Speaker 1: It is the last day of May. Remember back a
Speaker 1: couple of weeks ago, the Dow Jones Industrial Average book
Speaker 1: forty thousand. It's also up sixteen percent over the year.
Speaker 1: Now one of its major components, though Honeywell makes up
Speaker 1: about three point four percent of the index, is lagging
Speaker 1: despite delivering solid numbers every quarter. Romaine and I caught
Speaker 1: up with its CEO, Vima Kopor, who is celebrating his
Speaker 1: one year anniversary in the post on Saturday, and we
Speaker 1: started by asking him there are three businesses, automation, energy
Speaker 1: and aerospace still fit together.
Speaker 2: My near time priority is deliver the results. We have
Speaker 2: an earnings guide. We meet or beat it so that
Speaker 2: gives us the right to play, continue to evolve our portfolio,
Speaker 2: but also be open for all the options. I mean,
Speaker 2: my job as the CEO is make sure that we
Speaker 2: drive the shareholders earnings. That's that's what they really stand
Speaker 2: here for. But near term, we have a strong operating system,
Speaker 2: strong strategy, and I feel convicted we are on the
Speaker 2: right track.
Speaker 3: As you know, there are a lot of investors, activists,
Speaker 3: investors who of course have looked at the model and
Speaker 3: least in their minds sting they have a better feel
Speaker 3: for it. I've heard you, I've heard your CFO as
Speaker 3: well as other executives at Honeywell talk about this idea
Speaker 3: that you yourself are your own activists investor kind of explain that.
Speaker 2: It's like you always look at it. Are we creating
Speaker 2: value collectively? And ask that question frequently enough and don't
Speaker 2: wait for an activist to show up, Ask that question,
Speaker 2: present that productivity to the board and see what the
Speaker 2: answer is, and whatever the answer is, run company towards
Speaker 2: that versus trying to wait for any other scenario. That's
Speaker 2: what we really mean. Why we are our own activists.
Speaker 1: So if you were your own activists and looking at
Speaker 1: your stock price versus your peers, what would you tell
Speaker 1: yourself because it's underperformed? And the question for many analysts
Speaker 1: is for no reason? Because you deliver. You got the margins,
Speaker 1: you got the growth, you got the earnings, So what.
Speaker 2: Gives Obviously, I mean, being in this job for a year,
Speaker 2: it's certainly a disappointment, I would say, But what we
Speaker 2: are working is to deliver our commitment for this year.
Speaker 2: And I'm confident that as we delivered our earnings a
Speaker 2: year progresses will certainly get the valuation, what we are
Speaker 2: looking forward to.
Speaker 1: There's also a conversation that the moves that you're doing
Speaker 1: in terms of divesting some assets that aren't on core
Speaker 1: and making some acquisitions like you did a carrier for example,
Speaker 1: almost five billion, they're.
Speaker 2: Just not enough.
Speaker 1: They're not sexy enough, they're bolt on. You need like
Speaker 1: something transformational. When you say to that, I would.
Speaker 2: Say that, given we have three compelling trends on which
Speaker 2: we are aligned to, I don't see a need to
Speaker 2: add one more transformation. That to me is a stretch
Speaker 2: argument by making it too general. The question remains valid.
Speaker 2: What's the next big move in automation, what's the mess
Speaker 2: moo move in aerospace? Absolutely, and that's why I really
Speaker 2: work every year, every day to make sure that what
Speaker 2: can we do organically and what can we do inorganically,
Speaker 2: And you can expect us to do a lot of
Speaker 2: work towards that as the time passes by this year
Speaker 2: and next year. I'm excited about in organic opportunities in
Speaker 2: each of the three spaces, and our pipeline is much
Speaker 2: stronger than it has ever been before, and I do
Speaker 2: expect that we should be able to announce the right
Speaker 2: deals during the course of this year, and that will
Speaker 2: be the true test set that we're really executing our
Speaker 2: strategy and we don't need a transformational deal.
Speaker 3: Is that primarily going to be acquisitions? Are there also
Speaker 3: divestagers that you're also considering.
Speaker 2: Some divests too? I mean, you know, if I have
Speaker 2: to truly live to my word of the three mega trends,
Speaker 2: there are parts of our portfolio which don't fit well,
Speaker 2: and we'll slowly divest them. The reason we have not
Speaker 2: been public is the best interest of our shareholders because
Speaker 2: by making it public, we won't get the value at
Speaker 2: the exit point. But it doesn't mean internally we're not
Speaker 2: doing the work. We are doing the work, and I
Speaker 2: think it will unfold as the time passes by.
Speaker 3: I do want to get your thoughts on the automation business.
