Q4 2021 Honeywell International Inc Earnings Call
Speaker 1: Good day, ladies and gentlemen, and welcome to Honeywell's fourth quarter earnings release and 2022 Outlook call. At this time, all participants are in a listening-only mode, and the floor will be open for your questions following the presentation.
And they gave us a definite and.
Welcome to Honeywell's fourth quarter earnings release, and 2022 out of the call at.
At this time all participants are in a leasing on the mill and the floor will be opened for your questions. Following the presentation.
Speaker 1: If you would like to ask a question at that time, please click on the raise hand icon at the bottom where you've seen the screen. As a reminder,
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As a reminder, this conference is being recorded.
Speaker 1: I would now like to introduce your host for today's conference, Sean Meehan, Vice President of Investor Relations. Sam, please go ahead.
I would now like to introduce your host for today's conference, Sean Meakin, Vice President of Investor Relations. Please go ahead.
Thank you Ari.
Speaker 2: Good morning and welcome to Honeywell's fourth quarter 2021 earnings and 2022 outlook.
Good morning, and welcome to Honeywell's fourth quarter 2021 earnings in 2022 outlook Conference call.
Speaker 2: On the call with me today are Chairman and CEO Darius Adamcic and Senior Vice President and Chief Financial Officer Greg Lewis.
On the call with me today are chairman and CEO , Darius Adamczyk, and senior Vice President and Chief Financial Officer, Greg Lewis.
Speaker 2: Also joining us are Senior Vice President and General Counsel Anne Madden, and Senior Vice President and Chief Supply Chain Officer Torsten Pills.
Also joining us are senior Vice President General Counsel and Madden.
Senior Vice President and Chief supply chain Officer Torsten Pilz.
Speaker 2: This call-in webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com.
This call and webcast, including any non-GAAP reconciliations are available on our website at www dot on the wall Dot com forward Slash investor.
Speaker 2: Honeywell also uses our website as a means of disclosing information which may be of interest or material to our investors and for complying with disclosures under obligations under Regulation FD. Accordingly, investors should monitor our investor relations website in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media.
Honeywell also use our website as a means of disclosing information, which may be of interest or material to our investors and for complying with disclosure under rate obligations under regulation FD Accordingly investors should monitor our Investor Relations website. In addition to following our press releases SEC filings other conference calls webcast and social media.
Speaker 2: Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today.
Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our businesses as we see them today.
Speaker 2: Those elements can change based on many factors, including changing economic and business conditions. And we ask you that you interpret them in that.
Those elements can change based on many factors, including changing economic and business conditions and we ask you that you interpret them in that light.
Speaker 2: We identify the principal risks and uncertainties that may affect our performance in our annual report on Form 10-K and other SEC files.
We identify the principal risks and uncertainties that may affect our performance in our annual report on Form 10-K , and other SEC filings.
Speaker 2: This morning, we'll review our financial results for the fourth quarter and full year 21, discuss our 2022 outlook, and share our guidance for the first quarter of 2022 and full year 22. As always, we'll leave time for your questions at the end. With that, I'll turn the call over to Chairman and CEO Darius Adal.
This morning, we will review our financial results for the fourth quarter and full year 'twenty, one discuss our 2022 outlook and share our guidance for the first quarter 2022, and full year 'twenty two.
As always believed time for your questions at the end with that I'll turn the call over to chairman and CEO Darius Saddam check.
Speaker 3: Thank you, Sean, and good morning, everyone. Let's begin on slide two. We delivered a strong fourth quarter despite a challenging backdrop that included an accelerated inflationary environment, ongoing supply chain constraints, and persistent COVID-19 variants. I'm pleased for our disciplined execution as we navigate these challenges and capitalize on the ongoing recovery in our landmark.
Thank you Sean and good morning, everyone. Let's begin on slide two we delivered a strong fourth quarter, despite a challenging backdrop, including the accelerated inflationary environment ongoing supply chain constraints and persistent COVID-19 variance I'm pleased for our disciplined execution as we navigate these challenges capitalize on Angola.
Recovery in our end markets.
Speaker 3: Delivering our fourth quarter commitments for sales, segment margin and adjusted earnings for share despite these headwinds. The fourth quarter adjusted earnings for share of $2.09 of 1% year over year, and just above the midpoint of our guide.
