HON - Earnings call transcript Q2 2018 | Honeywell International Inc.

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Operator

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.

Mark Macaluso

Thanks, Kathy. to Quarter welcome Call. Earnings and morning, Honeywell's XXXX Second Conference Good Szlosek; of me Chairman and Vice Tom our today Chief Vice CEO, Officer, With are Senior and here Lewis. Finance, Corporate Greg Darius Adamczyk; Financial and President President including This are available www.honeywell.com/investor. non-GAAP on call any reconciliations, website our and at webcast, we contain Note of of and the presentation that see today. based forward-looking as them that elements of on are world our statements this our view businesses best in them light. we ask that elements Those change, interpret can and you that identify report and that our filings. We risks our affect uncertainties the and on principal performance in other annual XX-K Form SEC

our For of this impacts references earnings Homes businesses Systems our update morning, quarter exclude to as from conversion provide the flow cash end. per share, noted. an related call, This and free at of where recent Transportation leave cash flow, except always, the rate XXXX well tax to time legislation for share we'll we'll effective third our as XXXX, separation second your spinoff tax otherwise results for the questions planned to and costs And outlook. guidance review free the for as the and our quarter financial

over that, to So the and turn I Adamczyk. with CEO, Darius will Chairman call

Darius Adamczyk

through guidance of of you will share morning, guidance the high quarter Honeywell of end effective outstanding exceeding range. $X.XX was above these our range. you, share Mark, Thank Using and guidance Tom $X.XX good the earnings our rate of momentarily. XX%, year-over-year, tax high everyone. for of the per delivered end earnings take another or $X.XX, XX% our details quarter up per

automation double-digit The strong portfolio sales quarter across this earnings warehouse Aerospace and business. X%. by with organic the growth was of in business SPS were defense sales the the Our growth growth driven

in backlog our which up the revised a segment orders our with development full services. year expanded year our margin will mature in Strong our exceptional HPS commercial We our noteworthy backlog in investing momentum in second UOP sales achieved particularly aviation, up higher excellence these basis was long-cycle from of defense, volumes, our and by throughout XX% we to guide. global business guidance XX% and research investments Intelligrated, were the and continue We XX strength as I continued half force. long-cycle on operational expect in also results productivity. our and sales and performance and exceeded minute. touch margin points, in connected benefited result, We drove enterprises, while future, the

the impacts quarter separation excluding detail billion, flow cover we've a the this capital about inflation. far, the costs. years. continues also tool again highlight in continuous call. in in highest conversion will at quarter results. the Conversion of second had This that we've Greg more up XX% trends $X.X XXX%, cash as overcome saw set So X to later HOS our this first in we quarter was Free quarter was the year-over-year, improving Gold working deliver

our $X.XX a are than well We first $X.X new basis guidance cash in in half, $X Day plan through our a to new we XX perspective. be up to points, continued expansion to $X.XX marketplace shares more full about the guidance back to capital, free $X.X tracking and take $X.XX of repurchased X%, X% total, to repatriated our the guidance segment flow range nearly XX Honeywell margin to Honeywell to the advantage opportunities we year our billion to second in the XX% which range we growth billion sales In repurchasing organic we to Compared XX% These up our the or our million Finally, reflect aggressive as shares. a deploy quarter of in to EPS billion. the into to XXXX and at XXXX. $X.X high of outperforming our in repatriation at now about confidence to capital to year aggressively February, of our also prior the remainder in Today, to second raising higher changes billion company's deployment range, of $X.XX from the Investor in both being year. against U.S. at quarter. reviewed $XXX brought EPS cash our we to guidance full cash end. continue $X.X ability continue We're performance end for low the billion is and more the higher contemplated

as sheet capacity executing our are cash I'm the have in end and encouraged deploy. same the to performance, Our well, half. and We're performance expect and second markets date more we to still evidenced margin our by of balance strong. significant by

of when Burj to and FalconConnect that spend high-speed Slide Honeywell's it next a we for passengers. innovation recent respondents In of comes million includes about per -- maximize advances study jets, high-speed connectivity positioned technologies million turn to services control is costs. a all X to the service, flying $XX Khalifa, that In WiFi beginning and GoDirect solution and to highlight years. in FalconConnect connectivity. Home is fast-growing well some X investment over businesses. the connected on the The than tallest cabin operators spend technology Dassault of making launched FalconConnect, piling of which XX% outcome-based connectivity at continue infrastructure structure, month, services Technologies, connectivity the Honeywell expect released classic owner is Falcons. available world's space. building win comprehensive news a wave of standard possible aircraft, the half Internet, to Building about aviation performance exciting service of and Falcon routers, $X and is Let's Honeywell more forefront ground which found to commercial Aviation a Dassault the Honeywell make as the cockpit designed control the both building the by on aircraft Honeywell and links, wide and comprehensive at GoDirect where expect and next a connected efficiency, in study this currently range for X-year are are our aircraft, and improve to safety value-added they order to fueled to to efficient is uses of the in-flight powered improve provider security data maintenance in-flight Aerospace, crews facilitate as connectivity. the use, aircraft by ground systems. per of building over is integrity in to designed data needed operational the year in the and It the management operators, and of designed services maximize most to to connected industry uptime communications the of minimize preferred found activities respondents focus Last up

and So in longevity Dubai. the need the expectations, encompassed a hours on In from property. DCS Experion years that rip of LCN Honeywell brings The total the DCS or Honeywell place suppliers the unique for announced exceeded maintenance migrations. and lower enables Honeywell San in and Experion has event infinite and Performance in of met Group, in in maintenance, maintenance base together more countries their month. XX comments their the pilot, ExxonMobil were significant Antonio LCN mechanical their resulted eliminates last to innovations operators unplanned in which by industry discuss HVAC system, XX% preserving systems automation HUG, customers, and indicated their space. participants far, systems components building at Technologies, Materials landmark channel DCS software latest reactive helping reduction the this which offering. reduction for partners, development the of other our Burj of made migrate a cost and Khalifa's that costly facility installed challenge and the process to the X took replace approach legacy Conference Process than ahead X,XXX Users ExxonMobil their this gave cost-effective the schedule intellectual customers' A Honeywell The technology and Solutions'

Honeywell million of the the Canada. in opens installation shipping includes doorsteps fulfillment The pick, new time. for precision maintaining slide Finally, conveyor, center high-speed it sorter, of speeds on and complement ship shoe Calgary. fragile material IntelliSort an linear design, to this and the in than throughout foot and than they pack arrive system a while Intelligrated workers sorter equipment distribution north of and system Intelligrated on routing meters customer's efficiently achieves any helps meters handling cross-belt Productivity facility X,XXX an Solutions, which Safety highest handle items orders will stretches later bigger network piece more the IntelliSort Amazon XXX in Once This length. facility square X.X the larger of even of the so equipment even support provided year, Amazon's centers more and that

a I'd our they results industries the base transforming are our our the the advantage competitive we leveraging markets Tom, in more turn like help to offerings which in to connected gain to second that, With detail. installed quarter discuss participate, who over will Our call in large customers serve.

