Earnings call transcript Q4 2022

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Operator

Thank you for standing by, and welcome to the Honeywell Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's call is being recorded.

I would now like to hand the call over to Sean Meakim, Vice President of Investor Relations. ahead. go Please,

Sean Meakim

Good XXXX Crystal. welcome Honeywell's to Thank and morning XXXX quarter earnings outlook fourth you, and conference call.

with Vice Financial General Counsel, On Darius Vimal Kapur; and call me Madden. Vice Chairman Officer, are the President, Senior and Chief Adamczyk; Operating Senior Greg President Officer, Chief Anne and and Lewis; President today CEO,

may our This be disclosing should at www.honeywell.com/investor. website call on available our of material or webcast, and interest means also of including website uses to are information, a any which non-GAAP reconciliations, as Honeywell our under webcasts investors calls, our and disclosure addition releases, with website for press to conference public and Relations complying social Regulation SEC obligations FD. following filings, our media. Accordingly, investors Investor in monitor

economic We you and may presentation performance business conditions, on are Report in in this on change world statements Note uncertainties and SEC many our see the as on affect the filings. of can including risks identify that that that our view of today. our other changing contain Annual based the that and and businesses them based factors, interpret XX-K principal them we Form of that forward-looking and we elements ask best Those elements light.

first our of This discuss full the year our XXXX fourth our sharing XXXX. morning, XXXX and year XXXX we the quarter review for financial for guidance and will full results quarter and outlook, including

at time questions for the leave we'll your always, end. As

CEO, Adamczyk. With that, call I'll Chairman the to Darius turn over and

Darius Adamczyk

you, and everyone. morning, Thank Sean, good

us differentiated deliver and inflation headwinds segment Honeywell's play. one, cash fourth on was margin, flow challenging and organic supply slide to commitments. disciplined solutions with sales, chain But on The constraints at Let's enable quarter two. execution and free earnings begin still another

building strength are the Organic of businesses. aviation, our in sales seeing the growth underlying end UOP markets, testament operations led wind-down of excluding long-cycle or impact we particularly in up by commercial advanced businesses, XX%, a products, materials to in double-digit were Russia, up the and year-over-year XX% across

backlog, and a The story which minutes. X% The and X% fourth quarter to positive in our record new see a Greg Technologies. year-over-year sequential for organic growth more to gives leading a $XX.X detail these in Aero Materials orders us strength up tailwinds sequentially which in growth confidence XXXX fourth our Performance two to X% continue of grew quarter. also in were X% the and a in Orders businesses due in and PMT, was another to outlook, few will Vimal strong Aerospace and and one about share billion, we’ll

Our segment and of our to stay margin solutions in actions. strategic basis expanded safety points ahead year-over-year, inflation productivity over points by curve improve. And expansion we basis volumes pricing the XXX as through continue led with XXX

year-over-year our the but billion the the Excluding XXX original year. guidance with expansion was the year-over-year cash in our impact XX% fourth basis margin Quantinuum, investment points. was for Free XXX% $X.X in in conversion, of with down adjusted line delivering quarter, flow

repurchases, share quarter Day. year March in repurchased billion, billion shares our our bringing including total billion goal $X in our of deployment Investor exceeding $X.X the fourth $X.X $X.X billion to of Capital from was full and

initial top despite approximately year results line share, billion the per delivered macroeconomic and XXXX, conditions. above high-end segment year-over-year shifting our full the constantly we headwinds For margin earnings and outstanding of for adjusted $X guidance in

and up with X% XX earnings organic year-over-year per of finished sales above of share, the end basis expansion X% year of our points top $X.XX the $X.XX and original We margin guide. adjusted growth,

highlighting billion. this all-time these year, We our in billion our against And as our of XX% guides. well a The through performance high $XX.X the guidance an Orders our on X% backlog progression the revenue. of of slide of up as appendix ended an year $X.X basis. generated XXXX organic reached presentation cash contains

deployment XXXX deployed in in of $XXX share closing $XXX high-return $X.X capital on total, million billion Digital to weighted repurchases, US to We billion in which count the expenditures addition was average $X.X share and X.X%. for the by million Capital lowered acquisition Designs. our

Finally, maintained growth billion paying policy, out dividend our we $X.X dividend for years. time in and the XXth our raising XX

framework, our we execute always, by on to our Accelerator underpinned As continue value-creation proven which system. operating is

and am I'm of to and value and the the to our seeing ability our end our confident strength backlog tailwinds, in execute drive proud challenging the I shareowner we're across of current environment. markets,

fourth Now the the quarter, discuss development an which let's X our important to to strength improved and further from company's for turn slide future.

announced In the of NARCO our $X.XXX court exchange elimination cash in payment the Trust, of to our obligations funding providing agreement final fourth the the our the trust. approval we buyout for quarter, with billion

buyout cash This the liability weighing the charge balance liabilities place in in We quarter, fourth of legacy been sheet January. company managing. since the been numbers one the outflow has recognized the on and our the XXXX, of carefully took from has

Partially sale from NARCO emerged offsetting will the entity bankruptcy, be Trust by Platinum the impact private the Equity. the buyout the from Harbison-Walker and announced the which International, is renamed that acquired reorganized equity of and firm, of that

represents cash development transaction million. financial our impact $XXX later We significant expect be reducing This in this free the by in to XXXX, a flow improvement completed strength. net approximately

charges eliminating further by funding Specifically, eliminates to our our related financial obligations, extinguishes on sheet uncertainty quarterly asbestos health. balance and it our NARCO company's simplifies any evergreen

slide turn to quarter to results detail discuss in our me on fourth let more over Vimal, X. Now

Vimal Kapur

Thank good you, morning, Darius, everyone. and

slide Let's to turn X.

challenging As we Darius a our financial operating continue mentioned, on environment. deliver to very despite commitments,

chain volume double-digit XX% third SBGs: and quarter PMT and four grew sales generated supply HPT, quarter, in Aero improvement our growth HPT despite constraints. in We continued Aero. fourth from organically of three with the In

and in orders X% HBT, in businesses but evidenced exception backlog. expected, organic as As seeing with we some remains of robust in and shorter-cycle our long-cycle growth the of demand across warehouse weakness X% are signs in SPS demand our pockets portfolio by automation growth of

our encouraged constraint volume sequential quarter year-over-year enable of nimble we basis Aero us of surgical Supply nearly solid improvement growth, on margin ahead investment another price/cost. as Alongside by point remains segment digits in in and double a as expanded a by Digital staying chain XX% organic our robust expansion output to approach make to are to but Honeywell XXX of overall in growth came XQ.

