notable fluctuations and underlying trends that can inform the assessment of credit and collection management effectiveness.

Receivables Turnover Ratio

The receivables turnover ratio exhibits moderate variability throughout the periods. Starting at 4.89 in the first quarter of 2021, it demonstrates a slight decline into mid-2022, reaching a low of 4.45 in the second quarter of 2022. Following this dip, there is a recovery trend evident, with the ratio gradually increasing to peak at 4.94 by the first quarter of 2024. Subsequently, the ratio experiences minor decreases but generally remains around the mid-4 range, ending at 4.56 by the third quarter of 2025.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the turnover ratio trends. Initially stable at around 75 days during early 2021, the collection period lengthened significantly into mid-2022, peaking at 82 days. Following this increase, a gradual decline is observed, reducing the period to 74 days by the first quarter of 2024, suggesting improved collection efficiency. However, in late 2024 through to the third quarter of 2025, the collection period shows a tendency to rise again, oscillating between 76 and 81 days.

Relationship Between Metrics

Consistently, the data reflects the expected inverse relationship between the receivables turnover ratio and the average collection period. Periods of higher turnover align with shorter collection days, indicating more rapid conversion of receivables to cash. Conversely, declines in turnover are associated with lengthier collection periods, implying slower receivables processing.

Overall Insights

The trends suggest relatively stable receivables management with occasional periods of less efficient collections, particularly evident mid-2022 and again towards the end of the observed timeframe. These fluctuations could be influenced by changes in credit policies, customer payment behavior, or broader market conditions. The recovery in turnover and collection period seen after mid-2022 indicates responsive adjustments or improvements in collection practices. However, the slight deterioration in the latest quarters signals a need for ongoing attention to credit risk and collection strategies to maintain optimal liquidity and minimize credit exposure.

The analysis of the key working capital turnover metrics over the specified periods reveals notable changes in the company’s operational efficiency and cash conversion cycle.

Average Inventory Processing Period

This period shows a clear upward trend, increasing from 75 days in early 2021 to a peak of 103 days by the third quarter of 2025. The gradual lengthening of inventory days indicates slower inventory turnover, which may suggest challenges in inventory management or supply chain efficiency. From 2021 to 2024, the inventory days steadily climbed from the mid-70s to around 100, with minor fluctuations. Towards the end of 2024 and into 2025, the days remain elevated above 98, reflecting a sustained longer holding period for inventory.

Average Receivable Collection Period

The receivable collection period fluctuated moderately throughout the timeframe, starting at 75 days in early 2021, rising to a peak of 82 days mid-2022, and then showing a relatively stable pattern near the mid-70s to low 80s in the most recent periods. There is no strong directional trend, but the slight increase in 2022 followed by stabilization could suggest some variability in the efficiency of collecting customer payments. The period remained mostly within a range of 74 to 81 days, indicating fairly consistent collection performance but with some room for improvement.

Operating Cycle

The operating cycle, which sums inventory and receivable periods, clearly extends over time. Starting at 150 days in early 2021, it rises steadily to a peak of 184 days by the third quarter of 2025. This lengthening cycle reflects the combined effect of longer inventory processing and moderately stable receivables collection. The extension of the operating cycle suggests the company is taking more time to convert its investments in inventory and receivables into cash, which could impact liquidity and working capital management.

Overall, the data indicates a trend of increasing working capital intensity driven primarily by longer inventory holding periods. While receivables have remained relatively steady, the significant rise in the inventory processing duration contributes to a lengthened operating cycle, potentially signaling inefficiencies or increased complexity in inventory management. Monitoring these trends will be important to ensure they do not negatively affect the company's cash flow or operational flexibility.

The analysis of the payables turnover ratio and the average payables payment period over the observed quarters reveals a consistent pattern with minor fluctuations throughout the time span.

Payables Turnover Ratio

The payables turnover ratio demonstrates a generally stable trend, oscillating primarily between 3.36 and 3.86. Early in the period, the ratio hovers near the upper bound, around 3.8 to 3.9, but a subtle downward shift occurs toward the later quarters, with values mostly settling between 3.3 and 3.6. This slight decline suggests a marginal slowing in the frequency with which the company settles its payables over the year. Nevertheless, the variations remain modest without indication of abrupt changes in payment behavior.

Average Payables Payment Period

The average number of days to pay suppliers exhibits a corresponding inverse behavior relative to the payables turnover ratio, ranging roughly between 95 and 109 days. Notably, the payment period extends gradually over time, starting near 95 days and increasing to over 100 days consistently in the recent periods. Peaks appear near the end of calendar years, with values peaking around 109 days, suggesting a possible seasonal or end-of-year influence contributing to longer payment durations. Overall, this trend implies the company is taking slightly longer to pay its obligations as time progresses.

In summary, the company's payment activity toward suppliers is characterized by a marginal elongation of payment terms, reflected in the gradual decrease of the payables turnover ratio and the corresponding increase in the average payment period. These changes could indicate strategic management of cash flows or evolving supplier relationships, although the shifts are not dramatic enough to signal any immediate financial distress or significant operational shifts.

Inventory Processing Period

The average inventory processing period shows a general increasing trend over the analyzed quarters. Starting at 75 days in the first quarter of 2021, it gradually rises to a peak of 103 days by the third quarter of 2025. Notable increments occur during 2021 to 2022 and again toward 2025, indicating a lengthening time for inventory turnover.

Receivable Collection Period

The average receivable collection period fluctuates moderately throughout the period. It begins at 75 days in early 2021, experiences minor variations with highs around 82 days in mid-2022 and lows near 72 days in late 2021. The period stabilizes close to the mid-70s to low 80s days range toward the end of the timeline, demonstrating relative consistency in collecting receivables with some short-term volatility.

Payables Payment Period

The average payables payment period generally exhibits a stable yet slightly upward trajectory. It starts around 95 days in the first quarter of 2021, rising gradually to levels around 104-109 days during 2023, before maintaining similar levels near 104-105 days by mid-2025. This prolonged payment period could suggest an extension in the time taken to settle obligations.

Cash Conversion Cycle

The cash conversion cycle presents moderate fluctuations with an overall increase from 55 days in early 2021 to peaks near 79 days by late 2025. Some quarterly variations are visible, with occasional declines, but the general pattern indicates a lengthening cycle, implying capital tied up in the operating cycle is increasing over time.

Summary of Trends

The data reflects a consistent trend of increasing inventory holding periods and payment durations, accompanied by a relatively stable but fluctuating receivables collection period. Consequently, the cash conversion cycle extends gradually, signaling that the company's working capital is increasingly committed over longer periods. This pattern could warrant attention to inventory management and payment terms to optimize liquidity.