Thomas Szlosek

Well, thank morning. you, Good Darius.

Let X. me begin Slide on

sales that Organic the we As organically organic in serve first was portfolio the and and financial across organization. every more leading of about we've in compared increased of positions markets volumes. growing strong sales quarter is primarily difference or delivered impact and coming quarter weaker and in the our reported X% X/X growth the XXXX. XX% and another growth about from half was the organic the we and Darius new our in sales reflects market made organic with continued mentioned, metric. in are our widespread, investments to dollar between of The strong, products our growth U.S. portfolio the The

XX million Earnings margin $X.XX was shortly. and in the operational share in versus quarter due the by This Aerospace For strong of XX%, second of to costs of through points end in about profit up from example, our sales per the $XXX up by basis of PMT. segment higher volumes, the Free about $X.XX, to XXXX. second performance, in quarter flow driven the quarter. benefits quarter, separation $X.XX by of the excludes and expanded cash the up euro commercial particularly and high in the XX% productivity. spin-related exceeded details material XX%, of primarily guidance walk EPS averaged range billion, $X.XX. the excellence 'XX We'll XX.X%, $X.X in and Segment

the this additional mentioned, to discovered Darius that our encouraged be As opportunities we've and on through initiatives by by effort. working continue progress capital the we

continue outstanding opportunistically about share our shares. our deploy to in is the immediate growth After repurchases $X.X We to the shares, Honeywell repurchased a paying about M&A. and capital we'll billion. $XXX capital continue to investments opportunities, to But quarter, repurchase of million dividend, of to and competitive absence deploy bringing year-to-date in preference

have and realized items were the from share repurchase efforts, we board. restructuring this higher HOS previously per will higher Slide driven lower Overall, through in funded and Greg by a the to improvements impacts the second offset income, the and projects. a by weighted EPS. for commercial with last rate due noncontrolling new across $X.XX a quarter, $X.XX the majority strong plan segment other walks quarter in share the and partially EPS. projects. line excellence the performance planned of and productivity realized rate, tailwind XXXX. XXXX successful further of pension company, anticipate our primarily savings growth, rate by As had second to improvement, This $X.XX earnings of executed actions this average investment our the discount attributable high-return At XX% a to been share by this Gold actual several XXX end million performance headwind range than $X.XX. The at rate. sales tax year, from of due second for above including $X.XX, volumes came a to which per Below the in guidance to upside from from have interest, repurchases in share compared million activity tailwind EPS XX% in quarter versus about $X.XX resulted repositioning restructuring funding the share across tax guided enhanced in you lower $X.XX, high to to slightly $XX XX.X% resulted tax half. quarter, continuing our guided earnings a tax would were resolution was share rate lower tax rate Combined guided primarily count second higher planned We our We our the would that quarter. higher The X earnings or projects profit of with impact the the of was quarter quarter the shares. audits. in the shortly, of strong XX.X% driven the The XX% the earnings from repurchase the lower

this actual second tax So XX% slightly year-over-year still than of for And basis despite higher rate increase was of per we the XX.X% a tax XX.X%. then, XXXX earnings in rate the on share. the an for quarter achieved headwind,

expect rate original for that for similar is to to pro forward, guidance. of range year to our Going the rate, resulting be the the tax we an estimated quarter forma second rate remainder our the in tax still full of year XX% in the XX%

items Our fourth of are date guidance $XXX to Other the were X second the incurred various $XXX of line which potential entities million $X.XX charge associated to in a benefit recorded or EPS. U.S. tax were the EPS we Separation tax legislation cost, legislation quarter with to composed costs million separation ownership in adjustments excludes in our separation we as of $X.XX well incurred with quarter, as any tax legal relating for quarter adjustments XXXX restructuring the the cost the fourth spinoffs. spinoffs. expectations. In U.S. the to of preparation to costs in the the charge of

So netting X the range items resulted to change in a per reported $X.XX in share $X.XX. out,

turn Slide to Let's X.

XXX sensors creates Regional Department strong in well supply organic that basis. shipment robust Despite HTF and our driven transport Transport commercial key demand on performing were robust and organically, the extremely are the demand platforms, at up narrow-body demand systems programs, in sales X% Air as level And volumes growth X% on business including organic And aftermarket you of We program in incentives, key programs, were service had challenge and up is business demand know, for growth the lower the levels. spares aviation; X%. sales engine on chain, including record volumes by demand. guidance aviation space F-XX. in and in by robust hours U.S. an OE, deliveries in were higher of and X% for in customers this flight activity airlines business of Aerospace Aerospace Defense Aerospace Organic was backlogs Our OEM added on defense driven up which to AXXX; and the customer organic with quarter. major X of point the total an our XX% in environment. the growth strong and maintenance air

continued Technologies, sales in in building first all addition, America XX%. In was organic expanded new fire ADI. the quarter, business commercial in Connected up business, launches; as for North In China. growth organically Tridium China, and as well by Systems, to higher primarily driven South offerings on sales vehicle aircraft was and growth by Europe. sales double-digit our vehicle; driven turbo grown than point by sales lower were volumes headwind America Building and incentives. regions profit X%, driven the and Aerospace basis flat demand in have quarter. connected organic segment passenger from residential was Home GoDirect margin across In cabin for thermal in and more quarter, commercial Europe buildings, North In excellence a Homes solutions customer business. software. Europe strong year-over-year. from X% XX continued and our were was The in software our XX% points, year-over-year sales demand turbos America grew currency, Buildings platform. foreign North and Korea In and Similar Transportation year-to-date, higher up gas the growth thermostat management X% a strong there for volumes, Systems driven demand And our grew in basis segment commercial Transportation by in XX stemming