SPS in was detail discuss While experience more most we also a lone will quarter the history, year-over-year, to business decline generated profitable which in in shortly. revenue segment a the its

the of quarter Let's organically quarter This aviation, year-over-year minutes despite commercial business. commercial chain in Aerospace fourth performance state Sales marks quarter Aerospace. XX% up by consecutive past seventh growth which years. two us the fourth for of confidence for gives on double-digit second aviation. XX% organic spend were growth straight a aero by the supply the the few the and the sales over led

sequentially. remains XX% factor factory gating XX% year-over-year a chain and with output growth, Supply volume though to we a quarter up this a made progress further

Our past-due backlog an fourth in the quarter, more grew of was the inbound accelerated but orders. this by pace strength driven

hours shipments overhaul in where sales year-over-year. led activity. flight higher the set were highest to increased Commercial in and quarter deliveries OE, was aero ship growth XX% increased fourth repair as in Growth commercial and sales spare resulted up aftermarket XX%

on a XXXX. the year, strong, digit momentum rates volumes defense the quarter order year-on-year high for us basis remained fourth and digits up giving positive in quarter, be for single the While our continue lower in the for to mid-single

to sales in by deliver our contracted lower-margin and Technologies partially to products, XX.X% more margins our XXX efforts. fire growth to to building segment year-over-year. outstanding basis Building delivered use products. commercial backlog Aero higher building of sales OE another due and us Modest XX% with sequentially organic point resulting reduce organic improvement growth excellence offset in cost supply management systems, chain XX% enabled quarter products in

backlogs higher for we the with considerably XXXX. XXXX entered organically pre-COVID the in start higher unlocked. higher consecutive levels of the for However, project sales year than providing also organic runway year, We norms. due increased third with growth a Building supply not chains We quarter. than past double-digit have solid still levels the finished year sales fully solutions than our exited backlog with the project and

target enabled to environment HBT commercial nearly Our this to long-term progress segment margin expand substantial XX%. continued margins us XX.X%, reaching of our basis XXX in excellence point inflationary

in Performance PMT The as quarter materials continue despite value quarter XX% in quarter we capture grew fluorine quarter fourth organically XX% Materials the organically Russia. across products. from was X% robust headwind see and Technologies consecutive in Advanced to sales led fourth a demand materials the grew the advanced growth. and portfolio where

catalyst UOP processing and shipments, sales. Process UOP Technology grew saw as a Technology result demand. refining a also of quarter the in from gas in to XX% we loss year-over-year organically, led Sustainable overcoming X% double-digit strong growth increase was by sales Growth Solutions. returned ratio headwind in

life solutions, reducing In in quarter. weather strength in at once some grew by the digit and Process operational the organically the Solutions by services also of quarter, Fluorine caused output solution quarter, grew portfolio, late orders across led thermal plants, a again strength PMT our with products. underpinned in one projects. and fourth XXXX, freeze in challenges the double cycle

expectation, the automation of the decreased with and offset safety and by line Segment Safety margin by cost higher XX% and Solutions efforts. to Productivity basis in and lower commercial by points offset quarter driven XXX margins sales partially contracted sales inflation products, our excellence and organically sensing in volume solution in continued business in productivity our portion X% technology warehouse as of quarter, lower growth was in services. sensing

due to actions standout lower more business overall, some another our saw XXX solutions. XX.X%, and in cost of SPS declined margin headwinds. moderation this see conditions, inflation business leverage growth. we and from excellence, services While commercial than continues demand for mix, to Segment point of but in Intelligrated sales highest improved basis offsetting remain productivity volumes quarter with volume our a macroeconomic expansion ever to PSS was aftermarket differentiated our confident double-digit

and to by revenue year-over-year. growth Connected Connected than the by continues XX% in in had including quarter and We portfolio double-digit year-over-year Building Sparta growth, all Enterprise. results across business accretive our Growth supported more SaaS of in recurring Systems grew another over Cyber, quarter. be Honeywell XX%

For of XX% in count which XX% $X.XX, of the a per Honeywell. strong the XQ contributed Adjusted software this in of lower Segment operational guidance bridge be the A main indicator earnings full tax a of EPS for $X.XX. in range. improvement $X.XX for SC prior profit to rate a XX% fourth quarter effective appendix of and additional year-over-year grew Overall, reduced our the the year, XQ our power an adjusted to growth. grew the year-over-year added both per double improvement, XXXX digit, midpoint margin can A share of is result XXXX great by of driver an and adjusted found this share, from drove share earnings franchise. is above sales presentation.

$X.X at higher Moving through free our to but by guidance quarter, to full midpoint down the continued environment fourth we XX% billion. headwind quarter We from cash free the as to cash. in Cash supply-constrained receipt of flow generated the the billion of cash XXXX. year well work year-over-year $X.X continue delivering inventory be million challenged as receivables of in Garrett $XXX flow and as

quarter principles So XXXX. our operating overall, to Honeywell's through allowed manage as rigorous we close successfully another us challenging

Slide to about turn see expect across markets let's in talk broader environment X and end the Now XXXX. to we our macro where to

see to continuation XXXX, to our XXXX. also meet in faced markets. volume in from end key demand we to robust unlock progress ahead of ongoing several Looking we But many of our chain supply see order challenges our a in key we initiative in very of more the

aftermarket OEM a makes continue customers way demand, to our Commercial more be its contribution hours, standout of particularly flight terms Aerospace in as as wide-body meaningful a amongst on back to build normalization. both as well will rates

