Honeywell at Bank of America Conference: Strategic Vision and Challenges

On Tuesday, 13 May 2025, Honeywell International Inc. (NASDAQ:HON) presented at the Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025. During the session, CFO Mike Stepnik shared insights into Honeywell’s strategic direction, highlighting robust Q1 results and future challenges. While the company demonstrated strong performance, it also faces hurdles such as tariffs and Chinese competition.

Key Takeaways

• Honeywell reported strong Q1 2025 results, with significant orders and effective pricing strategies.
• The company plans to separate into three entities to enhance focus and capital efficiency.
• Tariffs had a gross impact of $500 million, partially offset by price escalations.
• Honeywell is investing in high-end technologies and growth opportunities, particularly in energy transition and sustainability.
• Despite potential economic slowdowns, Honeywell remains optimistic about its diversified portfolio and risk management.

Financial Results

• Honeywell exceeded top-line commitments in Q1 2025, with strong orders continuing into April and May.
• Tariffs resulted in a $500 million impact, reduced by $100 million through strategic pricing and supply chain actions.

Operational Updates

• Building Automation: Strong performance, particularly in Europe.
• Aerospace: Defensive Spaces business thriving; aftermarket demand remains robust.
• Industrial Automation: Focused on Life Sciences, with Intelligrated revenue up 5%.
• UOP: Catalyst business stable; project business tied to capital investment cycles.
• Defense & Space: High demand both domestically and internationally.

Strategic Initiatives

• Honeywell is restructuring into three separate companies to improve focus and capital allocation.
• The company is targeting high-growth verticals and prioritizing new product introductions.
• Adjustments to production and sourcing are being made in response to the tariff landscape.

Future Outlook

• Honeywell maintains a conservative guidance approach, focusing on leading indicators.
• The company is exploring monetization options for Quintinuum, including a potential IPO.
• Growth is anticipated in Aerospace, Building Automation, and UOP segments.

Q&A Highlights

• Tariffs and Sourcing: Manufacturing adjustments are precise, with customer sourcing influenced by trade policies.
• Tax Policy: Honeywell favors the current tax regime, with potential changes for R&D expensing.
• Capital Allocation: Priorities include mergers and acquisitions, stock buybacks, and dividends.
• Competitive Landscape: Honeywell differentiates through high-end technology amid rising Chinese competition.

For a detailed account of Honeywell’s strategic insights and performance, refer to the full transcript below.

Full transcript - Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025:

Andrew Obin, BofA Multi-Industrial Analyst, BofA: I’m Andrew Obin. I’m BofA’s multi industrial analyst. Welcome to our Industrials and Transportation Conference. I think it’s year two in revised format. So this year, we’re gonna have over 500 investors in attendance.

Last year, we had, I think, over 400. So we’re moving in the right direction. And, you know, as I said, the goal is to have it large, boring and good. Know, so that’s the goal for the conference. And hopefully we’re succeeding.

We have fantastic corporate attendance close to 100 corporates. For those of you visiting, we are going to have takeaway dinner on Thursday. If folks want to go grab a meal with us, we still have a couple of slots left. It’s going to be in Midtown. So let me just touch on some big themes.

All the noise aside, industrials are the best performing sector in the market year to date. We think that US will, is, and will be the best market in the world for industrials. And we think that U. S. Is in the midst of the biggest CapEx cycle in two decades.

And that’s our North Star. And despite all the noise, we think fundamentally that’s what’s going on. And we think, look, these stocks are not cheap, the market gets it, but we think that’s the underlying fundamentals. So far this earnings season, I think stocks have demonstrated surprising resiliency. So we think a couple of things.

A, we think probably below the surface, there is just simply more pricing that these companies have. I think these companies have done a great job learning how to do pricing during COVID. And I think they’ve brought this toolbox to the current environment. I also think on the margin, it is likely that the companies have been more aggressive moving supply chain out of China over the past several years and make the supply chain more resilient than we thought. And so far as reshoring goes, there’s a lot of noise, but we think there are going to be few large verticals which will drive reshoring activity, and we’re not sure there’s going be anything else.

