Honeywell International Inc. (NASDAQ:HON)

Inventory Turnover

The inventory turnover ratio shows a declining trend from 4.94 in March 2020 to 3.53 by June 2025. The ratio decreased steadily with some minor fluctuations, indicating that the frequency of inventory being sold or used over the periods has reduced, suggesting slower inventory movement over time.

Receivables Turnover

Receivables turnover exhibits fluctuations around a relatively stable central tendency between 4.5 and 5.0 throughout the periods. This suggests that the company consistently collected its receivables at a steady pace, with no significant trends toward improvement or deterioration.

Payables Turnover

Payables turnover ratio shows a slight downward trajectory, decreasing from approximately 3.86 in mid-2020 to a low of 3.36 in March 2024 before slightly recovering. This indicates that the company is taking longer to pay its suppliers over time, possibly enhancing working capital management or reflecting changes in payment policies.

Working Capital Turnover

The working capital turnover ratio shows significant volatility, with values ranging from 3.37 to as high as 8.84 during different quarters. Notably, there is an increasing trend through 2021 and a peak around late 2021, followed by fluctuations in subsequent periods. The erratic pattern may reflect variability in sales relative to working capital or changes in operational efficiency.

Average Inventory Processing Period

The average inventory processing period has been steadily increasing, moving from 74 days in early 2020 to over 100 days by mid-2025. This increase corroborates the declining inventory turnover, indicating that inventory remains on hand for longer durations before being sold or used.

Average Receivable Collection Period

The average receivable collection period remains fairly stable, generally fluctuating between 72 and 82 days. This stability aligns with the relatively steady receivables turnover ratio, suggesting consistent credit collection practices over time.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, shows a gradual increase from 150 days in early 2020 to around 184 days by mid-2025. The lengthening operating cycle indicates that the overall time taken to convert raw materials into cash from sales has been increasing, driven mainly by lengthening inventory and receivable periods.

Average Payables Payment Period

The average payables payment period shows a moderate upward trend, increasing from about 95 days to a little over 105 days by mid-2025. The lengthening payables period suggests the company is taking more time to pay its suppliers, which could be a strategy to improve cash flow management.

Cash Conversion Cycle

The cash conversion cycle displays variability but generally trends upward, increasing from roughly 53-58 days in early periods to values above 70 days in later periods, peaking at 79 days. This indicates that the company’s net time taken between outlay of cash and cash recovery from sales is lengthening, possibly reflecting the combined effects of slower inventory turnover, stable receivables, and extended payables periods.

The cost of products and services sold exhibits fluctuations across the observed periods, with a general increasing tendency toward the later quarters. Beginning at 5,534 million US dollars in the first quarter of 2020, the cost slightly declines in the subsequent quarters of that year before increasing steadily from mid-2021 onward. Notably, the cost reaches peaks toward the end of 2024 and the first half of 2025, with figures surpassing 6,000 million US dollars.

Inventories demonstrate a clear upward trajectory throughout the reported quarters. Starting at 4,584 million US dollars in the first quarter of 2020, inventories increase consistently, with minor variability, reaching 7,013 million US dollars by mid-2025. This steady growth represents a substantial accumulation of inventory over the period, indicating potential scaling of operations or changes in inventory management strategies.

The inventory turnover ratio, available from the fourth quarter of 2020, reveals a gradual decline over time. Initially close to 4.9 times per annum, the turnover ratio decreases to approximately 3.5 times by mid-2025. This downward trend suggests that the company is turning over its inventory less frequently as time progresses, which may reflect longer holding periods, decreased sales velocity relative to inventory, or strategic shifts in inventory policies.

Cost of Products and Services Sold

Shows a fluctuating but generally increasing pattern, with costs rising notably after 2021 and peaking at over 6 billion US dollars in late 2024 and early 2025.

Inventories

Displays a continuous and significant increase from 4.6 billion to over 7 billion US dollars, indicative of growing inventory levels across the periods.

Inventory Turnover Ratio

Exhibits a weakening trend, falling from nearly 5 to around 3.5, implying a slower pace of inventory turnover that could bear on operational efficiency and working capital management.

The company's net sales exhibited a generally upward trend over the analyzed periods with some fluctuations. Starting from a lower base in the early 2020 quarters, sales experienced a decline in the second quarter of 2020 but subsequently recovered and showed growth through subsequent quarters. Notably, quarterly sales peaked near the end of the 2024 calendar year, indicating a positive sales momentum. However, some short-term declines appeared intermittently, suggesting variability in demand or external factors impacting revenue generation.

