WEBVTT - Honeywell CEO Vimal Kapur Talks Company Outlook

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<v Speaker 1>It is the last day of May. Remember back a

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<v Speaker 1>couple of weeks ago, the Dow Jones Industrial Average book

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<v Speaker 1>forty thousand. It's also up sixteen percent over the year.

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<v Speaker 1>Now one of its major components, though Honeywell makes up

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<v Speaker 1>about three point four percent of the index, is lagging

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<v Speaker 1>despite delivering solid numbers every quarter. Romaine and I caught

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<v Speaker 1>up with its CEO, Vima Kopor, who is celebrating his

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<v Speaker 1>one year anniversary in the post on Saturday, and we

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<v Speaker 1>started by asking him there are three businesses, automation, energy

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<v Speaker 1>and aerospace still fit together.

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<v Speaker 2>My near time priority is deliver the results. We have

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<v Speaker 2>an earnings guide. We meet or beat it so that

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<v Speaker 2>gives us the right to play, continue to evolve our portfolio,

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<v Speaker 2>but also be open for all the options. I mean,

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<v Speaker 2>my job as the CEO is make sure that we

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<v Speaker 2>drive the shareholders earnings. That's that's what they really stand

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<v Speaker 2>here for. But near term, we have a strong operating system,

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<v Speaker 2>strong strategy, and I feel convicted we are on the

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<v Speaker 2>right track.

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<v Speaker 3>As you know, there are a lot of investors, activists,

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<v Speaker 3>investors who of course have looked at the model and

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<v Speaker 3>least in their minds sting they have a better feel

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<v Speaker 3>for it. I've heard you, I've heard your CFO as

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<v Speaker 3>well as other executives at Honeywell talk about this idea

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<v Speaker 3>that you yourself are your own activists investor kind of explain that.

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<v Speaker 2>It's like you always look at it. Are we creating

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<v Speaker 2>value collectively? And ask that question frequently enough and don't

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<v Speaker 2>wait for an activist to show up, Ask that question,

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<v Speaker 2>present that productivity to the board and see what the

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<v Speaker 2>answer is, and whatever the answer is, run company towards

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<v Speaker 2>that versus trying to wait for any other scenario. That's

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<v Speaker 2>what we really mean. Why we are our own activists.

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<v Speaker 1>So if you were your own activists and looking at

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<v Speaker 1>your stock price versus your peers, what would you tell

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<v Speaker 1>yourself because it's underperformed? And the question for many analysts

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<v Speaker 1>is for no reason? Because you deliver. You got the margins,

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<v Speaker 1>you got the growth, you got the earnings, So what.

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<v Speaker 2>Gives Obviously, I mean, being in this job for a year,

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<v Speaker 2>it's certainly a disappointment, I would say, But what we

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<v Speaker 2>are working is to deliver our commitment for this year.

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<v Speaker 2>And I'm confident that as we delivered our earnings a

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<v Speaker 2>year progresses will certainly get the valuation, what we are

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<v Speaker 2>looking forward to.

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<v Speaker 1>There's also a conversation that the moves that you're doing

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<v Speaker 1>in terms of divesting some assets that aren't on core

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<v Speaker 1>and making some acquisitions like you did a carrier for example,

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<v Speaker 1>almost five billion, they're.

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<v Speaker 2>Just not enough.

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<v Speaker 1>They're not sexy enough, they're bolt on. You need like

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<v Speaker 1>something transformational. When you say to that, I would.

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<v Speaker 2>Say that, given we have three compelling trends on which

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<v Speaker 2>we are aligned to, I don't see a need to

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<v Speaker 2>add one more transformation. That to me is a stretch

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<v Speaker 2>argument by making it too general. The question remains valid.

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<v Speaker 2>What's the next big move in automation, what's the mess

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<v Speaker 2>moo move in aerospace? Absolutely, and that's why I really

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<v Speaker 2>work every year, every day to make sure that what

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<v Speaker 2>can we do organically and what can we do inorganically,

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<v Speaker 2>And you can expect us to do a lot of

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<v Speaker 2>work towards that as the time passes by this year

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<v Speaker 2>and next year. I'm excited about in organic opportunities in

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<v Speaker 2>each of the three spaces, and our pipeline is much

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<v Speaker 2>stronger than it has ever been before, and I do

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<v Speaker 2>expect that we should be able to announce the right

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<v Speaker 2>deals during the course of this year, and that will

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<v Speaker 2>be the true test set that we're really executing our

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<v Speaker 2>strategy and we don't need a transformational deal.

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<v Speaker 3>Is that primarily going to be acquisitions? Are there also

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<v Speaker 3>divestagers that you're also considering.

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<v Speaker 2>Some divests too? I mean, you know, if I have

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<v Speaker 2>to truly live to my word of the three mega trends,

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<v Speaker 2>there are parts of our portfolio which don't fit well,

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<v Speaker 2>and we'll slowly divest them. The reason we have not

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<v Speaker 2>been public is the best interest of our shareholders because

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<v Speaker 2>by making it public, we won't get the value at

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<v Speaker 2>the exit point. But it doesn't mean internally we're not

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<v Speaker 2>doing the work. We are doing the work, and I

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<v Speaker 2>think it will unfold as the time passes by.

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<v Speaker 3>I do want to get your thoughts on the automation business.