Alongside continue XXXX to XXXX. chain the we supply in profile, expect Aero of progress demand that strong in steady

potentially top XXXX, a double line growth Aero's compared we As to result, digits. achieving acceleration expect in low

for evidenced We as we energy across continued channels building green through by in building future of investment see particularly fuels. the continue production well sustainable solutions, current as both orders strength in technology sustainable solutions, both -- sustainable and tailwinds institutional including in and technologies supply

between to gradual levels. at we We supply drive volume more growth expect balance and with a line of see top improvement a chain, XXXX. moderation elevated in in to remain it but price Coupled raw should in for material inflation our a

of growth for the full the in year, growth order quarter including the and to Our sequential X% fourth third quarter for but decelerated remained Aero, compared in from X% territory, SPS. PMT positive

supply backlog record in consecutive positive X% except Aero billion Our and quarter. almost reflecting the reduced for to chain part remains fourth effort $XX of growing SPGs the our at mitigate levels, of We year-over-year in loosening all second shortages. quarter, backlog effects

of of a The half. near-term particularly and of customers will China's current is Year, macroeconomic the Zero short-cycle Chinese lot impact this some pause SPS though the our tailwind uncertainty potential uncertainty in New businesses how may giving COVID be amongst reversal XQ, a regarding and there's in the impact HBT, policy second

by to As discussed in XXXX, quarter is robust. to growth confidence manage We'll on from we execution, operational continues expectation you underlying pension is have with lower the our operational another non-cash look environment to through in our the headwind operating challenging profit income expect call, our EPS system underpinned a Honeywell third the segment our growth Accelerator. but Underpinning continued come called have rigor us.

Now turn it come discuss detail to as XXXX Greg financial to X let more me together our to move for we over dynamics guidance. how in these Slide

Greg Lewis

and Vimal, morning, Thanks, good everyone.

X% which the expect an $XX for shared, overall total Given the represents range to for X% sales to sales just XXXX, backdrop we growth Vimal year. $XX in organic of billion, billion of

needed inflation, in contributions volume impact to expect and the balance XXXX. more While where we'll offset we between pricing to the actions cost price continue of drive of

year, slower chains in year sequentially and headwinds the to the are first first throughout strongest the zero China the from will supply of potential in of year as believe last half we COVID Similar policies quarter. the improve reversal be

in encouraging in should remains growth further this aftermarket, sales. commercial and normalizes travel demand particularly aviation fuel air in expect we continued open In added borders and China wide-body the backdrop flight hour Aerospace, and very the commercial aftermarket in change defense provide international drive to In as transport The policy to dynamic. space. both growth,

OEMs deliveries margins. rate Honeywell, year-over-year, to translating to schedules driving commercial growth, the are for the leading set in revenue OE into On increase a corresponding side, also credits, a ship headwind upwards selection more but trending build among

in has return XXXX. gating In factor team book the Defense constraints, recent to our XXXX, commercial we're volume to encouraged demand, improves. XXXX in and strong convert resulting in expect output supply executed both defense growth into growth Space, in the we in plan the to Supply X% improvements chain to months, by order remain but defense as not sales and and our growth chain

but backlog sourcing X in than quarter, improved Aero XXXX levels suppliers. in for to The We our for the electronic skilled environment constrained among growth projections. shortages with supply past labor remains us more higher that Tier XX% components chain confidence and Aerospace entered components the X due year-over-year, giving over mechanical are

high single-digit the low For year to overall in Aero, growth organic double-digit be we range. for expect to the

top modest credits we increased our the only as strongest leverage margin OE by Aerospace expansion line While to XXXX, mix largely will likely volume offset in year-over-year be is grower in business. due expect unfavorable selection increased commercial

of private cognizant we're broader costs. economic financing Technologies, continue and non-res Building environment to be increased impacted by In in the investment expect to construction

result However, provides a that solid buffer throughout partially visibility XXXX, of of sales the slate built as XXXX. a environment for chain orders, strong we and supply

this as capitalize yet we coming most year robust that book-to-bill believe funds in we verticals businesses. investment a buoyed robust these management growth key as will and addition, supporting stimulus by sales on remain XXXX projects and see such systems have In that building not institutional government building the education, significant We deployed, been healthcare. airports from

also supply We incremental throughout normalizes, for our building spot services orders the chain the expect layering year demand in. increased as

overall remain growth overall. For our year early single-digit current the anticipate backlog HPT, organic in environment, low support to XXXX strong sales in cautious we the expecting for and us

our energy of long-term with we much efficiency. portfolio our sustainability as Technologies framework very Building in However, remain secular for confident trends of and aligned is

On in the exit momentum the segment margins, XXXX we expect carry expansion from full the rate, for year-over-year to year. strong resulting

year growth Services XXXX build Lifecycle PMT, by will and year. another throughout growth with upon of year enable Solutions Process sales convert into solutions. another conditions built the up an thermal macro sequentially led to in through Solutions we and In XXXX Backlog and set favorable impressive solid are

already as comps upside. improved UOP, the support to that In has a headwinds we sales potential provide will lap lost for Russian business

robust Our a Demand capacity new shipments will to should Process be continue LNG offset Russian year. in poised fourth catalyst our to tailwind, to also the the particularly quarter growth Technologies lost while business. is energy XXXX, business for remain returned and supply at grow to throughout for

demand comps, improvements. continue will to difficult products supply growth Materials, despite our Advanced Solstice chain thanks In and strong for

In reduction such app sustainable legislation, will Solstice, as offerings responsibility. increased benefit our other inflation addition and customer focus on to from environmental the

up XXXX. modestly a mid-single margins Sustainable digits XXXX. and PMT In Orders of dramatically end expand two Technology million accelerated continue have to expecting productivity the should Solutions be PMT by we of we're years, business more expect our the XXXX past continued $XXX sales same leverage of result in as we improved as actions. over total, and our volume pricing and sales target in for towards the

and Productivity our year impacted environment trough most this in business by to And demand XXXX. in the Turning with Safety near-term to before XXXX. capacity will warehouse growth business limit new will in opportunities to the investment the likely projects be in long-cycle decreased That continue Solutions. macroeconomic returning Intelligrated, and coming

