Honeywell International Inc Q1 2025 Earnings Call Transcript

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

Question: Nigel Coe - Wolfe Research, LLC - Analyst : Thanks. Good morning, everyone. Thanks for the question. Maybe just a bit more details on the tariff impact, the way that flows through, obviously $500 million. I just want to confirm that's the -- I'm assuming that's second half, so the analyze will be closer to $1 billion. But maybe just talk about kind of the offset strategies there. Any pricing versus supply chain measures? Anything there would be helpful.

Question: Nigel Coe - Wolfe Research, LLC - Analyst : Okay. Thanks. That's helpful. And then, Mike, you mentioned contingency in the guide related to macro. I'm curious, is that more of a top-down -- reading all the stuff in the press that we're all reading, is that more of a top-down contingency? Or are you starting to see unusual behavior or anything to kind of inform a weaker second half?

Question: Stephen Tusa - J.P. Morgan Securities LLC - Analyst : Hi. Good morning. Can you guys just parse out what your volume assumption as -- I think coming into this year, you've talked about like 3 points of price? Maybe what's the volume assumption just in the context of this contingency? Just trying to kind of gauge what's kind of in the base case and what's just a hedge on that front.

Question: Stephen Tusa - J.P. Morgan Securities LLC - Analyst : Yeah. That makes a ton of sense. And then just related to the tariffs, can you maybe talk about how much is roughly coming from China? And I know this may be kind of old news at this stage, but any other -- other than Mexico, any other kind of hotspots that we should be watching when it comes to other regions? Or is this mostly like a China thing, the $500 million?

Question: Stephen Tusa - J.P. Morgan Securities LLC - Analyst : It's a 100% what? Sorry?

Question: Stephen Tusa - J.P. Morgan Securities LLC - Analyst : Immaterial. Yeah. Got it. 100% covered. Thanks a lot. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:30PM, HON.OQ - Q1 2025 Honeywell International Inc Earnings Call

Question: Julian Mitchell - Barclays Capital Inc. - Analyst : Hi. Good morning. Maybe just wanted to start with the Industrial Automation segment. So maybe help us understand, you have that big drop-off in the PSS top line in the first quarter. How are you thinking about that playing out for the balance of the year? Anything odd going on sort of share-wise? And on the margin front, I suppose those IA margins were down in the first quarter. I think they guided to be up slightly for the year. So maybe any help around the sort of cadence of that margin swinging from down to up as we go through the year?

Question: Julian Mitchell - Barclays Capital Inc. - Analyst : That's helpful. Thank you. And then just my follow-up on the capital deployment. Last year, you had under $2 billion of buyback and close to $9 billion committed to M&A. This year, year to date, you're running at sort of $3 billion buyback and a couple of billion of M&A. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:30PM, HON.OQ - Q1 2025 Honeywell International Inc Earnings Call Any way you could frame for us sort of the buyback scope for the year? And I understand it depends on share price action and other uses of cash potentially. But just trying to gauge sort of how aggressive or large could that buyback be assuming the share price stays around current levels.

Question: Scott Davis - Melius Research LLC - Analyst : Hey. Good morning, Vimal, Mike, and Sean. I hate to beat the dead horse, but still on tariffs. I just wanted to clarify kind of the cadence of -- you've got the cost side of tariffs and you have price; I imagine they don't match up kind of perfectly, unless you're doing surcharges, I suppose. But is the intent to match up price and mitigation efforts with tariffs by, say, the end of the year and have it be neutral by then? Or do you think you can do it sooner than that?

Question: Scott Davis - Melius Research LLC - Analyst : Yeah. That's good color. I'm not asking for specific numbers, but let's just say that it's $800 million ballpark of total tariff impacts. If there was a way to kind of rank it by segment or give us a little color by segment of where the bigger impacts are, just to be helpful. If you want to give numbers, that would be great, but I don't expect it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:30PM, HON.OQ - Q1 2025 Honeywell International Inc Earnings Call

Question: Andrew Obin - BofA Global Research (US) - Analyst : Good morning. So looking at aerospace, I think on Aero OE, I think we were sort of indicating that Aero OE was going to be better than I think what happened. And then on the aftermarket, I think it came in quite a bit stronger. And I appreciate that your numbers seem to be in line with what other folks are reporting in the aerospace. But can you give us more color as to what's happening on the Aero OE? What's happening on the aftermarket? Is there a destock going on? Would be greatly appreciated. Thank you.