The delivery of our fourth quarter commitments for sales segment margin and adjusted earnings per share. Despite these headwinds with fourth quarter adjusted earnings per share of $2 nine up 1% year over year, and just above the midpoint of our guidance.
Speaker 3: Organic sales were down 2% year over year. That was heavily impacted by the COVID mask declines in fewer days in the fiscal quarter, which Greg will touch on later. Our focus on differentiated solutions for double-digit fourth quarter organic shelf growth in the commercial aerospace aftermarket, productivity solutions and services, advanced sensing technologies and recurring connected software business.
We're getting sales were down 2% year over year net was heavily impacted by the COVID-19 mass declines and fewer days in the fiscal quarter, which Greg will touch on later, our focus on differentiated solutions drove double digit fourth quarter organic sales growth in the commercial aerospace aftermarket productivity solutions and services advanced sensing technology.
He has been a recurring connected software business.
Speaker 3: Segment margin expands 30 basis point year over year, led by strong pricing actions that we took again this quarter to address the headwinds we faced from inflationary pressures and supply chain disruptions. These swift pricing actions allow us to stay ahead of the inflation curve, driving a 5% increase year over year on top line and yielding approximately 50 basis points of margin expansions narrow in price.
Segment margin expanded 30 basis points year over year led by strong pricing actions that we took eight again this quarter to address the headwinds we faced from inflationary pressures and supply chain disruptions. The swift pricing actions or stay ahead of the inflation curve driving a 5% increase year over year on topline and yielding approximately 50.
<unk> points of margin expansion net of inflation.
Speaker 3: We generated $2.6 billion of free cash flow in a quarter, 4% above the fourth Q2020, achieving 178% adjusted conversion.
We generated $2 $6 billion of free cash flow the quarter, 4% above the fourth Q2 thousand 20, achieving a 178% adjusted conversion.
Speaker 3: In terms of capital deployment, we put $2.1 billion of cash to work in the fourth quarter. Looking at the entire year, orders across Honeywell grew double digits organically and backlogged increased 7% to $27.7 billion were driven by strength in many of our segments as we enter 2020.
In terms of capital deployment, we put $2 $1 billion of cash to work in the fourth quarter looking at the entire year orders across Honeywell grew double digits organically and backlog increased 7% to $27 $7 billion were driven by strength in many of our segments as we enter 2022.
Speaker 3: We finished 2021 with 4% organic sales growth, 60 basis points of margin expansion and $8.06 of adjusted earnings per share, a 14% year over year.
We finished 2021 with 4% organic sales growth 60 basis points of margin expansion and $8.06 of adjusted earnings per share up 14% year over year.
Speaker 3: We generated $5.7 billion of pre-cash flow in the year, resulting in an adjusted conversion of 102% or 17% of revenue, a very strong result. Our earnings per share and our pre-cash flow performance was above our initial guidance range shared at the start of 2021, demonstrating our ability to deliver on our commitments despite unforeseen challenges and shifting economic.
We generated $5 $7 billion of free cash flow in the year, resulting in adjusted conversion of 102% or 17% of revenue very strong result, our earnings per share and our free cash flow performance was above our initial guidance range shared at the start of 2021, demonstrating our ability to deliver on our commitment.
Despite unforeseen challenges and shifting economic conditions.
Speaker 3: In the appendix of this presentation, it is a slide highlighting our guidance progression throughout 2021, as well as our performance against these guys.
In the appendix of this presentation is a slide highlighting our guidance progression throughout 2021 as well as our performance against these guys.
Speaker 3: On our capital deployment strategy, we have maintained a balanced approach over the past several years, consistently deploying more than 100% of operating cash flow to fund share repurchases, dividends, M&A, and capital expenses.
And our capital deployment strategy, we maintain a balanced approach over the past several years consistently deploying more than 100% operating cash flow to fund share repurchases dividends M&A and capital expenditures. This past year was no exception in fact 2021 marks the highest level of capital deployment.
Speaker 3: past year was no exception. In fact, 2021 marks the highest level of capital deployment the last six years. Despite the challenges we faced in 2021, we deployed $8.5 billion of capital demonstrating our commitment to investing in high return opportunities in any environment.