However, services and And double-digit in should in will short-cycle softness XXXX. first sequential sales taper half destocking to we later solutions the 'XX, expect we growing distributor continue in demand off our and to expect see dynamic rates, year. been this productivity the the business that of aftermarket has at and impact improvement services, but and

safety business for In down strong a expect in SPS, finish 'XX year XXXX. will In continue after benefit another from improved From sales be a total, mix be we drive to growth margin improvements. the as to should year. to SPS sensing single mid our operational and continue high 'XX we sales digits standpoint, and technologies, to for solid

rates margin XXXX. a will be achievable for standard high the are new business high-teen necessarily believe not forward, While and was 'XX we the XQ moving watermark in

excellence our last to year, year, 'XX supported higher the by Similar we to and build productivity overall operational XX volumes, actions. our commercial next SPS XX continue margin benefit from points expand to as So to expand structure expect cost improved in in our that sales margins to and continued we efforts segment and on most, improvements we expect basis mix business.

up $X.XX earnings to year, to income. the despite headwind of $X.XX adjusted, an $X.XX, approximately share lower we flat For expect per X% pension from

range Excluding $X.XX to this adjusted. impact, our X% have would XX% up adjusted to $X.XX, been EPS

UOP a cash HWI of in billion, front, $X.X onetime $X.X $X.X we or XXXX to $X.X net billion the to excluding the On and impact billion flow billion billion expect $X.X free of matters. range NARCO,

and takes in I'll puts turn EPS cash for first, slide couple through walk the our a our minutes. and bridge But let's of to detail through in for greater flow 'XX XXXX. seven walk

As the you expected the is key tax, the will earnings profit of and repositioning, used range. which between is lower includes range our in approximately is for than negative be million, midpoint Net can difference see, of segment before at profit $XXX million to to $XXX million $XXX guidance in to $XXX of the driver million $XXX of 'XX, our which capacity be contributing income below-the-line million in impact, growth segment 'XX. we the $X.XX which

tax the we expect approximately effective of rate for an tax, year. For XX%

these interest excluding items, other by pension, offset up repositioning net be are $X.XX charges, midpoint primarily year-over-year driven expense. of and asbestos lower to expected higher inputs at the guidance, With by and line below partially the share per

share our for count weighted million minimum share, million reducing case in result count, in For a is from benefit program to will X% average the of approximately XXX share base $X.XX count that per approximately reduction share XXXX. our our XXXX XXX

decline a pension expect and a income this in we large increased OPEB communicated, previously the result environment. of year, rate we as interest As

down about and $XXX year, of expect to the from driving $XXX headwind we income, XXXX, approximately full pension about $X.XX For OPEB million million EPS.

'XX that position shareholders. needed. item no noncash of be of and pension-funded status will and ended returns, this status contributions overfunded in diligent result employees to over a a a pension our with for accounting However, strong We as great as incremental XXX%, are management ensure is a our

In $X.XX, per on in range an flat to up year-on-year to to share X% total, of earnings we expect the be 'XX adjusted basis. $X.XX

our However, the X% impact to $X.XX pension midpoint. excluding of would a guidance $X.XX, headwinds, be non-cash the at range of up

talk for X slide XXXX. of to let's drivers cash guidance Now turn our the about and free

progress XXXX story as cash expect a we've strong largest of and growth capital items. outlined Income normalizes. cash is to bridge, we flow performance the in chain be free driver As make by offset discrete working characterized free this year as operational the further our can few on the non-operational flow, supply

as legacy range cash the free the excluding are XXXX we billion cash for of matters spoken billion, XXXX of previously we free to Accounting $X.X $X.X the discussed expecting settlements, X% to between expect for flow we flow, range $X.X to up at year-over-year settlement the earlier, We midpoint $X.X billion about. in billion. had legal the

QX. discuss Now can slide to we let's turn guidance our X, for and

constrained, providing we potential closely highlighted are XXXX we chains wary record country its earlier, As COVID We're impacts the foundation the modest in Zero volumes. China and sequential with the quarter. entered anticipate monitoring of backlog, policy however, we improvement first QX of as changes a impacts. restrictions for solid remain eased in COVID Supply and reopens

demand as However, that second changes positive a policy a we be in robust these throughout year result the will and China. for progress anticipate in we net half will

at segments. the Looking

growth We we in and quarter expect the execute first demand in strong remains sales robust, backlog. our environment as on Aerospace the

full XQ will supply of we the subdued expectations growth the rate the constrained more anticipate than most be be However, year for our as will quarter.

followed modest growth increased we through heal. Technologies, see sales backlog continues our quarter by Building We and growth chain anticipate the of to in sales organic In first building supply as in projects, strongest fire. work the we sales the

PMT, another quarter growth expect In we in year-over-year XQ. of

plants will to with embedded by is downtime, that that though that some the our in growth with year-over-year advanced unplanned strong our we We're in led cause one guidance. sorry, disruption expecting, still growth. of experienced expect materials We be a though again laggard, PMT Process Solutions, once

decline will aftermarket growth and Productivity demand of the sensing our automation services Intelligrated and sensing offset in to part year-over-year warehouse a Safety in leading and In and safety technologies Solutions, softness sales. short-cycle business,

the high another expect strong in margin we teens. However, performance

the the in billion we of billion up X% to sales $X.X anticipate quarter, to X% So range first in organically. for overall Honeywell, $X.X

XX.X% is points and we our mix. XX.X%, in of margins range expect below business as in We the favorable diligent to to up $XX our between the to XX line continue to $XXX from million XX repositioning net be of million range and expense capacity year-over-year with remain provide efforts. expected benefit to of million fund $XXX transformational The impact basis to we a an million price/cost management between $XXX as

effective to to the be and the for rate expect be the count XX% XXX average million We tax to approximately share in of quarter range XX% shares.

As a result, income. we or the year-over-year excluding expect first quarter EPS to of between non-cash $X.XX to X% up and XX%, impact X% lower $X.XX, down year-over-year X% up pension

liabilities And be related paid to quarter lastly, a already the a flow in net in lowest to cash cash payments first is the legal our operations settlement expect January, we and while out historically from use the aforementioned from perspective, free XQ. were

a level operational while prudent caution, maintain portfolio we're in of our Overall, confident technologies. our we differentiated abilities and of

to businesses innovate well the long-term support we'll continue portfolio and the in stage for invest Our and of positioned cycle, to this growth. is

over call Darius the on with slide turn Now that, I'll back to XX.