But the ones that will happen, I think, will matter. So first, semiconductors. And when we talk about semiconductors, there’s really TSMC in Arizona, right? But it’s big. TSMC just announced another $100,000,000,000 project in Arizona.

And we think the second and third order effect of that is going to be to bring more to continue to bring more supply chain to Arizona, and we think this is going to be very, very important. Talking to executives, LNG, we think is another area where the market should be excited. So far, as far as we can see, think hydrocarbons is the most neglected area of the markets with some of the most attractive multiples. But we think LNG is one area that will continue to receive funding under the new administration. We do expect a lot of projects move forward.

One area that is not getting a lot of attention is pharma. I think there’s been $150,000,000,000 of pharma CapEx announced. That actually, I think three times how we calculate everybody was excited about EVs. Pharma is going to spend sounds like three times more than the EVs. It is going to be real.

And finally, you have sort of this whole T and D and AI CapEx, but that’s a bit separate. I think we’re going to spend a lot of time sort of talking to companies about evolution of their supply chains, both in terms of supply chain resiliency and possibility of moving supply chains to North America. And I would say finally before I finish, I think in another topic that is underappreciated by investors, I would say, is the rise of the Chinese competition. I think over the past couple of years, China has been ignored by The US Investors because it hasn’t grown. I also think the dirty little secret is that US companies are continuously being squeezed out of China, they’re not talking about it.

I think the next step is Chinese companies coming to the world stage. I think we’re probably going to see it first with European competitors just because they’re more global in their nature and more reliant on exports. But we think rising China’s competition and China providing good product at a good price is going to be a big theme for the next three to five years. I was on ARC Forum in Barcelona last week. I think European industrial competitors are keenly aware of this dynamic.

Not sure if investors have caught on yet. With that, we’re going to kick off right on time. We have Honeywell. We upgraded Honeywell last week. The stock is neglected for a lack of a better term.

And we think there’s a lot of good news happening below the surface, both in terms of execution and end markets. We view the stock as inexpensive. You know, this morning with us, we have Mike Stepnik, senior vice president and chief financial officer of the company. And I think we’re going to go and just do a fireside chat. And Mike, thank you for joining us today.

Thank you for having me. Appreciate it. And of course, Sean is sitting in the audience. Thank you, Sean. How are you?

Good to see you. Yep. So yes, so maybe to kick off, thank you for joining us today. There’s a lot going on at Honeywell. Just to start, can you just give us an update on the business performance and separations?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Sure. So we obviously are extremely pleased with the first quarter. We delivered on top line commitment and had a beat across the board, you will. Orders in the first quarter were strong. They’re strong again in April and what we’re seeing in May.

So we’re quite confident about our guide and what we said during earnings. I think the only, I would say, just hesitation or pause is the demand piece in the second half of the year, specifically in the businesses that have more exposure to China and how that’s going to play out. From a tariff standpoint, tariffs are we said, I think, are $500,000,000 of gross impact for us. We’re offsetting with price escalations in other actions as far as our supply chain. Just yesterday, they came down for us another $100,000,000 So it would become less, I would say, impactful relevant.

But we’re watching demand, and we build a little bit of contingency in the second half into just monitoring the demand and but largely feel good about all of our segments.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And Mike, you sort of highlighted, you brought up that you’re seeing strength in April and May. Any verticals that you want to call out having the strength, it is May 13. Anything what are you seeing in May?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Building automation for us is performing well, specifically products. Fire, Europe is doing well. We can see green shoots in Europe as far as short cycle demand. China has been good for us too. Even China is not a big revenue driver for us.