The last six years. Despite the challenges we faced in 2021, we deployed $8 $5 billion of capital demonstrating our commitment to investing in high return opportunities in any environment.
Speaker 3: We invested $1.6 billion in M&A, adding strategic assets to our portfolio that enhance our technology offers, innovation, and ultimately, our long-term growth potential.
We invested $1 $6 billion in M&A any strategic assets to our portfolio that enhance our technology offers innovation and ultimately our long term growth potential.
Speaker 3: specifically, we completed four transactions, including Smart Assistance, ViPlex, Performance, and the $270 million, we contribute to the Continuum Combination, which I'll talk about more about in a moment.
Specifically, we completed four transactions, including Sparta systems, <unk> for Forex and the $270 million million.
$1 billion, we contribute to continuum combination, which I'll talk about more about the moment.
Speaker 3: We spent $900 million on capital expenditures, continue to build technologies to make our world safer, more efficient, and more sustainable.
Spent $900 million in capital expenditures.
To build technologies to make our world safer more efficient and more sustainable we deployed $3 $4 billion to repurchase shares reducing our weighted average share count by one 5% and finally, we maintain a strong dividend policy paying out $2 $6 billion and raising our dividend again for the 12.
Speaker 3: We deployed $3.4 billion to repurchase shares, reducing our weighted average share count by 1.5%
Speaker 3: And finally, we maintain a strong dividend policy, paying out $2.6 billion in raising our dividend again for the 12 times new Lebanese.
Todd 11 years looking forward I continue to be encouraged by the strength, we're seeing in many areas of our portfolio as we continue to execute on our rigorous and proven value creation framework underpinned by our accelerated operating system that drives outstanding shareholder value next let's turn to slide three to discuss some.
Speaker 3: Looking forward, I continue to be encouraged by the strength we're seeing in many areas of our portfolio as we continue to execute our rigorous, improving value creation framework underpinned by our accelerator operating system that drives outstanding shareholder value. Next, let's turn to slide three to discuss some exciting wins in our sustainable technology solution.
Wins in our sustainable technology solutions business.
Speaker 3: We continue to make substantial gains for our sustainability.
We continue to make substantial gains for our sustainability business in our fourth quarter, we announced the commercialization of our up cycle process technology, a revolutionary new process that expands the types of plastics that can be recycled. This process can produce feedstocks used to meet recycled plastics, but more.
Speaker 3: In the fourth quarter, we announced the commercialization of our upcycle process technology, a revolutionary new process that expands the types of plastics that can be recycled. This process can produce feedstocks used to make recycled plastics of a much lower carbon footprint and has the potential to increase the amount of global plastic waste that can be recycled to 90% of the carbon footprint.
Much lower carbon footprint and has the potential to increase the amount of global plastic waste that can't be recycled to 90%.
Speaker 3: In addition, just last week we announced our intent to form a joint venture of our regard innovative, America's largest plastics refightler to build an advanced recycling plant in Texas.
In addition, just last week, we announced our intent to form a joint venture of a guard innovative America's largest plastics recycler to build an advanced recycling plant in Texas.
Speaker 3: The facility will use our upcycle process technology and is expected to have the capacity to transform 30,000 metric tons of mixed waste plastics into 20-well recycled polymer feedstocks per year.
The facility will use our up cycle process technology and is expected to have the capacity to transform 30000 metric tons of <unk>.
A way of mixed waste plastics into Honeywell recycled polymer feedstocks per year. We also recently announced that we've introduced into an agreement with prior battery, we intend to provide smart energy storage solutions to address the needs of a wide range of commercial and industrial customers alike, Fryer will leverage honeywell's leading tech.
Speaker 3: We also recently announced that we've introduced into an agreement with Prior Battery, the intent to provide smart energy storage solutions to address the needs of wide range of commercial and industrial customers alike.
Speaker 3: Fryer will leverage Honeywell's leading technology offerings, including integrated automation, field instrumentation, and security integration solutions or manufacturing processes.
<unk> offerings, including an integrated automation field instrumentation and security integration solutions are manufacturing processes in churn annual purchase 38 gigawatt hours of battery cells produced by prior for multiple for energy storage system applications.
Speaker 3: In turn, honey will purchase 38 gigawatt hours of battery cells produced by Friar from multiple of energy storage system applications.