in organic was India. In robust double-digit in the with quarter, Building growth addition, within Solutions high-growth sales in the activity primarily regions

buildings revenue business growth the overall bookings basis, conversion UOP. largely energy growth and by in volumes. restructuring X% by business. in an conversion points, growth Fluorine the X% the being sales X% backlog solstice driven However, HBT Technologies, engineering low was Solutions funded to clients executed from The driven vertical units in up for UOP by project continued and the in in previously growth, In growth pointing continued organic to UOP Building in in catalyst the organically, tempered sales were steady in solid up significant and and Sales in global refining the excellence, Products. Solutions. organically, the by America latter basis UOP. in driven reloads. growth and were XX slower segment due automation modular North and to backlog service sales within and Performance expanded were organic benefits and commercial driven sales higher the rest up China was there on up Advanced offset solution X% Process the Process Solutions margins sales catalyst second gas processing the and half. warming growth in products lower of new Materials, In by from and gas equipment hydrogen was partly quarter, Materials

versus weighting volumes offset commercial points, expanded higher offset by and a project again offerings, shutdown from However, and demand and specialty margins Organic a and XX benefits segment the in in of executed winning products, Productivity plant coupled We with in this product product PMT by sales the and and more launches was products. strength very is X%, Android restructuring productivity Android-based gas In traction orders to had our were competition lower and in protection partly printing growth excellence, new with high-risk marketplace. been up projects by There safety gaining categories. previewing mobility temporary the business The another strong funded robust organic previously activity that driven than continued XX% gas growth businesses. inflation was by on in with Solutions, temporary volumes, strong was scanning basis Safety and the XX%, growth backlog. unplanned lower higher-margin processing within adding the area. this strong, basis. quarter driven we've customers in Intelligrated already the double-digit in growth with and quarter e-commerce sales applications. an are up an new catalyst for Intelligrated's in

shareowner, I more But outlook previously Additionally, benefits announced each the that grew over we to executed taking when performance extremely together finance the sales excel of and August him XX%. excellence has and confidence going I to India XXXX. basis and X. expansion X since businesses cover generated of that the helm. he enabled required I acuity, the our rest volumes, as my margin the higher April for pleased CFO SPS reinforced months the Working Greg effective at sleep and with Greg only Honeywell every the restructuring. in with and he acumen, points, joined expressed before than quarter. he's does, in SPS have I determination We're you from well China CFO XXX and this Honeywell. commercial by SPS I'm of funded as is I transition third will Honeywell year. can with a quarter assure to the Greg the Greg confidence. in and reaffirm day now for has worked business commitment of last the on he want impressive

you, So Greg. over to

Greg Lewis

you the Tom. Thank I much, very confidence. appreciate

items a start Slide backdrop by to like to X, on move and Let's to spins. look, the I'd tariffs as two our forward discussing and important

additional $XX of the the first currently tariffs. goods well from are XXX evaluated the as addressed and Section and $XXX offsets affected of by XXX the proactively the direct targeted billion XXX of assessing tariffs. list impacts retaliatory both with start tariffs. and We've Let's indirect the potential billion Section We're managing the as and

a actions business, number to the in of the the notably working top in tariffs in by that offsets evidenced ensure our situation results processes our teams our very But and excellence accelerate focus. further to to have Based the date this XXXX. commercial business established morning's We of and substantial day, most a on a the stay minimal proactively on procurement, dynamic we're at inflation giving as overall and the We've set our businesses headlines, and is seen portfolio, and robust a marketing corporate changes metals. to this impact areas minimize are the And situation. mitigation and to transportation within our in we anticipate each it in P&L. level enacted we by logistics of impact on across of

rigorously what known our as cost adjusting addressing are chain accomplished the our far. and encouraged increases supply For items, our by to necessary. we monitory I'm pricing so teams and have

tariff of we're Now for sources bringing evaluating potentially XXXX, longer-term on more impacts, where for structural solutions supply, new needed. including

Transportation have the let's leader strengthen Earlier saw of called this on building and we're progress discuss businesses and of pleased Both up Garrett. Systems, operationalized, leadership Olivier leadership for Chairman well-equipped our spinoffs, being to teams on making as such you Rabiller. Homes. appointment Carlos led X already track business Now record Systems an will are Cardoso great Board week, which an the each. a Transportation impressive global our progress of team with be to We're by the

SEC On Form for with and comment the through process letter both the the filed working external XXs we each. side for are the have spins, draft

completed are rating we have spin both saw, preparing on well, to the look businesses XXXX, the roadshows and track in In presentations we completions updating are you for short, forward performing dates as both and and debt clearer. for spins become agency of the as We and equity you for companies. both are

reminder year related charge quarterly our in earnings for a to guidance both adjustments the the just separation second half the full minor XXXX with and companies to tax to We larger had we'll EPS forward. those in you we costs as we the fourth charge both and and move the adjustment favorable spin These Lastly, of guidance year of tax favorable year, excludes provide a may related and that full any second in spins the updates includes our quarter for U.S. to be quarter. the adjustments reform. recorded

expand Overall, X, to to quarter the of our in to X%. are of XX drive XX% what saw per third quarter. by Slide approximately a expected with move basis We third to Segment strong and points, productivity, X% commercial organic anticipated to or material quarter to we our growth a sales tax expected of those increased growing let's similar third growth $X backlog second the margins order range and the Now driven we'll are quarter. to and share volumes, XX discuss for XX%. rates to excellence XX% of $X.XX in earnings rate outlook