It’s about 5%, but China demand is there. So we’re seeing that. From a project standpoint, Middle East, Australia, APAC. So we’ll see, I would say, strength as far as demand.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Terrific. So, you know, maybe we can talk a little bit about, you know, one thing that we’ve noted, the company has changed, I think it’s planning philosophy. So you’ve been in the CFO seat for about four months now. Honeywell seems to be guiding more conservatively and, you know, also consistently in the past couple of earnings seasons. What changes have you made in your approach to guide and what changes have you made in managing the different business segments?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Sure. So as far as the guide, and I’ve been even though I started in February, I’ve been essentially building the guide and the plan for the year since about September. And what my philosophy is that we need to drive the business for short term performance but also for long term performance. And what I’m focusing on is really looking at leading indicators and focusing on leading indicators as far as how we guide. And what I want to guide and how I want to set the plan is, is have I want to have a high degree of confidence in what we can deliver, and that’s what we’re guiding.

As far as what I focus the teams on is really a couple of things. First one is really focus on making sure that we hit our milestones on NPI, product introductions, offering management refreshments in the offering. That’s because that drives really a midterm strength growth for us and hitting those milestones. And then the commercial, I would say, intensity as far as how we go into our markets, how we pivot to higher growth verticals and how the team shows up as far as the commercial intensity.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And just to go back to the initial guide, you know, long as we’re sort of we’re gonna go talk about other things. You have sort of talked about slowdown. It doesn’t sound like have you seen any slowdown so far in April, May? Anything slowing?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Not a broad slowdown. I would say in our ESS business, we see some of the customers just, I would say, hesitating on some of the investments, but that’s not broad based. And there’s more, I would say, anecdotal versus a big trend. I think with tariffs stabilized and the backdrop macroeconomic backdrop stabilizes here in the second half, we’ll see those investments to continue.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. Thank you. Maybe we can talk about the spin. So the company is breaking up in three. And now it’s interesting if you do just some of the parts, you know, I I think it does suggest that you’re trading relatively in line and, you know, there are a lot of puts and takes here.

But how do you think about the benefits of breaking up the company just beyond the sum of the parts math?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yeah. So first, I would say the board and Vimode, there was a major What we really looked at and if you follow Honeywell for a while, it’s we went for the period of accelerator and optimization, I would say, for cost efficiencies, etcetera. As you look forward and you look at our three large segments, their needs are diverging in terms of the capital investment needs as far as innovation, themes in each industry. And we’re a big believer that these businesses being by themselves then can be more focused. They can allocate capital more efficiently.

They can manage their growth CapEx better. And that’s really the reason why why we’re separating.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. Thank you. So maybe we can dive into Aerospace first. Can you just explain the dynamic that drove Honeywell Aerospace organic growth of nine percent, but at the same time you have Commercial OE organic growth of negative 7% in the first quarter ’20 ’5 percent. And what gives you conviction that commercial OE growth turns positive from here?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Sure. So I would say, first of all, we’re super excited about what our Defensive Spaces business is doing and really, really happy with the aftermarket demand. On the commercial OE side, we still have past due back of about $2,000,000,000 And if you look at our OEM customers, they’re not linear in terms of how they take product from us. So what I can tell you is our supply chain output has been growing double digits for the last, I think, 11 quarters in a row, including the past quarter. And we see this demand to continue.

And there is, I would say, nothing that would tell us that demand is slowing down on OE. Now as far as how it translates to revenue, I would say it especially last quarter and this quarter, it will be a little bit choppy as I would say some of our OEM customers normalize their productions because they haven’t been very linear as far as how they took product for us. Sometimes they get to inventory, sometimes they pass it to their end customers. Sometimes they slow down because they see that they have enough, I would say, safety stock. So it’s not linear, but the demand we can see it.

We can see it one by new demand coming in and two, the backlog that we have and plus the backlog.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. Maybe we can talk about a little bit. We would have thought that BizJets would be the most economically cyclical part of the business. We sort of estimate roughly 20% of commercial aviation. Is that the correct way to think about the portfolio?