Speaker 3: Battery energy storage systems technology development is vital to the continued decarbonization of global power system as well enable the transition to renewable energy.
Battery energy storage systems technology development is vital to the continued de carbonization of global power system as will enable the transition to renewable energy sources.
Speaker 3: In a fourth quarter, we announced in agreement the University of Texas at Austin that will enable the lower cost capture of carbon dioxide emissions from power plants.
In our fourth quarter, we announced an agreement the University of Texas at Austin that will enable the lower cost capture of carbon dioxide emissions from power plants and heavy industry. We are committed to achieve carbon neutrality in our own operations and facilities by 2035, we're committed to helping our customers use their carbon footprint as well.
Speaker 3: We have committed to achieve carbon neutrality in our own operations and facilities by 2035. We're committed to helping our customers use their carbon footprint as well. We'll leverage UT Austin's proprietary advanced solvent technology to help power, steel, cement, and other industrial plants lower their emissions and meet their sustainability goals. Finally, we saw tremendous growth in the development of the new technology
<unk> leverage Ut Austin propriety advanced solvent technology to help power steel cement and other industrial plants lower their emissions and meet their sustainability goals.
Finally, we saw a tremendous traction or green fuels business, which uses youll piece eco finding technology to produce high quality drop in fuels from sustainable sources over the last few months recorded six important wins, including two large multinational companies.
Speaker 3: which uses UOP's eco-finding technology to produce high quality, drop-in fuels from sustainable sources. Over the last few months, we recorded six important wins including two large multinational events.
Speaker 3: In addition, Diamond Green Diesel is using eco-finding technology to produce renewable diesel. They plan on having the capacity to produce over 1 billion gallons per year by the second half of 2020.
In addition, diamond Green diesel using eco bonding technology to produce renewable diesel they plan on having the capacity to produce over 1 billion gallons per year by the second half of 2020.
Speaker 3: These are just four select examples from our vast portfolio of sustainable offerings. We will continue to innovate, demonstrating that Honeywell will be a key player in the oncoming energy transition. Now let's turn to the next slide, take a look at some of the big commercial developments and how we are aggressively investing in...
These are just for select examples from our vast portfolio of sustainable offerings. We will continue to innovate demonstrating that Honeywell will be a key player of the oncoming energy transition now, let's turn to the next slide to take a look at some of the big commercial development and how we are aggressively investing in growth.
Speaker 3: If you've been following our press releases over the past quarters, including the examples highlighted on the previous slide, you're well aware of the successes we're having with new innovations and partnerships. We have many growth opportunities across the portfolio, be it new products, businesses, or entirely new markets. These areas present high return opportunities to deploy our CapEx and OpEx spend to create value for the future.
If you've been following our press releases over the past quarters, including the examples highlighted in a previous slide you are well aware of the successes, we're having with new innovations and partnerships with many growth opportunities across the portfolio. The new products businesses are entirely new markets. These areas presented.
Higher return opportunities to deploy our capex and opex spend to create value for the future.
Speaker 3: To highlight a few examples, in 2021, we are increasing capital investment to expand our solstice production capacity, commercialize our advanced plastics recycling technology, and build additional generations of both commercial and development quantum compute.
To highlight a few examples in 2022, we're increasing capex investments to expand our solstice production capacity commercialize our advanced plastics recycling technology and build additional generations of both commercial and development quantum computers.
Speaker 3: The fund key investment priorities in 22 blends to spend 1.1 to $1.2 billion in CAPEX of $200 million versus 2021, of 25% versus the prior three years.
One key investment priorities in 'twenty to blend to spend $1 one to one $2 billion in capex up $200 million versus 2021 up 25% versus the prior three years, our 2022 research and development priorities will be continued innovation is sustainable technologies develop.
Speaker 3: Our 2022 research and development priorities will be continued innovation in sustainable technologies, developing our next generation flight deck, and investment in new engine development to name a few.
<unk>, our next generation flight deck investment new engine development to name a few.
Speaker 3: R&D for 22 will be up approximately 200 million for 15% year-over-year and up 10% versus the prior three years.
R&D for 'twenty, two will be up approximately 200 million or 15% year over year and up 10% versus the prior three years.
Speaker 3: Our internal spending on capital projects at R&D has consistently been the highest return deployment of our capital. We'll continue to make these investments to drive our future.