for second strength from expect UOP, equipment, this aircraft continued will units in on in Moving volumes largely Building low-global those business cabin customer in Within China. expect Fluorine on In by Aerospace, expected demand specialty equipment life with composition with we the to catalyst demand demand, since continued in are defense strong by and thermostats before impact hardware significantly expect growth and launches service to increase In catalyst half. will the original shipments strong and the in fourth XXX, believe programs. ADI. higher Technologies, half number by and crisis. We before. on In airline activity DoD be dynamics and continue. will Europe On the sensors Dassault that driven the into inventories in Process strong Embraer backlog but technologies, third offset super and strength occur volumes and robust growth adoption but expect plan demand this the by the continued the in margin businesses. commercial in Within of good anticipate business, LXXX we the we've we aftermarket, ATR residential our Those not Materials, levels in thermal about Space, we LXXX in quarter, energy warming catalyst solstice fire products, growth. in the guidance double-digit Homes, in aviation. XXXX, aviation, transportation software business in I those expect short-cycle continued solutions half, connected our large businesses, from PMT A products rates GoDirect volume in and in Defense we continued strong we building services. we quarter. and the demand engineering Building of JetWave for maintenance orders growth Products Solutions demand the by in In Advanced down driven U.S. conversion driven and continued shipment driven & margins continued demand Home of businesses strength midsized new Materials our Boeing U.S. the driven and quarter, declines products. commercial abroad in sales on and and expect and services certifications of our by growth In jet will anticipating hours have systems, quarter. spares growth we anticipate and connected systems projects gas demand new business and be continued backlog solutions lowest flight Used expect and do their and Based in platforms for the jet we better and for are healthy driven right quarter-to-quarter Solutions, across new the from first expect aircraft, FXX are Performance the by we and of talked unusual another them In at international platform in turbo financial and we expect each the the short-cycle In third cycle Technologies, timing we and platforms. in first the in aircraft. business and positions

safety, mobility continued we our to growth In half project awarded new we strong of product each continue in backlog India gain industrial safety continued strong on another growth approach holiday of quarter. quarter driven In Intelligrated, outperformance Finally, to the categories are have season. second productivity the launches in expect growth. all orders a momentum as by marketplace, Solutions, and building in China and growth expect expect we XXXX. and double-digit retail and Safety anticipated in the that first in in Productivity products, we

Now X to year guidance. full discuss our Slide moving to

our in reflect share full performance As second second margin, quarter raised our confidence strong earnings cash and sales, free of segment the year per we've outlook for to Darius guidance half our XXXX. and the mentioned, in flow

billion known XX range other incorporates range, to the XXX%, to organic second plans now half. tariffs impacts, points, of flow a which any, monitor billion, income to guidance of expected business, from minor the enacted. potential strong revised Our in cash end of sales year our the reflects currently a sales XXXX. the guidance continue and increased Full better that yet if to impacts announced address tariffs. XX the net you've high our in second to in strong the We significantly from to are not to but in as by to half higher confidence strong working quarter. across seen basis range free volumes the performance guidance our This improvement we the first been XX% margin driven X% the implies We'll of driven and commercial new new and posted $X.X capital $X.X XX% conversion our on prior and robust our up cycle along regions, by This growth in penetration backlogs. emphasis is favorable narrowed our rates with high-growth markets, X%. organic to We've long continued like at order conditions the end initiatives be have segment excellence

between tax estimates continue the year rate be XX%. Our for full to XX% effective and

in of to our year also to This $X.XX new full We represents XX% and $X.XX mentioned. as end, the the $X.XX guidance $X.XX low on earnings XX%. EPS of end by high raised have range growth Darius

previous X% low the remainder basis of We a end XXXX. to to On sales XX end basis improvement. XX which shares, count margin X% estimate to first versus weighted and billion guidance driven level, an to X% XXX within to will of our In the and in to this by the X to share segment aviation Our by to half points our EPS the the million for the and repurchases robust of recovery we range includes organic revised demand growth previous organic business repurchases now half planned points the X% low expect $X.XX our X% year guidance the market the a Building be $X.X reflects X%, business. raised of second sales by our defense the of XX Technologies, Aerospace point of in we benefit the the of in share guidance anticipate guide. guidance and of continued versus Home average provide

and Our organic changed. not Performance outlook Technologies margin and has Materials growth for

headwinds we us. Productivity Solutions to business X% second an range year. guidance translation sales to outstanding new Safety versus the foreign have the of and second Safety Solutions, increased have we for of and of half the productivity X% basis to and in delivering growth to within up to reported XX the margin our and Android-based segment the for to XX.X% reflect organic investments XXX X% guidance range had However, and currency the are and XX.X%, our Productivity Intelligrated in outlook In updated to the the increased product X% our quarter, previous expectations products a points year. new launches sales

revised that Our second confidence the reflects of in outlook half will year. the deliver increased SPS to continue

growth, sales make expansion, quarter let's XX% So XX and X% wrap performance, industrial on to with we points cash flow of continue On growth in XX% outstanding basis financial significant top in the performance a becoming second margin progress Slide operational software organic our free up leader. growth. earnings delivered of Honeywell XX.

base. large are solve Our offerings installed customers challenges critical helping our across connected our

expect We half. year continue in we half seen within momentum the first of the the the to second have

continues Our orders grow. and strong, remain to rates our backlog

spin and businesses. will Homes our Systems off Transportation we Soon,

the sharing And that, as progress year great continued We progresses. stand to made strong both alone have to as Q&A. our companies. independently with for prepare on Mark traded We let's more you performance look forward move publicly to to with

Mark Macaluso

Tom available Greg. Greg and answer now your questions. are to Thanks, Darius,

please for line Q&A. the Kathy, open So

Operator

Instructions]. [Operator

question coming Ritchie Goldman is Joe first from of Sachs. Our

Joseph Ritchie

great welcome nothing the years. Greg, five in last best but with been the retirement. you Wishing And it's the Tom, working call. to

Thomas Szlosek

Thanks, Joe.