And talking about concerns about slowdown, are you seeing anything slow there?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: We’re we’re not. We saw hours normalize early coming out of COVID, but they stayed stayed at that 4% to 5% growth year over year. And we see strong OE demand as far as the fleets. And like I said earlier, with a part of our positive backlog and the backlog growth is driven by business OE equipment. So I don’t see a slowdown in the short term, not at least not in this year.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Maybe we can talk a little bit about defense and space. What are the key trends programs and noteworthy things in the latest president budget as far as Honeywell is concerned?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So looking at a defense budget and looking at Dodge, we we don’t see a lot of impact there for us. Actually, none so far. A lot of these these programs they’re working on, they’re multiyear. They’re committed, critical to to national security. So we haven’t seen the the slowdown.

We, on the other hand, see a lot of demand both domestically and internationally. About 25 of our defense and space business is international. And we made investments specifically in Europe in engineering capacity and and and production capacity, and Europe is our biggest international market as we just just see a strong demand there. And I think as as we progress over the next couple of years, the demand will continue to grow as national security becomes much more important to to Europe and and to some of the Asian countries.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And what what are the milestones we should watch for sort of the evolution of international sales? Just I guess the world is not getting safer anytime soon. But any any big competitions, you know, any any specific programs you would highlight?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So obviously, is thinking through how to source more local locally, etcetera. We have we bought this company, Synavit Navi, that’s based in Europe that actually plays into that. We’re trying to stand up more capacity both from an innovation standpoint and production in Europe. But we think that just given the the needs of European markets and everything that’s going with trade, I I don’t think it’s a it’s a quite a plausible strategy, if you will, to Right.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Because there’s plenty of U. S. Content on all these

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: European products. And I think it would just take too long.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And, you know, how should we think about just DoD versus international business? Which one should we expect to outgrow?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: International business in the short term is going to outgrow. Just much more pent up demand. And I think U. S. Defense and space is stable, but but it’s not growing at the at the same at the same level.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And the the impact of Doge?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: I don’t I don’t we don’t see any impact on Doge for us. Like I said, the majority of our programs are committed. They’ve been there for years and are critical to national defense.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: All right. So maybe we could go to building automation. So building products, and you’ve highlighted it has been performing better than expected in the past couple of quarters, 4Q twenty twenty four, first quarter ’20 ’5. What has been driving the upside relative to expectations? And maybe what is building products just for folks just

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So if you think about it, it’s building products, it’s products and that go into building infrastructure, fire detection, security, building management systems, etcetera. And then projects, and we use projects and services predominantly to pull our content and continue to advance our NPI. I think the I would say the most exciting thing about the building automation business is the fact that this is a business that truly exemplifies what we’re trying to do with the rest of the portfolio, meaning is create install base and then mind an install base with value add services, connected offerings, etcetera. And that’s been working very well for us. I would say the leader in terms of the growth for us right now in in building automations is FHIR.

FHIR is performing very well. High growth verticals for us are data centers, hospitals, hospitality, clean science, if you will, as well. We’ll play in that. So those are the verticals that are taking off. And we’re seeing a lot of progress in Europe.

In Europe where we partnering with our channel partners, we’re having new offerings and that strategy is paying off quite well.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And just on fire, maybe it’s it’s actually a serious question. It seems that incidents of fires in The US actually going up because of the lithium batteries. Is it related to that or is it just related to just structural business model changes at Honeywell?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: I would say that the battery fires are quite difficult Right. On the lithium battery. They’re very hard to contain.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Yeah.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: And I would say regular fire suppressants don’t don’t address those fires, they’ll contain those fires. That’s why you don’t see a lot of lithium batteries in the buildings. Yeah. Because building code doesn’t allow for it. Right.

But we’re working on technologies to maintain it and contain it.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Right. So for commercial buildings, lithium fires are just not an issue? No. Okay. Okay.

Okay. Okay. So it’s it’s more so it’s it is your business model working?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: That’s right.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Right. Because we’ve definitely seen it on the residential side. But

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yeah. Okay. I mean, building cold, I don’t think you have lithium battery. Yeah.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Don’t think we’re allowed to have, like, these scooters in the building for that very So maybe we can talk about it just to build on that. So how is cross sell and putting access solution Honeywell International channel going? Is it contributing to growth? And when do you expect this to contribute to accelerating growth?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So it’s contributing right now. And you can see it in building automation reported sales. And you’ll see it starting in the third and fourth quarter, the business will become organic for us as far as growth. I would say we are really pleased with the Access Solution business, and it’s a great addition to our product portfolio and project cross sell. But it also is accretive as far as growth and margins.