Accounts receivable, net of allowances, followed a broadly increasing trajectory, albeit with periodic declines. Early 2020 saw relatively lower receivables, which rose consistently through to late 2023. Slight decreases in the account balances were observed in certain quarters, indicating possible improved collections or changes in credit policies. The general increase aligns with expanding sales, reflecting typical business growth and possibly extended credit terms offered to customers.

The receivables turnover ratio, available from the second quarter of 2020 onward, remained relatively stable, fluctuating between approximately 4.45 and 5.04. This stability suggests a consistent efficiency in collecting receivables over the periods. Minor variations indicate that while the company managed its credit and collections effectively, occasional changes in turnover may point to shifts in customer payment behaviors or credit management practices. The ratio's steadiness despite increasing receivable balances is indicative of controlled credit risk and effective collection processes.

Net Sales

Overall upward trend from 2020 through 2025 with some quarter-to-quarter fluctuations; highest sales recorded towards the end of 2024 and early 2025.

Accounts Receivable (net)

Gradual increase consistent with sales growth but with some intermittent declines; reflects expanding business and credit extension with periodic collection improvements.

Receivables Turnover Ratio

Relatively stable ratio ranging between 4.45 and 5.04, indicating consistent receivables management and payment collection efficiency over time.

The financial data reveals certain trends in the cost of products and services sold, accounts payable, and payables turnover over the periods analyzed.

Cost of Products and Services Sold

This item displays a fluctuating pattern throughout the quarters. Starting at 5,534 million USD on March 31, 2020, it experienced moderate volatility with several peaks and troughs. For instance, it reached a low of 5,324 million USD on March 31, 2022, and then increased to a peak of 6,418 million USD on December 31, 2024. This indicates variability in production or service costs over time, with a general upward tendency towards the later periods.

Accounts Payable

Accounts payable figures show an overall upward trend throughout the periods, beginning at 5,676 million USD on March 31, 2020, rising steadily to reach 7,111 million USD by June 30, 2025. There are some minor fluctuations, but the general direction is an increase, suggesting an expansion in liabilities or extended payment terms.

Payables Turnover Ratio

The payables turnover ratio remains relatively stable, oscillating between approximately 3.36 and 3.86 across the quarters for which data is available. The highest values appear early in 2020 and 2021, with a slight downward trend observable towards the end of 2024 and into 2025. The stability in this ratio indicates consistent efficiency levels in managing payables despite the growth in accounts payable and fluctuating cost of products sold.

Overall, the data suggests that while costs and payables increase over time, the company manages to keep the pace of payments to suppliers relatively steady, as evidenced by the fairly stable payables turnover ratio. The increase in accounts payable might reflect strategic financing decisions or expanding operations, and the fluctuating cost of products and services sold could be influenced by market conditions or operational changes influencing production costs.

Working Capital

The working capital values display a fluctuating pattern over the reported periods. Initially, there is a substantial increase from 5,236 million USD in March 2020 to a peak of approximately 11,016 million USD in September 2020. This is followed by a general decline through to March 2022, reaching a low of 3,900 million USD. Another phase of recovery can be observed, with working capital increasing to around 7,009 million USD in June 2023, before once again falling to 4,325 million USD in June 2024. After this trough, a moderate upward trend resumes, culminating in 6,348 million USD by June 2025. The variations suggest periods of both accumulation and reduction of short-term assets relative to liabilities, reflecting possibly changing operational or financing conditions.

Net Sales

Net sales demonstrate a relatively more stable and gradually increasing trajectory. Starting at 8,463 million USD in March 2020, there is a modest dip in June 2020 but subsequent quarters show steady growth, with values rising from 8,454 million USD in March 2021 to a high of 10,352 million USD in June 2025. The overall trend reflects resilience and consistent revenue growth over the period. Short-term fluctuations occur but the general direction is positive, signaling strong market demand or effective sales strategies.

Working Capital Turnover Ratio

The working capital turnover ratio, available from December 2020 onwards, exhibits notable volatility. It starts at 3.64 and progressively increases, peaking at 8.84 in September 2022, indicating an increasingly efficient use of working capital to generate sales during this interval. Post-peak, the ratio shows fluctuations with cycles of decline and recovery - for example, descending to 3.37 in June 2024 before climbing again to 7.04 by June 2025. This oscillation may reflect varying operational efficiency or shifts in working capital management relative to sales.