Speaker 3: Investors have been a little bit concerned about how that's
Speaker 3: like the other two major units that you have. I mean,
Speaker 3: we are at a time a pretty tremendous structural change
Speaker 3: in our economy, structural changes that I think would be
Speaker 3: a pretty big tailwan for the automation sector. Why have
Speaker 3: we not seen that show work yet in Honeywells results?
Speaker 2: Look over our businesses, I would say The near term
Speaker 2: results are combination of our automation business, which is short
Speaker 2: cycle and long cycle. The long cycle portions of automation
Speaker 2: are doing well because people are building long term capacity
Speaker 2: on different end markets. The short cycle is still recovering
Speaker 2: from the COVID cycle, which can look awkward to say,
Speaker 2: you've been four years and you're still talking about COVID.
Speaker 2: But the stalking impacts the distribution distributors is still playing
Speaker 2: out and that's a large portion of our automation business,
Speaker 2: and that negatively impacts the numbers at this point. But
Speaker 2: we are confident as a year is progressing. Every quarter
Speaker 2: we are doing better than the previous quarter, and that's
Speaker 2: our you know, the Rubrik for twenty twenty four. That sequentially,
Speaker 2: we keep improving short cycle every quarter and we have
Speaker 2: a strong exit and end of the year which positions
Speaker 2: us very well for twenty twenty five. So I'm very
Speaker 2: confident this is going. This is if or when we
Speaker 2: exactly know the different businesses and different cycle they are
Speaker 2: and when they are going to see recovery. And we
Speaker 2: see recovery in many of the businesses already, but it's
Speaker 2: not all in because it's not a switch. We have
Speaker 2: multiple businesses and multiple end markets. Therefore, it is going
Speaker 2: to be sequenced over a timeline.
Speaker 1: So the warehouse automation part, you are one hundred percent
Speaker 1: committed to.
Speaker 2: It absolutely today we are absolutely committed to it. It's
Speaker 2: a critical need of improving worker efficiency or labor shortages.
Speaker 2: So this is not about debate of is it a
Speaker 2: good sector or bad sector. Fundamentally, the value proposition is
Speaker 2: very strong. It went through the capacity built and overbuilt
Speaker 2: during the COVID cycle because everybody put too much of
Speaker 2: bet on e commerce and overbuilt it. So it's going
Speaker 2: through some correction. So they are the correction pains we
Speaker 2: saw in twenty three. We're probably going to experience this
Speaker 2: twenty four. But if I take a five or ten
Speaker 2: year view, clearly there is a clear value proposition on
Speaker 2: why people invest in it because it gives productivity.
Speaker 1: To them, which leads us back just to inorganic growth
Speaker 1: is what you were talking about and seeing opportunities there.
Speaker 1: Next year, you're looking at selling that quantum computing business
Speaker 1: and that could fetch as much as five billion or
Speaker 1: even more. Right, that's a.
Speaker 2: Nice hefty sum.
Speaker 1: It is what do you want to buy so you
Speaker 1: don't have to have a huge transformational deal. But what
Speaker 1: is on your.
Speaker 2: Shopping So our shopping list is bolt on acquisitions because
Speaker 2: you want to be thoughtful on how you want to
Speaker 2: progress your strategy in each of these three mega trends,
Speaker 2: and the boldt on acquisition to me is something which
Speaker 2: attaches with your current business, takes you to an adjacency,
Speaker 2: and compounds the growth of that business by itself. The
Speaker 2: acquisition we made on Compressive Control last year, that was
Speaker 2: an acquisition into our automation business. It's a bolt on
Speaker 2: to that. The acquisition we made for our career is
Speaker 2: a boilt on to our building automation business. We acquire
Speaker 2: Cibit navin Itally, the acquisition get completing course of the
Speaker 2: year is a bolt on to our aerospace business. If
Speaker 2: you see that trend line, we are very purposeful to
Speaker 2: do the boltons and we stay on course for three
Speaker 2: of our mega trends, so we are not doing some
Speaker 2: random things which makes no sense. Everything you will see
Speaker 2: moving forward will following the same trend line.
Speaker 1: Is that going to be enough to get your growth
Speaker 1: engine really started?
Speaker 2: Absolutely?
Speaker 1: I mean when when is that growth engine going to
Speaker 1: rev up? Hardcore?
Speaker 2: Look, our commitment to our shareholder is eight to twelve
Speaker 2: person earnings growth every year. And what I need to
Speaker 2: work on is when you look at it five years
Speaker 2: or greater horizon, are we capable of delivering that every year,
Speaker 2: year on year. And so I look at organic growth
Speaker 2: and in organic growth in combination of that and are
Speaker 2: readily prepared for, you know, preferably double digit earnings growth.
Speaker 2: That's what I'm here for.
Speaker 1: That was Honeywell CEO Vima Kaporg