And per hour pro form a, this business is outperforming right now. So really excited about these acquisitions.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. So maybe shift to industrial automation. And why don’t we start with Honeywell Process Solutions?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yep.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Because you have some capabilities in LNG, we addressed it. But what’s the competitive landscape right now for Honeywell Process Solutions? Who do you consider your key competitors?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Process Solutions, I mean, we compete with several players. But really, we’re just looking at, you know, and what we can do in Process Solutions. And for us, it’s really about how Process Solutions can partner with UOP and great cross synergies there and focus on new technologies that we developed. The business has been growing at mid single digits for us. We’re really pleased with it.

We’re focusing on Life Sciences there right now and that’s a new growth vertical for us.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And if we go sort of to legacy, you know, so we think sort of downstream. You know, we sort of we’re thinking about sort of this three way competition between Emerson, Honeywell, and maybe Yokogawa. And, you know, this is view. I think other players have very nice installed base business, but I think for Greenfield and Brownfield, it’s really been a three horse race in in our view. You know, clearly, you know, your competitors are not asleep.

Right. And, you know, when we at when we were at Hanover, you know, clearly there are Chinese competitors coming out. So how is the competitive landscape evolving, I think, over the next three to five years?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yes. So the landscape is competitive. And like you said in your opening remarks, Chinese competition, as you can see, coming up, especially in China and Middle East. That’s why in a lot of cases, we have not localized in China because of the technology concerns, etcetera. But we feel very, very good about our offering both from a UOP standpoint and from HPS.

And I think that’s a big differentiator for us. And we’re just investing monies our engineering efforts just to continue to create new technologies, more efficient technologies, etcetera. Generally, I think I feel good about the space because the world will need more energy. Where it comes from, it really depends on a lot of things and geopolitical landscape and how governments think about their own energy security. But generally, we play across the spectrum and we know that the demand for energy will continue to increase.

So we feel well positioned.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Does the spec in China for automation, does it look differently for, you know, because historically what happened, right, people have taken high end Western technology, brought it to China. And now the Chinese are evolving their own standards. So as that evolves, this Chinese standard sort of decoupled from the rest of the world. Do they start dictating their own terms, right? Because they’re doing some projects in The Middle East, or does it remain fairly the same?

And so you have this global standards and everybody performs to the global standards. What does the evolution of Chinese competition mean for what sort of the product looks like?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yes. So I think it really depends on technologies. And we obviously like to play and we compete high end technologies. And that’s what we take pride in. And from a core values standpoint, hard in engineering company.

So we compete whether you take we take our ESS business, industrial automation, building automation, we try to compete in the high end markets, which technological, I would say, entry barriers are high, where you need to be specked in or it’s always essentially that technology is demanded by the code. With Chinese, right now, what we see in our markets is competition in lower end. Right. So like these TPOD refineries? Yes.

But you know, how the world is going to develop will Right.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Right. No. Thanks so much. And maybe just before we go, Intelligrated, Signs of Life. I think some of your competition sort of also is talking about that it’s looking better.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yep.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: How sustainable it is? How hopeful should we be? And I know your guide is actually quite conservative. Thank you. So I appreciate that.

But what are we seeing in Intelligrated?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So I would say, well, guide is pragmatic. But on Intelligrated, we’re happy with the first quarter performance. Revenue, I think, was up 5%, orders coming in. Over the last couple of years has been we resized the business, which we now we think we have a really good mix of aftermarket and new projects. And the pipeline looks of orders looks good.

