Honeywell has announced results for the fourth quarter and full year 2021 that met or exceeded the company's guidance despite an extremely challenging operating environment.
Honeywell reported a fourth-quarter year-over-year 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 chief executive officer 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."
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.