HONEYWELL INTERNATIONAL INC Q4 FY2024 earnings call

• Portfolio Evaluation: Completed a year-long comprehensive business portfolio evaluation and decided to pursue full separation of automation and aerospace technologies. Expect separation to be completed in the second half of 2026, tax-free to shareholders. - Capital Deployment: Deployed over $14 billion of capital in 2024, including ~$9 billion in acquisitions, remaining on track to deploy at least $25 billion by 2025. - Strategic Actions in 2024: Announced 4 strategic bolt-on acquisitions, planned spin of advanced materials, and sale of personal protective equipment business. - Quantinuum Partnership: SoftBank partnered with Quantinuum to explore quantum computing solutions, with Quantinuum making progress in technical and commercial aspects.

Aerospace: In 2024, organic sales growth in aerospace was double-digit, with segment profit roughly flat excluding Bombardier. For 2025, organic sales growth is expected in the mid-single to high single-digit range excluding Bombardier, with core Aero margins expected to be around 27% but impacted by the CAES acquisition, likely dropping to around 26% excluding Bombardier. Automation (Industrial and Building): In 2024, industrial automation had margin contraction while building automation had margin expansion. For 2025, automation businesses are expected to lead margin expansion, with IA sales down low single digits compared to 2024 and BA sales expected to grow in the low mid-single digits organically. Energy and Sustainability Solutions (ESS): In 2025, organic sales growth is expected in the low single-digit range, with margins expanding due to volume leverage and the LNG acquisition offsetting inflation. Advanced Materials: Spun off in 2024, it generated approximately $4 billion of sales with sector-leading EBITDA margins of about 25% on an estimated stand-alone cost basis.

• Sales: 2025 sales expected $39.6 billion to $40.6 billion, organic growth 2%-5% or 1%-4% excluding Bombardier impact. First quarter sales expected $9.5 billion to $9.7 billion, flat to up 2% organically. - Earnings per Share: 2025 adjusted earnings per share expected $10.10 to $10.50, up 2%-6% or down 2%-2% excluding Bombardier. - Free Cash Flow: Expected $5.4 billion to $5.8 billion, down 2% to up 5% excluding Bombardier impact.

• Geopolitical and Macroeconomic: Evolving geopolitical situation and challenging global macroeconomic conditions may pressure near-term momentum. - Demand: Tempered demand in some end markets. - Tariffs: Uncertainty around impact of new tariffs, not included in guidance. - Separation Costs: Onetime costs of $1.5 billion to $2 billion associated with separation of automation and aerospace, stranded costs still being refined.

Q: Julian Mitchell asked about stranded and onetime costs for aerospace and automation, and free cash flow conversion.

A: Mike Stepniak said Aerospace and automation are expected to have around 100% free cash flow conversion. Vimal Kapur mentioned onetime costs are estimated $1.5B to $2B, with refinement needed, and expected to normalize within 18-24 months post-spin.

Q: Scott Davis asked about timing to name management teams of the pieces and M&A profit contribution.

A: Vimal Kapur said management teams will be announced over time, with current Honeywell leadership to continue, and Mike Stepniak explained M&A profit contribution of $0.33 per share in 2025 is net neutral.

Q: Sheila Kahyaoglu asked about aerospace end market color and margin profile including Bombardier investment.

A: Mike Stepniak said aftermarket growth expected to decelerate but OE to grow, and Vimal Kapur stated Bombardier agreement is long-term with future revenue impact, and investments in aerospace will continue.

Q: Nigel Coe asked about margin guidance and R&D investment.

A: Mike Stepniak said margin guidance is directionally correct with M&A dilution at aerospace and expansion elsewhere, and Vimal Kapur mentioned R&D investment to increase with focus on growth while maintaining margins, and active M&A in all segments.

Q: Christopher Snyder asked about separation driver and short cycle market growth.

A: Vimal Kapur said separation driven by divergent strategies of aerospace and automation, and Mike Stepniak stated guidance is prudent given uncertain end market improvements.

Q: Joe Ritchie asked about separation of automation and further breakdown, and ESS margin.

A: Vimal Kapur explained common threads between automation businesses leading to separation, and Mike Stepniak discussed ESS margin drivers including catalyst sales lumps and below-the-line items.

Q: Andrew Kaplowitz asked about price vs cost and revenue growth by geography.

A: Mike Stepniak said price expected above 2% with focus on productivity, and Vimal Kapur stated growth in U.S., India, Middle East with pressure in Europe and China for automation businesses.

Q: Deane Dray asked about credit ratings and tariffs.

A: Mike Stepniak said automation and aerospace expected to be investment grade, and tariffs not material and manageable.