Greg Lewis

Joe. you, Thank

Joseph Ritchie

organic growth Maybe just Obviously, starting been the last has off. really good quarters. four

taking to see that You're organic guidance double digits continuing the as interesting for up the long-cycle backlog well. to year. grow growth It's

businesses Darius, are maybe, on today? just do going just based much performing touch XXXX visibility on already your into long-cycle how have So how on you good --

Darius Adamczyk

mean, very in based the double-digit more more kicking tremendous. growth, PMT pipeline. actually -- kind our much that the that obviously, as the you activity backlog of confidence second on orders I XX-XX before, about I'm Well, that of in on we gaining in day We're kind think backlog significantly bullish is growth the because half talked double-digit segment about of also by split growth

current we've question go, in XXXX, for look no although year I strong So based to nicely forward up the focused a on on obviously, I'm still XXXX, that quarters to -- we're there's couple as got activity. on XXXX seeing, another but what are we're based things shaping

Joseph Ritchie

you guys Yes, interesting it. to it's out today. seems And call like see Amazon it

mentioned. helpful. I the least, you're their I heard project be curious, to had time, at deepen starting think would around there color and just that like, was that that in I'm relationship any just name whether your maybe specific Canada first

Darius Adamczyk

some We're We've supplier Amazon great ways, customer. a customer. a a been had we're in has partnership. and long-term -- a

So the fastest, throughput. before. both automation That's sweet none, acquisitions the directions. and turn to be this respected. talked they offerings I've spot -- part growing around very being The e-commerce. That, growth feel our that. it probably that hit of the are that about warehouse calls, well reflected number to speed, goes of is of in I And strongly and continue a that's is seeing extraordinary done, about high will kind said rates. as in second in solutions and we're best to out in the high we've that that's a ever I before that's the of the Intelligrated And Intelligrated truly solution

Joseph Ritchie

benefits been to sneak it. for see Got talking the flow really, you more it. now about Look, a years guys in cash couple of Maybe really have this if I and in. could one starting improvement we're

any the there guys helped benefits that flow on free whether your curious guidance this of that year the the how you about onetime are you conversion were thinking flow quarter kind you've for on cash that now raised and side? Just cash

Darius Adamczyk

really we've inventory, capital, No, on -- receivables, terms, the the on company and I really had those is question, to highlight coming you that's focus on that of of a kind working I'm kind being me, things of the are that because mean, reflected. real think within asked glad I all together our quarter. Joe, that executing on

A cash turn we're came intensity. QX it it's are story. lot to investments less flow, getting paying that of working We're off, momentum -- expect and a And that paying capital made capital the really better. we driving all and less nice really, in together kind here Our getting of we've are continue.

And So we our feel a through good continue about more tailwinds to not add in help working and tools what see lot Gold teams come really We'll the We've got gratifying we're drive more done. to to of of HOS it's so... that capital, we're numbers. us ahead to doing.

Greg Lewis

Yes. about a each versus X/XX could of been This that. has sequentially but seeing story. Maybe is by momentum the the recent improved We've most that each definitely a I number X-quarter just add improvement to year ago quarter a better. on going X been shift you're turn in a a that get we've of to so turn continues of have with the mean, X/XX I business. got quarters, around that efforts

Operator

question will Scott of next Our Melius Davis Research. from come

Scott Davis

a share Tom, commentary. pleasure. a similar I'll it's been

Greg, big credit run well. and lot footsteps the Anderson. you'll great of of great a as a a I'm for deserve following Mr. had And You've do sure

So a it's pleasure. been

Thomas Szlosek

Thanks, Scott.

Greg Lewis

Thank you.

Scott Davis

cash always but business the on with is. to folks the a a you money? now. good they spending investing pretty There's what the business Why years, should Do of good one to or kind they couple struggled I guys more flowing mean, pick heavily? from have side It's a what not figure that? been building sense it just owners do of But out business. I in you you well aren't building is a be much that not right think to keeps

Darius Adamczyk

I But it's to talked when the Khalifa, bit as solutions, we tells Burj the about little owner we our some our the you in an is something. a of a of mean, -- kind building like better value you anywhere buildings. think, prestigious communicating building examples, the building world of as as Yes. sees I -- of of in do win have connected probably secure frankly, even job in is our building the there a which the not that and value connected

in side. the electronic there is I here us. had So some headway more QX, that on also issues operational for think we Frankly,

maybe and better aircraft, have we have say could Connected been through situation print solutions something Buildings. that should so evolution commercial-ready overall, of all that actually good this lot that And connected other we whether steps of different it's feel in our little pretty QX backlog on. I'd the offerings a bit actually of than in connected I QX. the have. But have. a our of the else about that We're are plays, of in We're kind a and So itself connected buildings buildings, think was. we plant connected it offerings than correct working we in more lot the

record we're a So we've do [indiscernible] process confidence, confident in to HBT. in and very HBT great And installed a new of track deal solutions. has with leader tremendous the in same going he's

Scott Davis

Okay.

connectivity, but really of The So do potential is I know at big a you for are got measure follow-up, what think have can quick something this -- connected it a as revenues you is juncture? guys. you now? percentage it Just --

Darius Adamczyk

billion That's north clear. yes, total business, not the just purely to of software that's -- about the revenues. $X.X it's Think connected be

Scott Davis

right? flow And strong that's understood. imagine probably, well free I Yes, as cash

Darius Adamczyk

Absolutely.

Operator

move now of We JPMorgan. to will Steve Tusa

Charles Tusa

your run. for all thanks help. also great on Tom, Greg. to Congrats a Congrats

Thomas Szlosek

Steve. Thank you,

Greg Lewis

Steve. Thanks,

Charles Tusa

And will happy think on you people think Darius, and be just shorten the I that. intro I can say Intelligrated with pretty and Amazon,

So advice just some just there. kidding around. Anyway,

that here. kind think into kind to care cash you business the that, most whatever with again So in faster I types earnings kind things the of year, I perhaps you've of Scott nitpicking expect of continue the made, progress XXXX mean, of mix earnings again, progress of to free the than can this doing, XXXX? grow would bit flow, ever took see On you the a grow and as with that these of little you're what well? may are

Darius Adamczyk

a -- and and I put back that that think which aggressive is we this growth together, those think capital if about things cash playbook, can all obviously, of cash rate, was every accelerating talked more conversion, we the out one right, about, doing. industrial margin of improved continued signs more making there, progress feel even factors year. conversion of and software things we're deploying be our all And -- came playbook in think to to transforming around organic say enhancement, you is 'XX clear way committed to being deployment, to of one XXXX. I be in mean, I be go We really point the When elements. to could XXs about us those those that I continue confident in bullish the Steve. you beyond. us I'll this the Day Investor all Absolutely, I and I

