Honeywell International Inc at JPMorgan Industrials Conference Summary

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

Question: Stephen Tusa - J.P. Morgan - Analyst : <_ALACRA_META_ABSTRACT>Aerospace is probably one of the less controversial end markets right now, although Delta didn't sound too great last night. So maybe you could just start with a state of the union, what you're working on these days. Obviously, you guys have the separation coming up, but more of kind of a fundamental state of the union, any kind of updates you wanted to give on the separation to start. James Currier - Honeywell International Inc - President and Chief Executive Officer - Aerospace Technologies Yes, no, absolutely. I think from a Honeywell Aerospace perspective, a couple of things I would say is the way we're positioned in the market today, I see a lot of tailwinds for us going forward. We have a very strong installed base. We're coming off of and entering another period of rapid OEM production growth as well going forward. I love the positioning that we have in our Defense and Space business, new products on certain platforms that are growing as well. So that setup works out very well. I think as you know as well, we closed out on two acquisitions last year, which set us up very nice with CAES and Civitanavi and the growth area for us in the defense and space market. So that's looking very well. Last year, for us, we had an absolute banner year in terms of lifetime wins of contracts that we secured well over $40 billion, unprecedented from what we've seen before. It's almost like 2.5 what we've ever seen in any prior year before that, largely driven by the technologies, the innovation that we're doing and the investments that we're making across the portfolio. So that setup has been very good for us. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 11:30AM, HON.OQ - Honeywell International Inc at JPMorgan Industrials Conference And I would tell you, from your comment about the separation aspect, I can't think of a better time to be very excited about the opportunities that this presents for Honeywell Aerospace in terms of our separation. Very strong management team across our organization, everybody on my staff has anywhere from 15 to 30 years of experience, specifically in Honeywell Aerospace. The ability to have very focused capitalized investments that we want to make going forward; our operating system, I feel, is one of the best in our industry in terms of efficiency and productivity across the board; and the commitment that we've made as part of the separation announcement that we will ensure that we're going to have an investment-grade balance sheet going forward. So that's sort of the macro view, I would say, for us as Honeywell Aerospace. If I break that down, it's a little bit more within the end market specifically. Within Honeywell, kind of what we've guided for 2025 is overall Honeywell Aerospace being in the mid-single-digit to high-single-digit range going forward. What I would tell you, the commercial OE portions of our business, as I mentioned, air transport, BGA, particularly in the BGA segments, business aviation segments where we have a lot of our avionics and engine content are all going to be growing double digit. Aftermarket will be mid- to high-single digits in that realm, largely driven by commercial air transport. We're still seeing a lot of growth happening in flight hours in that realm. I would say that's going to be more in the mid to high singles. Business aviation

Question: Stephen Tusa - J.P. Morgan - Analyst : How do supply constraints play into this or your output, if you will? I think for you guys, it's lingered a little bit longer perhaps than we would have expected. Where do you stand on unlocking some of that?

Question: Stephen Tusa - J.P. Morgan - Analyst : And where are you most stressed, what end markets does that cut across? Is that when it comes to defense, I assume it's on the OE side, but what part of the business is it most acute?

Question: Stephen Tusa - J.P. Morgan - Analyst : And I guess we brought up supply chain. Maybe I was going to address this a bit in the margin discussion. But what -- how do tariffs and what's going on out there impact Honeywell Aerospace?

Question: Stephen Tusa - J.P. Morgan - Analyst : All right. Turning back to the top line on commercial OE, talk about the main programs where you guys kind of gain the most content and then how those are progressing from a production perspective and which ones do you see the most growth in this year as you kind of deliver on that double digit --

Question: Stephen Tusa - J.P. Morgan - Analyst : For the ATR side, do you have any particular difference in exposure to the 320 or the 737?

Question: Stephen Tusa - J.P. Morgan - Analyst : Yes. And then as far as -- obviously, you have tremendous relationships with all these companies, but it is a very global industry. How do you see your customers? Are they talking to you at all about the tariff situation that they may have? Because that's coming across border as well. So I mean you just cut a deal with a Canadian company. So how are the customers reacting to this today?

Question: Stephen Tusa - J.P. Morgan - Analyst : So do you think this combination of, from a bizjet perspective, definitely cross-border business, perhaps higher prices, even though I'm not really in that market, unfortunately, higher prices for some and stock market volatility, I mean, is there a risk that there's a bit of a pullback in the bizjet market? Is that something we should be thinking about as a bit of a risk?

Question: Stephen Tusa - J.P. Morgan - Analyst : Got it. And from a Bombardier perspective, maybe just talk for a second about the deal that you guys announced in December and any other incremental color around that and your future R&D efforts with them.

Question: Stephen Tusa - J.P. Morgan - Analyst : And then what's the status of Anthem?

Question: Stephen Tusa - J.P. Morgan - Analyst : Got it. Moving to -- so it sounds like the OE side, at least as we move into the year, any comp issues where you're going to kind of start the year a bit slower and ramp throughout the year, pretty consistent double-digit growth throughout the year? Anything to consider here in the near term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 11:30AM, HON.OQ - Honeywell International Inc at JPMorgan Industrials Conference

Question: Stephen Tusa - J.P. Morgan - Analyst : So can we talk about aftermarket? Lots going on here. Delta preannounced last night some pretty weak numbers. What are you seeing day-to-day here in the aftermarket? And you mentioned there's some volatility. Maybe just explain that as we move through the year. This would be most -- so let's start with the ATR aftermarket for you guys.

Question: Stephen Tusa - J.P. Morgan - Analyst : So as we break that down a little bit, what is your headset? What are you thinking as far as flight hours growth this year?

Question: Stephen Tusa - J.P. Morgan - Analyst : And Honeywell's view on flight hours, what is your take on -- what is your -- what's underlying that from a flight hours perspective?