I would say with tariffs, though, it’s a little bit lumpy and choppy. And I think that’s where you also see a little bit of hesitations in customers as far as most recent tariffs and how they want to invest and which facilities they want to invest. But generally, I would say yes, the backdrop is improving.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: So maybe we can talk about sort of energy and sustainability solutions. So you targeted mid to high single digit served addressable market growth through the cycle for UOP. But UOP grew 8% in 2023 and zero in 2024, and the framework suggests low to single digits in 2025. So how do sort of these internal expectations fit within the framework for UOP?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So UOP will, for this year, continue to lead growth for us. And if I look at our Catalyst business demand, that’s been pretty stable. And I would say this is almost like an annuity. Every year, there are Catalyst sales and customers reload, and that business has been stable. Where we see, I would say, some lumpiness right now is in the projects businesses because they’re more dependent on the capital investment cycle and decisions.

And in EOP, any given project could be a couple billion dollars of someone’s money to invest. These tend to be more lumpy. But I would say what you’ve seen more recently in terms of our acquisitions, the one that we just announced, Sundyne and the prior ones, we were looking at essentially more stable business models and where the product is specified, has a higher after market portion of revenue, which will help smooth out those peaks and valleys, if you will.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Can we talk maybe about maybe we can talk about sort of UOP’s exposure to, you know, UOP has these dominant market shares in a lot of key markets just due to its history. I I know you guys have invested, to increase your presence in the LNG Sundyne acquisition. Maybe you can talk, you know, how are you pivoting UOP, which is clearly one of the company’s crown jewels for sort of where the world is going under the new administration and global Yes.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: This is really just us trying to diversify. And like I said, our thought is that the world will need more energy. Where this energy is going to come from will depend on a lot of different factors, geopolitical and others. And but we play we want to play across the spectrum. So right now, our LNG business, gas processing is doing very well.

But we also have a pretty rich portfolio in ESG, which the demand is softened for it, but we know it’s going to come back. Can you talk about

Andrew Obin, BofA Multi-Industrial Analyst, BofA: the Sundyne? Like, why did you buy it? It’s a very interesting deal. Can you just talk a little

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: bit more?

Andrew Obin, BofA Multi-Industrial Analyst, BofA: What did you buy? Why did you buy it? Right? Because clearly, this is where the company is putting capital.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yeah. SunDyne is a great technology first. And we know this company very well because their product is a lot of times specked in the process of when you design plants in UOP. So we’re quite familiar with this company. The reason we also like it is because it has a large installed base and it has a lot of aftermarket.

And we know just understanding our UOP business, we know these pumps are high technology pumps. They’re quite complex. They’re very difficult to reverse engineering if you will and replace. Actually derivative of aerospace technology, those pumps. And that’s why we invested in it because it helps support our UOP business and is less cyclical.

And we really well understand the end markets, what those funds play in and understand the technology.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And once again, we’re on ESS. Can we talk about Advanced Materials? Just I know it’s going to get spun out, but what are the latest trends? I mean, I think folks who cover HVAC space are obsessed with what’s happening with the availability of the refrigerant. Can you just talk about what’s happening?

Just explain to us because I think people and I think I had this conversation with Sean that, you know, refrigerant for HVAC is like the biggest part of the business. Just maybe explain to us what’s inside the business and what are the key drivers for the business.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yeah. So I mean, refrigerants, predominantly HVAC, cars, etcetera, that’s the biggest part of the business. But what I would say in this business, when we talked about our 2025 and going in 2026, what we like about this business is we see a cycle coming up again, and we’re actually investing in growth CapEx in this business this year, we’re quite confident this business will continue to grow quite well. The reason we’re separating Advanced Materials, and by the way, the name is Solstice Advanced Materials now, and it’s going to be spun out at the year end. We see a lot of growth potential in the business, but the business just from a in terms of its capital investment requirements around growth CapEx needs a little bit different profile and we think it will be better standalone.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. So maybe we can talk a little bit about Quintinuum. Sure. So back in October of twenty three, Honeywell announced that it would monetize Quintinuum in the next eighteen months. It sounds like IPO is going to be the method to monetize it.

Just any update on how you’re thinking about monetizing this business and where then IPO is still the right method?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So we’re working through it. As you know, the markets are quite volatile right now Yeah. As far as valuations and and investment base. But the business is that is that works for me is progressing very well for us. But I would say what’s probably more exciting about this business is the technology investment in We have couple great pursuits in terms of the equipment.