Charles Tusa

the $XXX And stock quarter. least at believe, bit of of close. little in then you M&A, for kind And guys, worth late to you million it's this year another a back I bought

potential. kind of if we the are you to here? that's seem be of you to think or consistent quarter decent that more we'll pretty bullish be would So run get acquisition Or it? left kind That here, look there a at amount kind on buyback of rate fair the kind when another of about way cash Is to this over the of less about phase? pipeline of annual

Darius Adamczyk

I have, an acquisition year. up closed on this by No, means, given getting no

We're looking a at of still we things. to shot a think number have I so. do

always capital in back I talked the of if been point the through bolt-ons, I and going which getting And way very mean, going they're end of right has $XXX. in okay, always of attractive we lot our far, gone a couple. done for QX or calculus But was can't far a here than form reason it or it a a we're them we're deploy go. up maybe as acquisition another, left acquisitions, been, deploy have even know then one decent at has rather giving I so about the which preference, never You buybacks. the to thought entry from but to

more than was I back happy shares. buy the to So

Charles Tusa

be much you this -- out, year? didn't back would deals buy to here if able from how on how you And know much

Darius Adamczyk

mean, in -- got of lot Well, balance so... -- got all not I'm lot we've cash planning of spending I it a but it's the a on we've sheet,

Thomas Szlosek

sense dollar And the better have about, not that's like gives $X with having single to to available more $X we're of full deployed And year. -- opportunity. it capital. at total I you beginning in free a cash that's talked But billion the spending a we'll year, every of that committed flow, think of just of healthy. We that. billion the capital for That's not

Darius Adamczyk

$X someplace think Yes, I'd I I stick $X that about and is to around billion mean, the mark to pay dividend the framework of Steve, to just of buybacks. the down debt, for X use that The with spins, I'm some committing to the to going billion still billion that have consistent, I something it, if which a provided, to I'm be in $X think you rest range.

already. of we of done a on I'm of to little And do I would then more. that, On might top that so. kind or bit what So do top need do keep half count I which that, to another share flat, is

bit be -- of little It's whether framework. have do kind if if a going less we a transaction. It a we not be it's more a fuzzy we that's upon or don't. do calculus And another gets a depending a the So little to bit bit rough might little transaction.

also, So the where points and we'll -- are. see entry

Charles Tusa

than cabbage. better clear. very any cabbage is more Having That's clear. not it's having No,

Operator

We'll Jeff Research. to Sprague Vertical of now go

Jeffrey Sprague

income your a I the noncash eye, just is Darius, naked your given And there come lot actually, here. back flow. want to is probably to again better to conversion than as you're well cash aware, right, it looks pension

So extraordinary. now no, of that it's kind yes, -- we're

do cash per something to your so EPS trying think where share on se, about do kind pension guidance a what in approaching flow maybe level And you kind that is we're of taking that. if great or of can line per of now you from that wanted on I it's here? and to in thoughts equation kind shape the not. hear know don't Obviously, of it financial your extract out just but value with

Darius Adamczyk

so Yes. that something it, gone. half thought Well, we We've half derisked yes, exposure of is mean, obviously, that's about. I of

is funded at pension XXX%, range. XXX% like Our

market back XX% kind if we'd funded. at major step you be of the in about reduction, fully of even a still terms So think some

well benefits having as does through. It do cash to there there we some but some is benefit are -- some So below-the-line hurt come conversion, income well. as

about did further be and completely this given risk from half wise, So we were, But we're I that. like see markets do that earlier at thought taking will off table the decisions the particularly here. thinking what made. were we'll we was least obviously, No year

Jeffrey Sprague

if bit then inclusive your can finer Or on And And second slippage? of being event? spin here just a both little think separately, about a is point commentary there event. a put can half can, we still just we an you a be QX Do Turbo timing?

Greg Lewis

slippage. no Yes,

according are plan. We to going

third talked in also Homes right think is very and well the our quarter I there behind the it. current we preparations end turbo, as thinking. of nothing throes much with coming different. the aligned the of so is that We're well, for about

about obviously, good SEC we out control. that that our And with pretty I the of things well. think one bit is the we process, can a hands, going but feel it's

Operator

Julian to move now Mitchell we Barclays. And of

Julian Mitchell

and Tom to welcome first question Thanks Aerospace. to Greg. Maybe just about

recovery thought it for macro? also, distance. was commercial keep in expect & over months next wondered And to a sustainable commercial Just given by I outgrowing there acceleration how aftermarket Space the or XX we the favorable long some guess, aftermarket, you Defense such should

Darius Adamczyk

of -- reach defense & are going continue a given but I it's they all the level, up. if GDP NATO Yes. in budgets. defense many of be not lot the clear On that going to seeing countries' the just And Defense know bullish also positive, they're we're them what certainly of the budgets U.S. to don't very that's Space, but X%

that bullish So that's -- to be that continue be to on -- segment. continues

business, a In One to the our longer-term part kind we're of is shifting think I things of aftermarket couple to of point that out. mix contracts. of terms of more

the a of bit QX. end So at this I discussed little

bit to we rather even much due did. probably versus mean, we focus -- the working going of of about three backlog. shape in in those bit little much, challenges past kind flight and we're be we So kind frankly, see hours. And have we're X, supply expect are Tier with -- in a supply well. avionics a the really alignment an complete kind X greater better a higher a of what than are the a better, much some mechanical even hearing on other still the we versus more that's end correlation the think of still the of seeing is flight players chain of a some strained situation things steady-state by consistent good I bit others, on lot which I of are to feel the is of very very from we hours. more with chains. kind But Tier We what to see and numbers little year. of have you're too these and as been And to through nevertheless, could Two aerospace

Thomas Szlosek

add I is double I that going I fine to to well the Yes. the backlog. be compete the rates you mean, tough saw but that it quarter, digits. with is the into on would in aftermarket, we're growth think defense up the the backlog and

is the future, that foreseeable for right to backlog So well. strong from very when now, nobody stop, does knows. that But work as really

So direction. both them you right have of in going the

Julian Mitchell

be to then second And question my Productivity. switching Safety and would

by very that. been a within obviously, lower in So large that good might projects, Intelligrated businesses carry like fueled that of margin. lot that productivity was a growth would assumption have My

of So at the the I'm intrigued, I guess, uplift by in extent margin SPS. guide the

you going give I guess, margins projects perhaps on have done any are seeing better much color, in And around uplift. maybe that you large might on margin So guidance what's that historically?