Darius Adamczyk

XXXX was of both attacked challenges we head geopolitical Honeywell. of challenges host financial our another and difficulties, commitments. we the macroeconomic over-delivered another on, and for we on progress faced Despite year

that has to scenarios, new with one brings NARCO including in and some robust potential uncertain due derisked innovation most future balance the ability leading world's solve $XX the Honeywell believe a the well optimistic sheet the XXXX of to record demand deploy and of -- backlog, the positioned is billion short to been problems. remain further to company and challenging recession settlement a While cycle inorganically, and to drive organically about capital I

our May members look on in to this of strategy, Day, algorithm. along will future last before exciting move One with other At Day pleased opportunities more long-term I, our Investor about announce will team, growth York new I'm provide we on and New City. held Q&A. Honeywell's sharing an item to forward XX our update XXXX Investor that data. senior the be We growth management Honeywell's business to

Q&A. move Sean, With that, to let's

Sean Meakim

only available question. Anne for are We line Darius, now queue please please Darius. others questions. open your Greg, Crystal, and Thank you to you, one in Q&A. the by remindful Vimal the ask of answer asking

Operator

the time, first this from Barclays. from will And will question-and-answer conduct Instructions] question we At come [Operator you. our Thank Julian session. Mitchell

is line Your open.

Julian Mitchell

morning. Good Hi.

Darius Adamczyk

Good morning.

Julian Mitchell

Good morning.

Just outlook. would wanted -- first be question the my around start to quarter

parts on that. So maybe two

Just Firstly, of that points year-on-year then check also Aerospace just of the in low-single-digit be they And we assuming that, that down the orders that? kind you in XXX then on half margins? should wanted Thank were XXX up SPS and segment QX, have maybe sort PMT last we down and within you. expect assumption. to margin second to or year? on Are after of a increase in

Greg Lewis

Thanks, Julian.

First off, not guide going we don't orders, to specifically. that on really comment so we're

highlighted, XQ expect Aero probably might reasonable relates we a each neighborhood. you're margin the be expectation. to is to it down in you Again, As that the margin right our don't outlook But think in guide individual I segments. rates for of the

about be done, going structure been I long, that, realities of has the margin actually expansion team top business. as is year our adjusting given the on cost sales before, that end And talked frankly, SPS that in Intelligrated highlighted, a are given of actually we to as, from the reductions all the their work sales in the for well as the profile margin painful not They as margin environment help of they've that standpoint. all

be going but guide. to are on that I specific your not So, think we're instincts right,

Darius Adamczyk

quickly adjust Yes. SPS -- systems QX, how think market that, And mean, maybe of in particularly I operating and our just we really the to to results, conditions. strength exemplify our add I to

they business, a cost structure. they our really challenges They some nice the That's that's their margin posted were you margins. As in not And resulted maximized on revenue facing which accident. by side. saw, by that They -- record very actions profile. pronounced aftermarket adjusted services

That's sure of is make see an good results operates, headwinds. which challenges, act market that some when very and how despite upon Honeywell we them we print early still example we

Operator

our Thank Steve from you. next And question will JPMorgan. come Tusa from

Your open. line is

Steve Tusa

good morning. Hi,

Darius Adamczyk

morning. Good

Steve Tusa

track of then you and Are is? any the color for track the Can guys said give you much on that? timing XX%. what think are, how target? that? last color for was, kind know, little on on incentives that the are And trajectory headwind a term OEM or -- more just longer still I I towards historically What's year guys don't on you you

Darius Adamczyk

I Yes, are. absolutely mean we

that that to committed think we're I very number.

credits year, outlook that sort our at Investor the we a look the on significant as if it's but operating algorithm in of we're to our gains, last the commitments we headwind. take -- margin end of this very And very lower you above our Greg? of sort As revenue, Day, profile. long-term within But our are The midpoint, much we're track. much OEM provided at just we're terms for on

Greg Lewis

Yes.

about think -- who airplanes taking production we that with Today, specifically promised incentives is those that realignment. terms to delivery, that of is that of of are and rate in a -- deliveries. going airlines tied be the and for airplanes -- and multiyear to in So Boeing's their they've have excess

to the And so that's needle. It's what's move going impact to -- to going sales. that's going our

rates, margin to When obviously and sales we print headwind. a as our that it's you're see going offset, an OE growth

variability delivery OEs on the that again, not to So, precise going the millions it's airlines be around to hundreds there's in is. measured the themselves. to actual of And going performance depending of the be dollars. We're that, of about what

Darius Adamczyk

do just very expect we're Investor And gave Day. goal points, you at in And the to last expansion we closing we Yes. maybe margin two some modest the Aero. committed

Operator

you. Thank

Davis next comes Our Melius from from Scott Research. question

open. is line Your

Scott Davis

and morning Anne. Good guys

Darius Adamczyk

morning. Good

Scott Davis

could you a the cost assumptions guys maybe through price/cost and kind of color are if of -- little little what I walk was around environment. bit inflation that a wondering your

raising Are I And with Just are be side? on on per of just helpful. And of cycle? a in guys? we context, inflation part your prices of still segment, after you your bit think, still the pass And you raising would little are kind done prices I'll it on suppliers color the Thanks. that.

Vimal Kapur

a that as Scott, inflation I not would headline, away. is moderating. going say It's

deflation on labor driving some price/cost. not are we some standstill on but more a on our costs But model kind are is -- So our there basis. losing in basis, of still costs a And trend energy eye on positive high, commodities.

getting not reducing moving -- -- more a our So that's on assumption that it's away. but on a entry trend

targets pricing still our We model positive adjusted. our been So price/cost into P&L. have want

we want we are to market did tighter going how to price/cost our are extent, XXXX, away want algorithm. go that our not we to that also to sensitive we to But adjust we protect compared from the we're volumes. with XXXX. also watching And in execution that So being

vary Greg, kind if of the add little They principles. that's principles. overarching want guiding So a you anything. Maybe, businesses within to but directionally, the our that's bit,

Greg Lewis

same neighborhood. say I planning that than this we're price mean is mid would single-digits, inflation all single-digits in Yeah. rather low double-digit maybe with year means that on I increases,

Darius Adamczyk

mean thoughtfully important Yeah. it's we that that that's do don't we do inflation. do watch such try we And just versus think versus pricing do increases. blindly. we our that blind -- And I to I pricing balancing just is not demand

years. three we've the share, of in et of this be to demand, Honeywell Digital, the four is to have of implementing we've to analytics I also We do market been got cetera. mindful power set And a last which mean that.

actually set is of last actually accuracy we've visibility new muscles this environment. the of really in face level as X.X years a good, developed we and inflationary Our it's

Operator

question for question. next our our next Jefferies. Kahyaoglu Sheila One moment And from comes from you. Thank

Your is line open.

