Honeywell International Inc at Goldman Sachs Industrials Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's great to hear, Vimal. And then so why don't we kick it off and just address the elephant in the room. So Elliott took its largest ever stake in Honeywell, calling for the company to break up. I just -- why don't we start off with what your thoughts are on the letter they sent to you? And how much have you engaged with them at this point?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And I'm just curious, clearly, you've had conversations with the Board about this as well. How has their reception been?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And I know -- look, I know it's still really early on. The last time there was a public activist interest in Honeywell was a few years ago, seven years ago, and Third Point took their interest. At the time, clearly, different CEO. But at the time, Honeywell responded publicly fairly quickly to the letter. Any thoughts around any type of public response at this point?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. Yes. Makes sense, yes. Shifting to the news from this week on the Bombardier partnership. Just maybe talk about the agreement, to some degree, the launch contribution. I think the accounting for those contributions, I think, was -- a lot of people didn't fully understand it, but also in the context of the resolution of the litigation that was pending between the two companies.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And the roughly $400 million number is -- seems higher than some of the launch contributions historically. Maybe just discuss -- I know, at a high level, you can't fully get into the details why the number is higher than typical contribution.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. Fair enough. Let's shift gears. So you talked about active portfolio management. You've got -- I've got to give you a lot of credit. There has been a bunch of deals that you've executed in your time as CEO. Talk about maybe some of those acquisitions, how the integration is going, what you've learned so far about the businesses that you've acquired. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 1:00PM, HON.OQ - Honeywell International Inc at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Great. That's good to hear, Vimal. I guess, on the flip side of things, you also have announced some divestitures, CP&E and the Advanced Materials business. If I take a step back, your predecessor did a lot to connect the enterprise, right? And we already had the discussion around Elliott calling for a split. As you think about the portfolio today, what can you do easily on the margin versus maybe like -- might be a little bit more difficult because of what's really happened over the last seven years in connecting the enterprise? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 1:00PM, HON.OQ - Honeywell International Inc at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's great to hear all the details on margins. Just maybe going back to the divestitures and how you're thinking about trimming the portfolio from here. I know you've talked about a 10% plus target. So maybe just, are there things that you can continue to do without disrupting the company?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And then just to be clear, the two to three inbound is typically folks interested in parts of your portfolio.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. Let's shift the gears to organic growth. Clearly, on the eve of 2025, this year, you're going to post about 3% to 4% organic across the portfolio. At the same time, you've had very significant headwinds in the Industrial Automation business this year. So maybe just as you think about next year, is the long-term target of 4% to 7% achievable? And is there -- as you see things today, is there an opportunity or a good chance that you can do the high end of the range?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Super helpful. I'll open up to the audience in a couple of minutes. I just wanted to follow up on a couple of the comments you just made. So on the Aero side, the mid-single digit to high single digit, how much of that is a function of the Defense supply chain normalizing this year? And you're seeing very healthy good growth rates in that business. And then also, any comments you want to make on the OE and aftermarket side of the business?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Helpful. And then in the context of the growth rates that you just mentioned, the margin entitlement might be a little bit different next year. I know the expectation longer term is segment margins above 25%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 1:00PM, HON.OQ - Honeywell International Inc at Goldman Sachs Industrials Conference But as you think about each of those different business segments and where you'd expect margins to grow the fastest maybe the slowest, any comments around that would be helpful.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : I'll come back to that in a second. Any questions from the audience? All right. Let's keep going. So in terms of the restructuring and repositioning that you've done across the portfolio, where are you taking out the most cost? Where do you see near- to medium-term benefits across the portfolio?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Yes, I'm talking about structural costs that you're taking out of the portfolio.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Fair enough. We were lucky enough to spend some time with your DC team at the end of September. I'd be remiss not to ask the election implication question given that we're only about a month removed. So just any thoughts on the next four years?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Helpful. I want to go back to the conversation we had earlier around some of the acquisitions and particularly the Access Solutions deal since it was the largest one announced to date. There's some concern heading into 2025 on not Access Solutions specifically, but the commercial end markets in the US. At the same time, to the point you made earlier, there is a significant amount of investment that's occurring from a mega project perspective here in the US and the companies that are selling into these facilities are likely to start benefiting in '25. So in that context, how do you think about what trends are you seeing in the business today? And then how do you think about the accretion that you could potentially see from the business and in the next one to two years?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And you mentioned earlier that paraphrasing that you've historically been under indexed in data centers that you're starting to see momentum. Just provide some color around what's happening there.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's -- Yes, that is a good problem to have -- did you have to reorganize your -- either your field organization or sales force? Or how did -- how do you attack that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2024 / 1:00PM, HON.OQ - Honeywell International Inc at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : One more question around the comments you made earlier regarding the Bombardier agreement not impacting 2025. And so as we think about -- we all have our estimates for 2025, but think about like the free cash flow implications, seems like there shouldn't be any implications from this recent agreement. But how should we think about free cash flow growth from here on out?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Great. Vimal, I'll turn it to you in case you have any closing comments.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Thanks for coming. Great to see you again.