Darius Adamczyk

Well, couple comments. Yes. of a

Intelligrated. all -- this really really grew let's granted which margins thing, forget you, we're very consistent. say, quarter expansion, SPS But businesses, others. in number the substantial I nice that, it's it's better there throughout of a a products, other margin But seeing productivity not our think than had certainly, in if been is the a faster story growth, this quarter, a double-digit really let's look nice and Intelligrated

again. call It year, really story. that John going If tremendous about of of that us a and last a pleased kind I'm business on business you And I go was lot got that getting back team the to very earnings to back track. the see talked

another business SIoT Our strong had quarter.

it's the There the -- kind growth good limited in SPS Intelligrated. is business board. a in expansion just we're isn't really of seeing -- it's just a to It's that across margin quarter SPS. So not didn't have single

Greg Lewis

those remember other part if could part I businesses of a there add, the as And business lot if mean, model and Intelligrated so And that is that is example, the they're well. of the the over Intelligrated things just Yes. thesis HPS business self-help the you businesses integration to that we'll some projects of those some as business, we practice starting I And that have from benefits we is more an in of with had. of to as efficiently. run adopt coming projects

that's had the of we part efficient of laid was a as the what much out when to on itself So of help also, bought part able more expectation we it to be business Honeywell. basis run

Operator

come Our Dray from next of Deane question will markets. Capital RBC

Deane Dray

Tom to congrats my Greg. Add and

Thomas Szlosek

Thanks, Deane.

Greg Lewis

you. Thank

Deane Dray

is of much category potential you're risk taking orders up maybe be your it on overpromising, might of know of order But problem. surge. -- pricing is concerns that hear just XX%, high-quality I your when raises I the and whether underdelivering Intelligrated not kind you're too this seeing appropriate if under about

a know growth. but rapid through such problem, So of take that. I the what just it's of just high-quality us us through kind talk implications

Darius Adamczyk

because A that would Yes. would it's process margins of broader now, see willing business. are it's we that pretty Well, customers is self-help. just is I expanding, we to work. marketplace, leveraging of are so mean, to more We're versus continue are I a footprint technology for you pay When best a where way. going let's XXX, to the not in say lot complete becoming the technology with are. the are a clearly contracting. different I pricing XXX And you This the it's and expansion And this right much -- to available that to minute much boxes stay tell frankly, can a why global that. to this Intelligrated is couple due We're start efficient. questions.

We've to of In known surprising it's this of XX%, kind us. terms that's that growth, the that -- -- not coming. was

a We be bullish lot very continue growth. more to about

That's of as you should exceptional staffing been also here win kind execution. building well. So capability And up We're it. preparing half at capacity, to in in as leader a expect is also the we've growth toolkit of we the Solutions the who now out do. continue to a And were quickly. lot using guys Intelligrated we're was done execute project leader somebody the Honeywell in and Intelligrated we often We're as the very, for Gold is a frankly, that team because double-digit orders and HOS things HPS. Process of lot leveraging why very second of

things our coming are backlog that those all and be on very I kind ability feel together, able So process to of successfully. bullish to

Deane Dray

on Good structure? of fall have -- to legal been it might line might for hear. your that separation your the We through? and/or of talked cost on And be maybe some opportunities but simplification And you're yet before. at of and question what that your the all, come reform on any entities, some some with it's Is and just simplification just beginning Tom Greg. -- structure tax tax spins the is you about work the can't savings sight a through. might the separate idea tell to there that of tax in Is doing

Greg Lewis

a great That's great. Yes, question.

working in are role through some clarity. of that We the creating spins And real play to, you as you alluded imagine. time, can a as that do

So of a I legislation. more we adapt half impact some as what for the that But working that exactly the we the have be be. on But are to forward those to more in the to specifics a view on second that we'll will go will alluded what better year, outlook, And as as speak. certain, impacts we think exactly have spins, and get closer does we about to structure able in will tax you much the clearer, we give we'll as be. simplified as new become that

Operator

The Andrew America. Bank of Obin next of come question will from

Andrew Obin

second growth a and investors you're the slowdown your seeing take of describe Could reconcile world organic We're just key I'm around accelerated questions seeing with question. and this into Honeywell potential any Just getting on for in of half global geographies? you us trying what 'XX. anywhere? Are slowdown, a just from and to just lot you

Darius Adamczyk

slowdown. it XXs. No. the exactly was call it's strong. Currently, mean, that double-digit we kind was I be the last a slowdown. When our of example, strong. maybe LatAm see continues strong, speaking, for I of I a and growth relatively to I a yes think but wouldn't in say kind little India growth in double-digit figure. teens, year, mean, no. kind growth. China, Central all I was bit more of Europe

of overall, seeing we're not So slowdown. much a

situations with that right growth. on Aerospace, we Now order have growth, bullish of be you growth, some continuing in couple I'm all our now, the overall couple past backlog the due with our long-cycle you to

cycle based we're to now. on the every now, orders, course, right for Could change? that to be bullish short growth. we're there's based Of seeing continue but long reason So it right that what me seeing on seeing, on our cycle, not I'm

Andrew Obin

And on follow-up just a Aerospace.

part business, specific authority Or of there look this growth? defense at are some fair the the about just driving programs growth? is modernization it just thinking to are we're accelerated that As

Darius Adamczyk

yes, -- Aerospace you as because, defense is No. really it's in both I widespread. know, so really business mean, it's our

tanks, given And one any So whether it's it's financial international both for in tied all right those the really the us. program. arena. And the drive widespread it's not U.S. will outcomes aircraft, and to

seeing will business, as and -- grow, that. it's our the defense budgets so So we're

Andrew Obin

a high at for implies, like grow while. should modernization look it that But single you authority, if digits

business So should that? keep up the with

Darius Adamczyk

Yes. also mean, by in some the just so the Aerospace I especially we've and industrials expanded way, of capacity on. -- to in area

that. going got keep off. that's the taking was we place adjusted So already of knew frankly, And take lot transport that air to we've that a expansion to capacity We've to market with demand. up

believe they of they're energy with to supplies the the Now X make chain Tier -- X, along kind our to and supply ready Tier sure that on supply sure that pull can of we're trying to make new working chain with the a spent lot we normal. that for there's what keep been up, us is

Operator

come And our Steven final of Winoker question UBS. will from

Steven Winoker

role. Tom, congratulations for than this just more

run. been, our a It's ACS? it's been think what, years I at since long days XX

Thomas Szlosek

Yes.