Sheila Kahyaoglu

everyone morning, and Good Hi. thank you.

Darius Adamczyk

morning. Good

Sheila Kahyaoglu

Maybe about improvement. if chain supply ask I could

Aerospace it? year-over-year improve And out in impact little do supply across working Can of frame kind You the out how in Where else capital You the X of X, in expect panning XXXX bit issues. it you And it the a to of supply Tier segments? chain. Tier with having you are in XXXX? do improvement labor have how total called you on chain? suppliers seeing expect it you

Darius Adamczyk

Yeah.

there's way to few it the saw of kind reduction the the that. The I up Aero. saw mean past in in direction. saw mean, sort demand one only SBGs. the dues I we we summary out which of metrics the past indicate but two and me a give you went punchline, punchline, we in it, QX a But is of I Aero. three I'll was sort think also robust and one very of describe not Let four our -- improving,

Is was an our And would a year-over-year Is that that XX%. basis offset So Aero tell an I opportunity? up you output to have around think you that. I issue? on that

and in reduced right which tells pretty direction So we're given the good and migrating actually that outcome, due one. also past you is that's that the the a other

is better. One, is of We improving. kind So In improving, before let semiconductors. definitely also the be really two The dues. for is it we left, how that's moderating it. me this what in likely what pace on sort have we normal some going slower was of a of see sort getting It Aero, the past semiconductors, it's to That's and split saw. We discussion saw and state see than year. the some clearing segments. it towards that we of end still of

Every decommits which every of from year. the Our a level prior decommits supply level was year a -- of low quarter was QX, actually, XX%, base XX%, below sign. under in which was good is over our for QX the to XX%, also

throughout slow we expectation So That's sort our the for as we chain. steady and improvement the of see move a supply year.

Operator

our comes Research. next Wolfe question. you. And Nigel question Coe One for from Thank moment our next from

line is open. Your

Nigel Coe

everyone. Thanks. morning, Good

-- to wanted Just

Darius Adamczyk

Good morning.

Nigel Coe

Hi. Good morning.

Just into wanted to a dive more. SPS bit

what So maybe, -- XXXX we saw a big of quarter. in think what some know I looks change there, about deeper XX%. that's from just outlook, down PPS. about we like channel bit but been a happened if then, last we there's it into first the dive And the can all, XX%, think with when headwinds we Intelligrated

to the range. but then the we helpful. know only looks that you representative maybe there going When converting? being market, mix this I terms in would we normalize above that color and on selective question, year, beyond of of of this projects XX%? be the are that's Any top it is therefore been that, like are margins teens, more And be Is high you've XX% accepting one year or

Darius Adamczyk

last because one, Nigel? repeat the you last Can question there, I get quite didn't the

Nigel Coe

one and Yes. we The Intelligrated the mix in at is, normalize of we XXXX, question XXXX, to when above margins? last XX PPS part are the

Darius Adamczyk

Yes.

too tell to will in what but demonstrated QX. I get one can be XX% tell, probably to basically we SPS that already -- -- we was it's early to going think I margins in you is for that,

So the changed. target hasn't

markets XXXX. of we occurred are and the mean, The is segment absorbing There's business, happening distribution an it, down. terms again, with that the down. see -- I overall capacity. In is markets in warehouse overbuild Intelligrated the that year and the XXXX are what's

on. We the of starting want. do the bit margin to in algorithm expect little an we at selective orders by growth uptick return being time, and pipeline in also profile that's more same and form. XXXX. orders a of an have are we're to We in in of encouraged actually kinds terms the And so are And that terms

So a bit of it's both. little

remember half. PSS a got to off year, to has a expect been have we business from. of strong record we're But, of a prior. coming bit draw softer half orders, particularly the first than to this see the We in fairly robust level that in we in backlog overall, the still and of second

some a to deliver team nice by base, -- I result, was our -- I frankly, think even strong the in consistent. Accelerator -- rate, know, financial Vimal, was SPS has revenue And and in incredibly the job cards actually very if So and margin really that It managing revenue there from a headwinds. encouraged expectations. dealt really don't operating a system out don't I you with was using nothing to in there's QX that they're of was done

Vimal Kapur

IGS, So, comment I just think, a I IGS. on want to add

focused will business. XXXX. But challenge are line margin top be in on in think this there I we

business will double trend for XXXX. digits continue Our years. is last aftermarket several in growing That service

we that fact, better opportunity. drive to is operating going to a higher rate continue want everything to other at faster and better be and focus another But possible do projects margin efficiency, executing to In improvement area.

are expansion are strategy looking margin at volumes the business. while So down, constantly we in Intelligrated

Operator

question our for please. moment One you. next Thank

comes Bank America. from from Our Andrew question Obin of next

open. is line Your

Andrew Obin

Hi. morning. Yes. Good

Darius Adamczyk

Good morning.

Andrew Obin

on couple PMT. a questions of Just

mean, about So you. of just first, be in and material strength heard better fund decarbonization, any are delays just of, that's question and get revenue So one. the But just driver. visibility Thank because that disbursement because about a federal clearly if you at process seems level on I every staffing big advanced And to you sort quarter? talk second, seeing better could on there? we, shortage

Vimal Kapur

that addition, a orders on we We sustainable pretty say, of Andrew, in performance -- see fuel strengthening see would forecasted, at XXXX. aviation capture now had I trend our space. strong in much decarbonization, I we in further IRS our in Sustainable part business the activity had portfolio. in Solutions hydrogen But happening carbon So We and at least on see the least helping. stronger the Technology in as

more active decisions. projects see customers are we So where making

business in good So STS we very remain optimistic performance on by XXXX.

continue. say We see materials, Solstice advanced the newer adoption I application in On on momentum more would areas.

pump an expanding is where heat new developing becoming we another business area exciting new is applications. As new applications that And example, and all about are expanding geographies.

trend. that see we So

side. pockets are where is there headwind material an There residential advanced in economic on

that's headwinds. in part There there electronic materials, in a server-related So there's business, are the PC. demand but a smaller of are where pockets

continue that. But momentum materials you overall a in strong supply an on has we products advanced the it picture momentum. some will So rightly, in said XXXX And also.