Question: Stephen Tusa - J.P. Morgan - Analyst : 5%, 5.5% flight hour growth. And then so the content is kind of a little bit of a positive impact to get you to the mid to high?

Question: Stephen Tusa - J.P. Morgan - Analyst : And then I know Honeywell at a higher level has gotten about 3% price. How much of an influence is pricing in the aftermarket these days? And how did that trend over the last couple of years?

Question: Stephen Tusa - J.P. Morgan - Analyst : Okay, 3%. Okay. The bizjet side, perhaps a little different. What are you seeing in flight hours there? And how do you think about bizjet aftermarket or maybe not too different?

Question: Stephen Tusa - J.P. Morgan - Analyst : And you guys have talked a lot about upgrades and mods and things like that. Is that more of a -- I would assume that's more of a business jet dynamic than an ATR driver?

Question: Stephen Tusa - J.P. Morgan - Analyst : And then just lastly on defense, what -- the outlook for the next couple of years, what's going on globally? How is that influencing Honeywell?

Question: Stephen Tusa - J.P. Morgan - Analyst : Turning to the margin side. The 29% margin was put out a couple of years ago. It's not quite a straight line on the way there. There's been some acquisitions. What are -- talk about the bridge on margins this year. And what do you see as kind of the underlying cadence going forward from a margin perspective when you kind of strip out the acquisitions?

Question: Stephen Tusa - J.P. Morgan - Analyst : Are investments in mix roughly the same size? Or does one -- is one significantly more than the other from a year-over-year perspective, if we think about that bridge?

Question: Stephen Tusa - J.P. Morgan - Analyst : Well, you did talk about investing in the supply chain and unlocking. Is that -- are those similarly sized items? Or is one significantly

Question: Stephen Tusa - J.P. Morgan - Analyst : Is 29% going to still be a part of our your long-term targets when you guys come out? Is that -- that sounds like it's still, in your mind, the right level --

Question: Stephen Tusa - J.P. Morgan - Analyst : Yes, correct.

Question: Stephen Tusa - J.P. Morgan - Analyst : Yes. Okay. And obviously, that depends on mix and things. But is there any -- as of now, when you think about Honeywell has a reporting structure, segment margins and then like a bunch of stuff below the line, how does Aerospace -- is it -- should we -- it's pretty easy to pull out the segment numbers, restructuring. Anything below the line that will move around from a reporting perspective that Aerospace will take more than their fair share of in the P&L?

Question: Stephen Tusa - J.P. Morgan - Analyst : Okay. And I guess, from a portfolio perspective, anything that you're looking to do differently when it comes to investing in the business, both inorganically as well as organically? What's on your mind as far as this window you have to prepare yourself for being a public company?

Question: Stephen Tusa - J.P. Morgan - Analyst : Is there incremental investment that you want to make? So like this year, it's supply chain and as that supply chain headwind wanes, that maybe you'll feather in a bit more investment as you prepare yourself to be a public company? Or is that investment kind of at a steady year-over-year run rate, so it's -- there's no real fungibility there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 11:30AM, HON.OQ - Honeywell International Inc at JPMorgan Industrials Conference

Question: Stephen Tusa - J.P. Morgan - Analyst : Okay. So R&D kind of flat, you're comfortable with your level of R&D, R&D flat as a percentage of sales --

Question: Stephen Tusa - J.P. Morgan - Analyst : Yes. It gets you to like 7% or something like that?

Question: Stephen Tusa - J.P. Morgan - Analyst : Okay. And then sorry I interrupted you, but on the inorganic side?

Question: Stephen Tusa - J.P. Morgan - Analyst : And then just lastly for me before we turn it over to these guys for questions. Free cash flow, Honeywell currently converting on adjusted earnings at about 85%. I think on the call, you guys had talked a bit about 100%. I'm not quite sure like what that definition is. But is there a pathway for you guys to get to 100% conversion at Aero? Or what's kind of the path to get to 100% or not at Aero? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 11:30AM, HON.OQ - Honeywell International Inc at JPMorgan Industrials Conference

Question: Stephen Tusa - J.P. Morgan - Analyst : And anything on -- for large global integrated organizations as they kind of come a part of it, anything on taxes and cash taxes that you see as being a moving part in this discussion at all, whether it's on a book or a cash basis?

Question: Stephen Tusa - J.P. Morgan - Analyst : Any questions out there? I know it's early. Jeff? Unidentified Participant I wonder if you could talk about -- when you think about that mix dynamic going forward, as the OE rates come up and we start to see more retirements, what impact that will have on mix and on profitability going forward?

Question: Stephen Tusa - J.P. Morgan - Analyst : How big is that business?

Question: Stephen Tusa - J.P. Morgan - Analyst : Okay. Sean didn't even move. I was expecting him to like wink or something like that. But I think that's a good question from the Aero expert in the room, of course. Like how is that accretive? I guess you're saying -- I guess, but from a mix perspective, retiring a plane, replacing it with a new one like-for-like, that is a pretty nice revenue but pretty dilutive event for you guys, right? I mean like you guys make really good money on some of the older stuff. That is the right kind of mindset there.

Question: Stephen Tusa - J.P. Morgan - Analyst : Are you seeing any of that in this year's numbers? Or it's too early for that given we're not really seeing the --

Question: Stephen Tusa - J.P. Morgan - Analyst : So I guess from that perspective, though, if you do start retiring more and the inventory of used parts grows, but you're serving less planes, why isn't that like a negative for the trading business as well?

Question: Stephen Tusa - J.P. Morgan - Analyst : Right. And you guys are such a global organization with like tremendous distribution channels and customer relationships. You guys are positioned well to do that. Any questions? One last one out there? Okay. I think you're good. Thank you.