Honeywell International Inc. (NYSE:HON) Q2 2018 Earnings Conference Call - Final Transcript
Jul 20, 2018 • 09:30 am ET
Good day, ladies and gentlemen. And welcome to Honeywell's Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Mark Macaluso, Vice President of Investor Relations.
Thanks, Cathy. Good morning and welcome to Honeywell's second quarter 2018 earnings conference call. With me here today are Chairman and CEO, Darius Adamczyk, Senior Vice President and Chief Financial Officer, Tom Szlosek, and Vice President of Corporate Finance, Greg Lewis. This call and webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com/investor.
Note that elements of this presentation contains forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change and we ask that you interpret them in that light. We identified principle risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings.
For this call, references to earnings per share, free cash flow, free cash flow conversion, and effective tax rate exclude impacts from separation costs related to the planned spinoff of our Homes and Transportation Systems businesses, as well as recent tax legislation, except where otherwise noted. This morning, we will review our financial results for the second quarter of 2018, share our guidance for the third quarter, and provide an update to our 2018 outlook. And, as always, we'll leave time for your questions at the end.
So, with that, I will turn the call over to Chairman and CEO, Darius Adamczyk.
Thank you, Mark, and good morning, everyone. Honeywell delivered another outstanding quarter with earnings per share of $2.12, up 18% year-over-year, exceeding the high end of our guidance range. Using our effective tax rate guidance for the quarter of 24%, earnings per share was $2.06, or $0.03 above the high end of our guidance range. Tom will take you through these details momentarily.
Our earnings this quarter were driven by organic sales growth of 6% and sales growth was strong across the portfolio, with double digit growth in the Aerospace Defense business and the SPS Warehouse Automation business. We expect the sales momentum to continue throughout the second half of the year, as our long-cycle orders were up 11% and our long-cycle backlog was up 14%, with noteworthy backlog strength in Intelligrated, Defense, Business Aviation, EOP, and HPS Services. I will touch on our revised full-year guidance in a minute.
We expanded segment margin by 60 basis points, which also exceeded our guide. Strong operational performance drove our exceptional margin result and we benefited from higher volumes, continued investments in commercial excellence, and material productivity. We achieved these results while investing in our future, particularly in connected enterprises, research and development, and in our global sales force. So far, we've also overcome the impacts of inflation. Greg will cover that in more detail later in the call.
Free cash flow was again a highlight this quarter at