Darius Adamczyk

our particularly double-digit of Yes. strong, couple I business, in very, Maybe strong. just very our QX, numbers. and couple specific mean to I in add of things flooring a a think, orders were

strong acquisition XXXX. was well-positioned the Our LST year. the in we is business is strong. made for Sparta on UOP extraordinarily business

a was it very orders think quarter. I all-in-all, So strong

if faced our operations they're caused remember, As some not some our we in some you X-degree frankly, That's very challenges cold out typically because, time pointed the very, around Louisiana see process unusual we in built Christmas us to weather the in of not of operate what December. on just track, weather. you that in

this expected. business positioned. growth orders I be is our So PMT is well AM that think Good -- performance and strong and all-in-all, should

Operator

please. comes moment for Research. our And Vertical Thank question question our from next One Jeffrey from Sprague next you.

is open. line Your

Jeffrey Sprague

Hi. Thanks. Good everyone. morning,

on incentives. follow-up a Aero margins me, the color from Just the on could. OEM I if Appreciate

give couple Aero. couple of or the I business right? help, some next think to continue parts delivers -- about the more, imagine those other you Just hard us can going help not to incentives other years you trying years also, getting of directional some but next the as jet think of might be It's escalate way Boeing in if to

of, peak kind is XXXX, for us incentives? headwind sense just of, give you can So a

Greg Lewis

Yes.

Jeffrey Sprague

and out it in XXXX? How might play XXXX

Greg Lewis

question, they they again, to the was – were Jeff, not because instincts on are Boeing, your Great – when in bubble, particular, this able grounded. jets and – Yeah. your deliver is right,

come go and to is up then acceleration again. that back down so And going

say, and it As we But it sure, be coming top depend entirely view with back going deliveries and the back looks But see those be, in like right for going reoriented XXXX maybe our to to ought starts XXXX, it by pace of let's that's then now, deliveries. it XXXX. to the is again, down. on into

is back this where realign then will and line. going deliveries things So temporary and come headwind, into back shipments to a be

more our P&L become aligned. will therefore, so And

Darius Adamczyk

Yeah.

that's exactly think right. I

be I orders the excited the expand think the unusual I even margins. an But Aero. to probably very exciting important is of headwind, are here backlog mean, this years we expect most the But the up. about we're is way next is, very I will future that's modestly think headwind. XXXX thing that, think Aerospace. mean, up, I we three missing for

Vimal Kapur

is… chain Supply

Darius Adamczyk

better. getting is chain Supply

really in I it's have there's the of in and to And other a a next period going for nice years backlog of – be three excited teams It's that Aerospace. lot position, business. ISC I'm really be Our think very capacity. confident demonstrated unlock than the to for nothing

Operator

our Thank you. come question. our Kaplowitz next from And moment question One for Andrew next will Citigroup. from

open. Your line is

Andrew Kaplowitz

everyone. Good morning,

Darius Adamczyk

Good morning.

Andrew Kaplowitz

year XXXX. year three I $XX with line would similar which mean in plan deployment somewhat capital XXXX, mentioned think, you another for billion So to

your you've any, strategic it, Can acquisition? you us hurdles stuck larger to – more billion strategic do to Honeywell got capacity And return quite deployed and consider have larger really done done a but requirements past than out a you've of bolt-ons. what, you M&A do there, remind acquisition? make we you've you when Instruments National almost financial of larger so to a to to if cash. Obviously, If You be to have disciplined bit the review, you've been a conducting the there were sure you in $X I'm as know know.

Darius Adamczyk

Yeah.

question. good think I Yeah.

But point obviously, let's call the over I point Number the have our to on years, is, around just the out we next And I'd $XX that's we have, approach. That's XXXX, based mean, last one. roughly things. deploy it capacity. so balance sheet one So two our of strong. disciplined we we two are have it, in a couple billion-plus years, a over

typically two our acquisitions. automation And hospital and is, is, do don't and company. point three we point controls and sustainability where So digital

are interested So in M&A doing we – smart XXXX. more in M&A

something a at you where And some point. we should value. company. be to going going that it's fit shareholder be have do at acquired we to to price confidence think a expect I strategic what be truly we going a But that generating it's can It's of as thoughtful. in and – lot is

Operator

Pokrzywinski Thank you. our next Josh from for come will One question from moment next Stanley. our question, Morgan please. And

Your line is open.

Josh Pokrzywinski

Good morning. Hi.

Darius Adamczyk

Good morning.

Josh Pokrzywinski

Good as guys you end right think guys for the a taking we should been think year, end chain. Any demand think understand Darius or able teasing businesses hopefully the as supply Thanks conversion environment question. the out have should you where morning. a supply backlog way of about a versus door? the while? getting out environment start bit backlog has obviously, if chain product here maybe I for longer-cycle more well do I or you're trick above-average to backlog now, this some

Darius Adamczyk

I'll I'll Maybe and turn over to Vimal. start Yeah. it

state. call all, good billion a than the if it's more we I of about you because first we So totality, $X feel at are about look very $X in backlog the where backlog, what billion to normal

more it's two, billion in you go to whether if -- If $X we three normal. debate $X can than back billion that years,

So position very is the backlog strong.

an the which long-cycle are and perspective, at HBT we've strong this half through predominantly position. backlog businesses, strong short-cycle Even year. in especially got SPS, a From the of least Aero, first very PMT, half. in We some this uptick have as into unusual in expect of businesses because second we first activity do year pull-forward of we terms half those some the order of go the

this know second So are cycle turning short of of but we especially cautiously it one actually pace. we're a good into unique the long get can where be really the don't cycle optimistic year, this and as those at half periods yet, we

second cycles the half half We too. we in more the long Vimal? the confidence first and of expect cycle, in short an strength have in much based on uptick the the

