Honeywell International Inc.

The stable outlook reflects Honeywell's continued commitment to maintaining adjusted debt to EBITDA of less than 2.5x. While its aerospace, performance materials and technologies (PMT), and HBT segments have been challenged during the pandemic, we expect that they will improve over the next few years--consistent with overall macroeconomic trends. Honeywell could continue to engage in merger and acquisition (M&A) opportunities, but we expect it will maintain liquidity and leverage appropriate for the 'A' rating. We could lower the ratings if the company's operating performance deteriorates significantly without a corresponding reduction in its debt and debt-like obligations to offset the decline. We could also lower the ratings if larger debt-financed acquisitions and shareholder distribution activities significantly stretch the company's credit measures.

...Recovery of key end markets should support favorable operating trends in the next few years. While Honeywell International Inc. had suffered broad-based end-market softness in 2020 because of the impact from COVID-19, the company has improved sequentially since then and has largely restored revenue and EBITDA to pre-pandemic levels. We expect the safety and productivity solutions (SPS) segment will have the largest benefit as short-cycle sales accelerated in productivity solutions and services and will accelerate in the sensor businesses, followed by the Honeywell building technologies (HBT) segment with continued demand for building products and management systems and continued momentum in healthy building solutions. Overall, we expect all of Honeywell's segments will continue to recover in 2022, and its improved credit metrics should be sustainable despite some challenges associated with lower commercial aerospace demand and Honeywell process solutions (HPS) project delays. Honeywell's...

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