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<v Speaker 3>Investors have been a little bit concerned about how that's

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<v Speaker 3>like the other two major units that you have. I mean,

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<v Speaker 3>we are at a time a pretty tremendous structural change

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<v Speaker 3>in our economy, structural changes that I think would be

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<v Speaker 3>a pretty big tailwan for the automation sector. Why have

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<v Speaker 3>we not seen that show work yet in Honeywells results?

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<v Speaker 2>Look over our businesses, I would say The near term

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<v Speaker 2>results are combination of our automation business, which is short

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<v Speaker 2>cycle and long cycle. The long cycle portions of automation

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<v Speaker 2>are doing well because people are building long term capacity

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<v Speaker 2>on different end markets. The short cycle is still recovering

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<v Speaker 2>from the COVID cycle, which can look awkward to say,

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<v Speaker 2>you've been four years and you're still talking about COVID.

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<v Speaker 2>But the stalking impacts the distribution distributors is still playing

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<v Speaker 2>out and that's a large portion of our automation business,

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<v Speaker 2>and that negatively impacts the numbers at this point. But

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<v Speaker 2>we are confident as a year is progressing. Every quarter

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<v Speaker 2>we are doing better than the previous quarter, and that's

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<v Speaker 2>our you know, the Rubrik for twenty twenty four. That sequentially,

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<v Speaker 2>we keep improving short cycle every quarter and we have

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<v Speaker 2>a strong exit and end of the year which positions

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<v Speaker 2>us very well for twenty twenty five. So I'm very

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<v Speaker 2>confident this is going. This is if or when we

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<v Speaker 2>exactly know the different businesses and different cycle they are

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<v Speaker 2>and when they are going to see recovery. And we

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<v Speaker 2>see recovery in many of the businesses already, but it's

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<v Speaker 2>not all in because it's not a switch. We have

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<v Speaker 2>multiple businesses and multiple end markets. Therefore, it is going

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<v Speaker 2>to be sequenced over a timeline.

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<v Speaker 1>So the warehouse automation part, you are one hundred percent

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<v Speaker 1>committed to.

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<v Speaker 2>It absolutely today we are absolutely committed to it. It's

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<v Speaker 2>a critical need of improving worker efficiency or labor shortages.

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<v Speaker 2>So this is not about debate of is it a

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<v Speaker 2>good sector or bad sector. Fundamentally, the value proposition is

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<v Speaker 2>very strong. It went through the capacity built and overbuilt

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<v Speaker 2>during the COVID cycle because everybody put too much of

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<v Speaker 2>bet on e commerce and overbuilt it. So it's going

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<v Speaker 2>through some correction. So they are the correction pains we

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<v Speaker 2>saw in twenty three. We're probably going to experience this

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<v Speaker 2>twenty four. But if I take a five or ten

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<v Speaker 2>year view, clearly there is a clear value proposition on

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<v Speaker 2>why people invest in it because it gives productivity.

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<v Speaker 1>To them, which leads us back just to inorganic growth

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<v Speaker 1>is what you were talking about and seeing opportunities there.

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<v Speaker 1>Next year, you're looking at selling that quantum computing business

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<v Speaker 1>and that could fetch as much as five billion or

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<v Speaker 1>even more. Right, that's a.

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<v Speaker 2>Nice hefty sum.

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<v Speaker 1>It is what do you want to buy so you

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<v Speaker 1>don't have to have a huge transformational deal. But what

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<v Speaker 1>is on your.

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<v Speaker 2>Shopping So our shopping list is bolt on acquisitions because

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<v Speaker 2>you want to be thoughtful on how you want to

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<v Speaker 2>progress your strategy in each of these three mega trends,

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<v Speaker 2>and the boldt on acquisition to me is something which

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<v Speaker 2>attaches with your current business, takes you to an adjacency,

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<v Speaker 2>and compounds the growth of that business by itself. The

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<v Speaker 2>acquisition we made on Compressive Control last year, that was

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<v Speaker 2>an acquisition into our automation business. It's a bolt on

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<v Speaker 2>to that. The acquisition we made for our career is

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<v Speaker 2>a boilt on to our building automation business. We acquire

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<v Speaker 2>Cibit navin Itally, the acquisition get completing course of the

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<v Speaker 2>year is a bolt on to our aerospace business. If

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<v Speaker 2>you see that trend line, we are very purposeful to

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<v Speaker 2>do the boltons and we stay on course for three

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<v Speaker 2>of our mega trends, so we are not doing some

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<v Speaker 2>random things which makes no sense. Everything you will see

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<v Speaker 2>moving forward will following the same trend line.

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<v Speaker 1>Is that going to be enough to get your growth

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<v Speaker 1>engine really started?

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<v Speaker 2>Absolutely?

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<v Speaker 1>I mean when when is that growth engine going to

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<v Speaker 1>rev up? Hardcore?

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<v Speaker 2>Look, our commitment to our shareholder is eight to twelve

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<v Speaker 2>person earnings growth every year. And what I need to

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<v Speaker 2>work on is when you look at it five years

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<v Speaker 2>or greater horizon, are we capable of delivering that every year,

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<v Speaker 2>year on year. And so I look at organic growth

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<v Speaker 2>and in organic growth in combination of that and are

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<v Speaker 2>readily prepared for, you know, preferably double digit earnings growth.

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<v Speaker 2>That's what I'm here for.

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<v Speaker 1>That was Honeywell CEO Vima Kaporg