Question: Andrew Obin - BofA Global Research (US) - Analyst : Excellent. And just a follow-up, I guess there are a lot of headlines out there about all this traffic, all this shipping traffic out of China collapsing over the next four to six weeks. How should we think about it? I would imagine is that in parts of the IA, the supply chain is exposed to China? Just can you just tell us because you're so diversified; you've been in China for a long, long time. Like how is that going to play out? Because there's this doom-and-gloom scenario of how everything is going to come to a grinding halt in about four to six weeks. It doesn't seem we see that in your guidance. I appreciate a different manufacturing footprint, longer cycle exposure. But as I said, I would greatly appreciate any color you can give us, how you guys are going to deal with sort of effectively trade embargo between US and China. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:30PM, HON.OQ - Q1 2025 Honeywell International Inc Earnings Call

Question: Andrew Obin - BofA Global Research (US) - Analyst : But it's actually -- it's demand destruction. It's not ability to access the actual components and parts, right? Because I think the headlines indicate like this massive shortage of parts. But it seems for you, it's under control.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Good morning, guys, and thank you. Maybe two more on Aerospace. First, if I could, just following up on Andrew's comments on aftermarket, 15% commercial aftermarket growth versus the guidance of mid- to high-single-digits, how is price a contributor? And how do you think about overall price in Aero versus the 3% for the total company? And any color regionally you could provide on aftermarket behavior?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Okay. And maybe if commercial OE is still set to outperform aftermarket for the year and any color on commercial OE production rates you could provide?

Question: Amit Mehrotra - UBS Securities LLC - Analyst : Okay. Thanks. Congrats on the quarter. Just maybe a couple of quick ones. One, can you just update us on the timing of the spin, if you think it could happen sooner than what you noted earlier? And then if Aerospace margins, I get the case and there's some mix dilution, but is there an opportunity to kind of build on the 1Q margin as we progress through just given the higher revenue? Or do we think first quarter is kind of the right run rate for the rest of the year?

Question: Amit Mehrotra - UBS Securities LLC - Analyst : Okay. That's helpful. And just as a follow-up, Building Automation, we've now had two straight quarters of high-single-digit growth. I know last quarter, you didn't necessarily want to extrapolate the goodness into this year, but now we've had another quarter of high-single-digit growth. As we think about the guidance over -- I mean, comps get a little bit more difficult, so maybe that explains it. But is the guidance still reflective of kind of not extrapolating what we've been seeing over the last couple of quarters? Or do you think now it's kind of more realistic based on the trend?

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : Hey. Good morning, guys. Maybe just following up on that last point and just relating it to the demand contingency that you've baked into the guide. So is it fair to say that you've got some good visibility on your long-cycle businesses, but it's really just on the short-cycle side, maybe in IA, maybe in BA, that you're most concerned and you're building in as contingency? Just any color that you can kind of parse out for what's baked into that demand contingency number?

Question: Joe Ritchie - Goldman Sachs & Company, Inc. - Analyst : Got it. That's helpful. And then just my quick follow-up, helpful to get some color on the separation. I'm just wondering, has there been any update on either the one-time costs or the stranded costs that you can give us any more information on either of those two options?

Question: Christopher Snyder - Morgan Stanley & Co. LLC - Analyst : Thank you. Maybe for my first one, just on Q2 margins, guided flat quarter on quarter despite volumes going higher and the PPE divestiture, which should have some level of margin tailwinds. I guess, is this kind of saying that there's some margin pressure in Q2 on the tariffs, and then as we go into the back half, we'll get neutral per some of the earlier comments?

Question: Christopher Snyder - Morgan Stanley & Co. LLC - Analyst : Yeah. Thank you. No. I appreciate that. And then maybe, Vimal, just maybe a bigger picture question on Industrial Automation portfolio. The business has leading positions in process, building and warehouse. There's not much of a discrete presence for sales into factory. You talked earlier about willingness to do M&A. So I guess my question is, do you think it's important for Honeywell Automation standalone entity to have discrete exposure in the portfolio? Thank you.

Question: Andrew Kaplowitz - Citi Investment Research (US) - Analyst : Good morning, everyone. Thanks for fitting me in. You mentioned that HPS is expected to lead Industrial Automation growth in '25, I think, in the presentation, but it didn't lead growth in Q1. I think warehouse automation did. So can you talk about the visibility you have in HPS going forward? And then when you're having conversations with your customers, are you seeing any hints of CapEx delays or project deferrals and what end markets or regions are driving HPS's growth?

Question: Andrew Kaplowitz - Citi Investment Research (US) - Analyst : Helpful. And just back to Aero and defense and space, you have difficult comps essentially all year in defense, but you delivered double-digit growth in Q1. Are you seeing more strength in international defense now? Or is it -- growth relatively balanced? And then it doesn't seem like you have or expect to see any impact from DOGE, but maybe you can elaborate on that?