Summary of Relationships and Insights

The inverse movement between working capital and working capital turnover in several periods is noteworthy. Periods where working capital declines notably, such as from early 2022 to mid-2024, often coincide with higher turnover ratios, suggesting more efficient utilization of available working capital. Conversely, increases in working capital sometimes correspond with lower turnover ratios, indicating accumulation of current assets or reduced operational efficiency in turning over these assets into sales. Meanwhile, steady growth in net sales throughout the period suggests sustained demand, which may require the company to balance working capital levels to support sales growth while maintaining efficiency.

The analysis of the inventory management metrics over the reported periods reveals a clear trend of gradual decline in inventory turnover coupled with an increase in the average inventory processing period. These patterns suggest shifts in operational efficiency and inventory management practices.

Inventory Turnover

The inventory turnover ratio, which reflects the number of times inventory is sold and replaced over a period, shows a consistent decrease from 4.94 to 3.53 over the available periods. Starting at 4.94, the ratio has steadily declined, indicating that inventory is being cycled less frequently as time progresses. This decrease from approximately 4.9 to 3.5 represents a reduction of about 28%, suggesting a slowdown in inventory movement.

Average Inventory Processing Period

The average inventory processing period, measured in days, has increased from 74 days to 103 days. This measure reflects the average time inventory remains in stock before being sold. The steady increase in this metric corresponds inversely with the inventory turnover trend. It signals that inventory is being held longer before turnover, thus slowing the inventory cycle.

Implications and Insights

The combined trend of a declining inventory turnover ratio and a rising processing period suggests potential challenges in inventory management, such as slower sales or overstocking. This may impact working capital efficiency since inventory is tying up resources for longer durations. If the trend continues, it could lead to increased holding costs and potential risks of obsolescence.

It is also possible that changes in market demand, supply chain constraints, or strategic inventory build-up influenced these trends. Continuous monitoring and investigation into the underlying causes would be prudent to address the slowing inventory turnover pace.

The receivables turnover ratio exhibits some variability but generally remains within a narrow range throughout the periods analyzed. After missing data in the early 2020 quarters, this ratio starts from 4.78 in March 2021 and fluctuates slightly between 4.45 and 5.04 over the subsequent quarters. The highest turnover rate is observed in March 2022 at 5.04, which indicates a relatively faster collection of receivables during that quarter. The lowest point within the available data appears in September 2022 at 4.45. Towards the later periods, from 2023 through the first half of 2025, the ratio stabilizes around the mid-4.5 to low 5.0 range, suggesting consistent performance in converting receivables to cash.

The average receivable collection period, measured in days, inversely mirrors the pattern seen in the receivables turnover ratio. Starting from 76 days in March 2021, the collection period decreases slightly to 72 days in March 2022, reflecting quicker receivables recovery. However, it subsequently increases to a peak of 82 days in September 2022, indicating slower collections during that period. Following this peak, the collection period fluctuates moderately, generally hovering between 74 and 81 days through 2023 and into mid-2025. No clear trend of improvement or deterioration is evident, but the data shows that the collection period remains relatively stable, albeit with periodic variations.

Receivables Turnover Ratio

Shows moderate fluctuations, with a range from approximately 4.45 to 5.04. Indicates an overall stable ability to convert receivables into cash.

Average Receivable Collection Period

Varies between 72 and 82 days, inversely correlated with the turnover ratio. Reflects a stable but somewhat variable cash collection timeframe without significant long-term trend changes.

Overall, the analysis of the receivables metrics points to a consistent working capital management performance in terms of receivables. While there are some short-term fluctuations, the company's effectiveness in managing receivables collection maintains a fairly steady level across the analyzed periods, without evident signs of systemic improvement or decline.

Average Inventory Processing Period

The average inventory processing period demonstrates a generally increasing trend from March 31, 2021, to June 30, 2025. Starting at 74 days in early 2021, the period gradually rises, reaching values close to or above 90 days during 2022 and 2023. This upward movement continues into 2024 and 2025, with the period peaking at 103 days by June 30, 2025. Such a trend indicates that the time taken to process inventory has lengthened over the observed intervals, suggesting potential changes in inventory management or supply chain efficiency.