Vimal Kapur

in-person addition, talked we constraints burn we better Aero our do performance do that headwinds both better we project than chain earlier, basis, faced will on in semiconductor did expect also they of So past which chain will chain expect that lot can what that on determined a businesses also backlog mean the in our to execute a maybe supply on supply XXXX. -- dues/backlog supply in as we And our on get more we and XXXX. our also on constraint, because

orders just we it's and question remain guide land, indirectly will we But back don't the optimistic. answering the Where forecast, that. of

the market long to market We demand perform get fair that commit. as the going of with And can we will market. we in as are our line share in performs,

Operator

moment next And Joe Thank please. from Sachs. our from Ritchie comes One you. question question next Goldman our for

is open. line Your

Joe Ritchie

morning, because Thanks. everyone. ask differently, I want Good than guidance a that maybe to little slightly last is question, bit wider normal.

maybe you for guidance yourselves midpoint And guys in under see so of the would year? below perhaps what guidance, EPS the the scenario coming the

Darius Adamczyk

soft of of a to probably in Yeah. in opinions questions. mean, a landing and think from I let guidance we are range. that year a is have terms And deep bit most this scenarios than you that is economic I admit recession, the -- wider ranging heard wider because the think first I the one And a couple out first people than of anywhere I've would all, guess. probably why anything there -- normal, there's me

range, highway think year I us. were -- this a to compared this guide it's wider more say the year and from than conditions. a to I more would than how ever. I economic this and we of uncertainty a of uncertainty little probably if bit have which probably just So rather every is, the is XXXX try of consistent perspective, XXXX, versus think, I is around or We indicative year And

range. for the So that's the reason wide

of At end, tougher the sure. conditions. the terms it's range, it's at the probably lower that out, lower means In probably -- end – economic it

more we growth. hope The some short is turns. order the cycle second which Short the a of end. the activity It's top becomes the and the at expectation, is turn than bit more to of we returns robust is in cycle expect half worse, second half what is China conditions the economic worse

actually we COVID Year QX of and we -- mean in the Chinese QX I we that think lifting And in be the we of challenging our China of second of restrictions, could But guide. actually upper China New because comes be if quite that in fruition, guide. so think to embedded on. that And end our strong. half -- sort actually the to could points that

that's So wider a where kind a of we of have range. bit

a range XXXX a guide it's uncertainty guess think much wide of simple Since as us was wider like narrower. it's I wider of as historically And I way, range the as many just by indicative the are and little a And that bit we there's not it's -- that economic of think But it did could. this educated it's to... facing.

Greg Lewis

Yes.

pretty think I talked feel economy lot we position. we'll activity a know mean we've about the of really come one knows good mean And more things. the what about, we where backlog I think good some a no right? I are be. I in had level we as June, will from

where some up five people continue said, winter has we I Europe been mild good the think, are as be. through temperature European well relatively we'll But have The first than and has four year. thought, that versus now. right months to held And we and we take a it figured more about -- to what go you as feel really could

Operator

RBC next Thank please. next our you. One our Deane Dray moment And Markets. from question, for question comes Capital from

is open. line Your

Deane Dray

really with the Trust. Good approvals. you. Thank get road. getting And had on to NARCO on the the was morning, line congrats to you everyone. And I know a That start finish all long

see. to nice So

Anne Madden

Thank you, Deane.

Deane Dray

side? like if And it in of in Yes. plaintiffs baked the the the helpful. It Honeywell not the Thanks. were little that's you on in the I out, a surprises great quarter Did trust, And the China, really and geographies? been it's geographies? could round was what to you've bit of geography. as that the surprise a but terms have the for you dire that But would and long just all pursue on major a forth. But with anything on energy weather the last see to on one question road. was the what's on geographies? so know it know Europe I just the you -- that XXXX seems first derisked. got But follow-up be approvals

Darius Adamczyk

in will really say, terms I'll Vimal probably surprises, soft commentary. major was out Maybe I the in Europe. and start we mean, would Europe up. I stood mean, ended QX. softer, further us for add of was I no That any in how UK particularly

But then as we looked actually at exit bad. rates weren't the December,

were and were October weaker, December better. rates So a November bit exit

a In a was ended. guide I we in of I our middle guided bit operating where terms for business it performance, of mean, we incredibly on actually came overall better what we guided. margin. I at and roughly that's the reason, we the mean range, of consistent mean, sort with little we --

I of NARCO. companies for balance by I eliminate some acknowledging and as the think sheet. And derisks understate company. of mean, or you articles your substantially the can't the the with you I the overstate of how kind thank do that how there, the it And way, when to read important can permanently out important it other from liabilities is future confidence, you

should I thrilled off reduced up was because deal. if balance liability think this It to have I much Vimal, I think as it it didn't bandwidth. maybe offense lot sheet. a hit am get a have But huge just the as of you…

Vimal Kapur

in it. won't only high commentary a think XXXX. everybody represent do I on part is large of and I'll strong is US China revenue. a thing that Honeywell very expect to repeat I aware We regions the growth so of have But think add I growth So Europe,

and in India, cautious optimistic. Turkey, we growth for markets, remain growth. pipeline remain we Asia, we optimistic strong a other optimistic, the Middle we ASEAN. good but QX, confident for very East, very are high are We very good very on have orders. But year. Central region backlog

of the of some planning that's offset Europe, our overall, see So part process. kind should we that we headwinds and dialing in in word what into of the are

Operator

does turn to our like Adamczyk I conference for conclude over That back now closing session. would remarks. Darius you. question-and-answer to the any Thank

Darius Adamczyk

We rigor you've to from delivered the strong typical ongoing I our your support. to effectively results with level come continue and uncertainties quarter thank of to navigate want shareholders fourth for operational expect Honeywell. multiple

stay you. for and you and Our to safe please May. listening, upcoming Day future healthy. Thank is Investor bright, Thank at further this and we look our forward all in discussing

Operator

Thank call. conference participation. you your today's concludes for This

now may disconnect. You

Honeywell International (HON) 2 Feb 232022 Q4 Earnings call transcript