Where we feel very close to 100 logical qubits capability, which essentially that in our view, it validates a commercially viable product. And from a from a technology standpoint, this technology has matured quite well for us. So you should see some, I would say, over the next twelve, eighteen months, you should see some really interesting and nice announcements from us in the area of Continuum.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: But the key here is you want to see some stability in the markets.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yeah. I mean, the valuations are crazy and just trying to pinpoint right now, it’s quite difficult. So we’re working through it, but it’s month to month is I would say it’s quite volatile right

Andrew Obin, BofA Multi-Industrial Analyst, BofA: now. And is IPO still the right framework of thinking about it?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: We’re thinking through several different options at this Interesting.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: So we do have a couple of questions that the management has asked this to ask every company on stage, so I’ll ask those. And then I have so first one, do you expect to shift incrementally more production to The US or to source more from The US because of tariff policy? And do you expect your customers to source more from The US because of these trade policies?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: It will really depend how the tariff landscape settles. We’ve made some tweaks in our manufacturing footprint over the last three months, but that’s probably in low single percent basis as far as our manufacturing footprint. So nothing ordinary. It’s more just surgical.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And the other question, the tax bill yet to pass is expected by many to include bonus appreciation incentives for domestic manufacturing as well as some individual tax relief. Do you expect this to have a significant impact on your company? And which are the potential tax changes that could have the most impact?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So like everybody else, we would like the, I would say, tax regime that’s in place right now to remain. I think that would be most beneficial for us with exception maybe of the R and D expensing. Obviously, that would be, I would say, beneficial to most company if that was allowed.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Excellent. You’ve been very efficient at answering the question. So couple more from me then. So structurally, how do you think about your pricing strategy across the different business units? Where do you get the most pricing power?

And what’s sort of an area of caution for you?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So with tariffs, obviously pricing got quite more But I would say going into the year and what we’re trying to accomplish via pricing is get pricing where we can, but not destroy demand. And we’re very careful about as far as learning from last time in terms of managing our overall price cost equation. We have this time around, we have, I would say, much more opportunities in terms of supply chain efficiencies and how we manage that. And we and that allows us to be more choosy as far as how we drive prices and where we drive prices to be able to stimulate demand and manage our share of the market.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: And are you guys doing more pricing or so far, have you done more pricing or surcharges?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: So we have regular way pricing, which we issued in during the year, and that’s, 2%, two point five % for us with inflation maybe now that will be north of 3%. But the tariffs, manage more for surcharges. We want to be very transparent to our customers where the surcharges are and what’s driving there. And we found that that’s a better way to drive the type of cost recovery.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Got you. So if the tariffs go back, you’ll pull That’s right. Okay. Excellent. And maybe the last question.

How you bought back more stock this quarter.

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: Yes.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: So how have the company’s view on buybacks have evolved over the past maybe twelve to eighteen months?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: I would say going into going for the first quarter and into the second quarter, we just felt the stock was very attractive from a pricing standpoint. So we wanted to front load that and take advantage of that, if you will. And as we go through the year, we’ll see how just how our capital allocation evolves priorities, whether it’s M and A, stock dividend. Dividend obviously will stay the way it is. We’re not going impacted.

We’ll be opportunistic, I would say.

Andrew Obin, BofA Multi-Industrial Analyst, BofA: Okay. Would you say you’re more open to buybacks than in the past or any change or?

Mike Stepnik, Senior Vice President and Chief Financial Officer, Honeywell: We’ll continue to maintain our capital allocation discipline and allocate capital appropriately, I would say, this year. We felt that going to the year in the first half, the stock was attractively priced for us to do more

Andrew Obin, BofA Multi-Industrial Analyst, BofA: buybacks. Well, ultimately, we agree that the stock is attractively priced. Mike, thanks so much. Right on time. Everybody, thanks so much for attending.

Thank you very much. Appreciate Of course.

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