Average Receivable Collection Period

The average receivable collection period fluctuates moderately throughout the timeframe. Beginning around 76 days in early 2021, it decreases slightly to 72 days in March 2022 but then experiences variability thereafter, ranging between 74 and 81 days. Although there is no clear upward or downward long-term trend, some variation is evident quarter to quarter. The collection period remains relatively stable around the mid-70s to low 80s over the years, signaling consistent but somewhat variable efficiency in collecting accounts receivable.

Operating Cycle

The operating cycle closely mirrors the movements of both inventory processing and receivable collection periods, consistently hovering between 150 and 184 days. It begins near 150 days in early 2021, increases steadily with some fluctuations to a peak of 184 days by June 30, 2025. This indicates a lengthening of the overall time it takes to convert inventory and receivables into cash, impacted primarily by the increasing inventory processing period and variable receivables collection period. The extended operating cycle may warrant attention for its potential impact on liquidity and working capital management.

The analysis of the payables turnover ratio and the average payables payment period reveals notable trends and patterns over the observed time frame.

Payables Turnover Ratio

The payables turnover ratio starts appearing from the first quarter of 2020 with a value of 3.86. It shows minor fluctuations across subsequent quarters, generally oscillating between approximately 3.36 and 3.86. A slight declining trend is observed from the end of 2021 through 2023, with values dipping below 3.5 at some points, indicating a decrease in the frequency with which the company pays its suppliers. Towards the end of the data in 2025, the ratio slightly recovers but remains within the range of 3.4 to 3.6, suggesting a relatively stable but reduced turnover compared to earlier years.

Average Payables Payment Period

The average payables payment period shows a complementary trend to the turnover ratio. Initial values in early 2020 are around 95 days, increasing steadily over time. By late 2021 and throughout 2023, the payment period extends beyond 100 days, peaking at around 109 days in early 2024. This elongation implies that the company takes longer to settle its payables as time advances. Although some slight reductions are visible after the peak, the period remains generally elevated, above 100 days, through to mid-2025.

In summary, the company exhibits a trend towards slower payments to suppliers over the periods analyzed, as evidenced by the declining payables turnover ratio and the increasing average payment period in days. This suggests either strategic adjustments in cash management or changes in supplier payment policies, potentially impacting supplier relationships or working capital management.

The analysis of the quarterly financial data reveals several noteworthy trends in the operational efficiency metrics related to inventory, receivables, payables, and the overall cash conversion cycle over the observed periods.

Average Inventory Processing Period

The average inventory processing period shows a consistent and gradual increase over time. Beginning at 74 days in March 2021, it rises steadily to reach 103 days by June 2025. This upward trend indicates a lengthening of the time inventory remains in stock before being sold, suggesting either slower inventory turnover or an accumulation of inventory. Such a pattern may imply challenges in managing inventory levels efficiently, potentially impacting working capital and liquidity.

Average Receivable Collection Period

The average receivable collection period remains relatively stable but exhibits slight fluctuations within a narrow range. Starting from 76 days in March 2021, the period varies between 72 and 82 days throughout the timeline, ending at 81 days in June 2025. This stability suggests consistent credit policies and collection effectiveness, although the minor increases towards the later periods may signal some slowing in receivables turnover or extended customer payment times.

Average Payables Payment Period

The average payables payment period displays a generally increasing trend, moving from 95 days in March 2021 to a peak of 109 days during December 2023, with some fluctuations thereafter, ending at 105 days in June 2025. This lengthening indicates the company is taking more time to pay its suppliers, which may be a strategic move to manage cash flow or reflect negotiation of longer payment terms. While beneficial for cash preservation, it could affect supplier relationships if extended too far.

Cash Conversion Cycle

The cash conversion cycle shows variability but an overall increasing tendency over the periods analyzed. Starting at 55 days in March 2021, it peaks around 79 days by June 2025, with intermediate fluctuations. This increase reflects the combined effects of lengthening inventory and receivables periods offset partially by changes in payables. The growing cash conversion cycle suggests the company is taking longer to convert its investments in inventory and receivables back into cash, which could impact liquidity and operational efficiency.

In summary, the company appears to be experiencing a gradual extension of its operational cycle, with increasing inventory holding periods and a longer cash conversion cycle, while maintaining relatively stable receivables collection. The extended payment periods point towards deliberate cash management strategies. Continuous monitoring will be important to balance operational efficiency against working capital demands.