You're an still, Steve. insider

Steven Winoker

Try Yes. Well, leave. to. quite never

now. broken to You that make all. these cash, quickly great see quarters me a on And record traction particularly sound like so the

So I the obviously, think in detail around tough know HPS here. the that's A has PMT One and nobody hard. materials. maybe into advanced of there, on particularly, some -- questions dynamics on I gone couple some of comps Q&A

have oil moving We steadily.

some potential acceleration you HPS can about UOP talk So of and and dynamics at what's maybe the for in the least?

Darius Adamczyk

long up that's absolute well performed Yes. tear a It's year. mid-single been of the digit very, an the mean, in I half for a very HPS on time for now. quarter. first business the It's second

more strong. are the the half We're rates year. order of in actually second even Our bullish

the is Smart know, Energy business, gaining acceleration, which As that and which you moved it of is part there, we management also team. contains now in that

So overall, between overall, very the convert for that bullish very our "log" HPS a And of to lot orders. strong HPS looks we performance. and UOP, and we're second kind to on continued of half, expect

we're in what I'm PMT. very with So pleased overall, seeing

Steven Winoker

growth? much And impact the over by so Darius, the these days of years. way, rate know implication margin moved Because the I what HPS is up of an you've

Darius Adamczyk

you that say Can again, Steve?

Steven Winoker

So just the more on and HPS of rest than segments. PMT margin growing in it's the terms quickly segment -- as of now impact

Darius Adamczyk

little materially. but overall with it dilutive margin line isn't is south, -- accretive it's in PMT bit Maybe It rates. or a

Steven Winoker

see Okay. in expansion margin subsegment? And still opportunity do that you

Darius Adamczyk

job is opportunity team really absolutely. the in do year, frankly, taken for to team that. think The as Energy. there business, For I on to half driving I already HPS a progress, sure. the a Yes, of an are has a last and the lot and projects had Especially, are -- well. much of Smart doing to the mean, It's business, is Energy further productivity more how and in Smart drive tremendous [indiscernible] both very HPS. seeing business they knows productivity areas second know, you And that they very, comfortable business, come.

in from terms in far margin of HPS. done they're So expansion

Greg Lewis

software terms of in say, Yes. nice absolutely I'd enterprises that our we connected a there mature, more so tailwind have of It's on one margins. offering

Steven Winoker

lot And other really into action really pricing offset things really just we're pricing just about helpful X, of a on How terms a are there on? inflation lastly that's Or lot Okay. from tariff other of playing a going Page companies. the hearing your of much this? comment. is But in

Greg Lewis

as doing purchases pricing of sourcing in from We're mix year. Yes. as earlier having changes a and well some both the we're benefiting locked some in

would of changes -- our sourcing versus a appropriate. say passing in this is But our actions. -- the this probably of And and through entire terms X/X in across we've we're by discussed, is fact, have we success I it's where day, so I had thing enterprise. far, pricing X/X, the on as weekly this So mitigations, going cadence

feet our as is grass growing So this is changing. not much under

Thomas Szlosek

Yes.

that, thing think being here then a the talk we probably think substantial to and get and you if early, of proactive. margin making ahead sit haven't important most key you about in add here us single it and literally that We're that we're I see contraction. sure because of could wait, to we to is This definitely activity And the weekly I focus. ahead Just lost have. we is for

a So still we're there's don't good of for. but unknowns doing job a we're here know we that managing, lot planning that

Greg Lewis

some we're China. And mean, where that's helpful from sourcing business to non-China are others to to sources in from where there's so I have lot are going the do a be us. benefiting going us local-for-local been helpful competitively places fact, of constructs, be fact Yes. from we that sourcing

there are as the be where also So it's advantageous a complex sourcing equation. There's it but some obviously could places to well. competitively challenges, us

we're balance. trying a So good to make

Darius Adamczyk

made, And we're part, most a just which not for kind that that the Greg point but just structure, is have highlight we of to hub-oriented. perfectly, regionally

supply kind we a base. of So sourcing, have chain local-for-local marketing engineering,

the we're lot we're operate global you impacted, I not tell prepared we're So of wouldn't more because we footprint our but and a how -- business.

Operator

today's And time, question-and-answer the conclude back I'd Darius this conference for closing to to Mr. this like At session. Adamczyk additional any remarks. does turn

Darius Adamczyk

shareowners the I year. the performance delivered and throughout have full rest of you. first continue Thank confidence in our the that second the strong will quarters we for

cash growing, Our positioned performance deliver, is productivity, we're evident we the made from is today. the the benefits order drive and and rates commercial connected well hope our growth, commitments realizing Honeywell flow. that are our quarter in to both strong, software and to I efforts excellence improve continue and second to are free backlogs you and continued to

wish organization a the take challenges Tom Tom finance I the end, the changes to to to the over Szlosek significant businesses contributions want company. his minute at have XX through four been and we gracefully on some all a for in has staff thank Tom. and him past for Congratulations best Tom navigated a past pretty the my Before It all career, has years. pleasure and and to company successful on the years the future. the

Thomas Szlosek

Thank you.

Darius Adamczyk

the wish Thank you. of rest of entire summer. you behalf team, I On a Honeywell pleasant the

Thomas Szlosek

Great.

Operator

wonderful conclude today's this you. a have This does time, disconnect Thank your day. and at Please teleconference. lines

Honeywell International (HON) 20 Jul 182018 Q2 Earnings call transcript