Our internal spending on capital projects in the R&D has consisted with the highest return deployment of our capital will continue to make these investments to drive our future growth also Honeywell digital one of the three main transformation niches initiatives has fundamentally changed the way we work and result in one.
Speaker 3: Also, Honeywell Digital, one of the three main transformation initiatives, has fundamentally changed the way we work and result in $1 billion of cumulative sales, productivity, and working capital benefits since 2018. We'll continue to invest in our digitization efforts to drive efficiencies and produce valuable data-driven initiatives.
Billions of dollars of cumulative sales productivity and working capital benefits. Since 2018 will continue to invest in our digitization efforts to drive efficiencies and produce valuable data driven insights. While this may be a modest drag on our cash generation 22. These investments are crucial to accelerating our.
Speaker 3: While this may be a modest drag on our cash generation in 2022, these investments are crucial to accelerating our growth and drive transformation across our portfolio.
Growth and drive transformation across our portfolio.
Speaker 3: Let's turn to slide five, pick a closer look at quantumium during the major breakthrough initiatives for honey.
Turning to slide five take a closer look at one P. M. During the major breakthrough initiatives for Honeywell.
Speaker 3: In the fourth quarter, we completed our previously announced business combination of annual quantum solutions.
In the fourth quarter, we completed our previously announced business combination of Honeywell quantum solutions.
Speaker 3: Cambridge Quantum to form a new company, Continuous. As mentioned, our investor communications throughout 2021, this combination may raise the leading quantum computing hardware, the leading quantum computing software to form the largest and most advanced integrated standalone quantum computing company in the world.
Cambridge quantum to form a new company continues as mentioned in our Investor Communications throughout 2021. This combination marries the leading quantum computing hardware, the leading quantum computing software to form the largest and most advanced integrated Standalone quantum computing company in the world.
Speaker 3: Quantinum technology will help solve some of the world's most pressing challenges, including breakthroughs in drug discovery and delivery, material science, and industrial optimization, to just name a few. Quantinum's cybersecurity offering launched in December , quantum origin, is the world's first commercial product built upon quantum computers that delivers outcomes that classical computers could not achieve.
Continuum technology will help solve some of the world's most pressing challenges, including breakthroughs in drug discovery and delivery materials science and industrial optimization to just name a few continuum cyber security offering launched in December quantum origin is the world's first commercial product built upon bottom computers.
It delivers outcomes that classical computers could not achieve.
Speaker 3: This revolutionary new product will be crucial to companies and governments who need to ensure protection of sensitive information against adverse or serious equipment.
This revolutionary new product be crucial to companies and governance, we need to ensure protection of sensitive information against adverse or serious criminals.
Speaker 3: With the introduction of quantum origin, which is already serving Fortune 500 customers today, we expect continuing to reach approximately $2 billion of sales by 2026. One year earlier, then the estimate we provided in our leadership webcast back in November .
With the introduction of quantum origin, which is already serving fortune 500 customers today, we expect continuing to reach approximately $2 billion of sales by 2026, one year earlier than the estimate we provided in our leadership webcast back in November .
Speaker 3: Upon the completion of the combination, Honeywell invested $270 million into Quantium and Honeywell currently owns a majority stake. We expect a slight margin headwind of 30 basis points to Honeywell in 2022 due to the increased R&D spend associated with Quantium.
Upon the completion of the combination Honeywell invested $270 million into continuum and Honeywell currently owns a majority share stake we expect a slight margin headwind of 30 basis points to Honeywell in 2022 due to the increased R&D spend associated with quality as shown on the previous slide.
Speaker 3: shown in the previous slide. Overall, we expect, continued the $150 million headwind to ebit that. However, this R&D investment will yield great returns as we accelerate the commercialization of this revolutionary technology.
Overall, we expect continued to be $150 million headwind to EBITDA. However, this R&D investment will yield great returns as we accelerate the commercialization of this revolutionary technology.
Speaker 3: The appendix of this presentation contains a slide explaining the 2022 financial impact to Honeywell and more people.
The appendix of this presentation contains a slide explaining the 2022 financial impact to Honeywell in more detail.
Speaker 3: You believe this unique opportunity for investors to gain exposure to an early stage growth technology company at an industrial multiple. Containment is the best position company doing quantum computing and has all the building bracks to be the front runner in what is projected to be a trillion dollar in this.
We believe this unique opportunity for investors to gain exposure to an early stage growth technology company at industrial multiple continuum is the best positioned company Julie quantum computing has all the building blocks. If you the front runner in what is projected to be a trillion dollar industry.
Speaker 3: Now I will turn the call over to Greg to discuss our fourth quarter results and 2022 outlook and more.
Now I will turn the call over to Greg to discuss our fourth quarter results and 2022 outlook in more detail.
Speaker 4: Thank you, Darious, and good morning, everyone. Let's turn to slide six. As Darious highlighted, we delivered on our financial commitments despite a very difficult operating environment.
Thank you Darius and good morning, everyone, let's turn to slide six as Darius highlighted we delivered on our financial commitments. Despite a very difficult operating environment fourth quarter sales declined 2% organically as supply chain constraints continued in the quarter predominantly in Aero HPT and Sps the quarter.
Speaker 4: Ford Cora's sales declined 2% organically as supply chain constraints continued in the quarter, predominantly an arrow, HBT and FPS.
Speaker 4: The quarter also had difficult year over year comes with lower COVID related mass demand impacting growth by two percentage points and six fewer days than fiscal 4 Q2 020, which is worth approximately three percentage.
Also had difficult year over year comps with lower with lower COVID-19 related mass demand impacting growth by two percentage points and six fewer days in fiscal <unk> 2020, which is worth approximately three percentage points.
Speaker 4: Turning to the segments, aerospace fourth quarter sales were down 3% organically compared to the fourth quarter of 2020 as we continue to manage through the supply chain constraints for face.
Turning to the segments aerospace fourth quarter sales were down 3% organically compared to the fourth quarter of 2020, as we continue to manage through the supply chain constraints. We're facing continued flight hour improvement led to over 20% year over year growth in air transport aftermarket sales and over 10% growth in business and general aviation aftermarket sales.
Speaker 4: continued flight hour improvement led to over 20% year over year growth and year transport aftermarket sales and over 10% growth in business and general aviation aftermarket.
Speaker 4: Business and General Aviation, original equipment sales, also grew double digits in the quarter.
Business in General Aviation original equipment sales also grew double digits in the quarter.
Speaker 4: Defense in space was down 18% year over year in the fourth quarter, which stoppedness in US defense, partially upset by international defense, which grew sequentially and year over year.
Defense and space was down 18% year over year in the fourth quarter with softness in U S defense, partially offset by international defense, which grew sequentially and year over year.
Speaker 4: 7 margins expanded 140 basis points to 29% as a result of value capture, improved business mix with higher aftermarket sales, and productivity partially offset by higher cost materials.
Segment margins expanded 140 basis points to 29% as a result of value capture improved business mix with higher aftermarket sales and productivity, partially offset by higher cost materials.
Speaker 4: Building technology sales declined 1% organically year over year due to continuing supply chain constraints across the business, partially offset by pricing. The orders were up 4% in the quarter.
Building technology sales declined 1% organically year over year due to continuing supply chain constraints across the business, partially offset by pricing the orders were up 4% in the quarter.
Speaker 4: Backlog and Building Solutions was up double digits year over year, with growth in both projects and services positioning HPT for strong performance in 2022.
Backlog in building solutions was up double digits year over year with growth in both projects and services positioning HBC for strong performance in 2022.
Speaker 4: Our healthy buildings portfolio finished the year strong with over 200 million dollars of orders in the quarter bringing the total orders for 2021 to well over 400 million dollars.
Our healthy building portfolio finished the year strong with over $200 million of orders in the quarter, bringing the total orders for 2021 to well over $400 million.
Speaker 4: Second margins and HBK continued to be strong at 21.1% in the quarter, though it was down 30 basis points year over year, driven by lower volume leverage and cost inflation, mostly offset by favorable price.
Segment margins in HBK continued to be strong at 21, 1% in the quarter, though was down 30 basis points year over year, driven by lower volume leverage and cost inflation, mostly offset by favorable pricing.
Speaker 4: In performance material technologies, sales rep 2% organically led by 7% growth in UOP and 5% growth in advanced materials. UOP sales growth was driven by higher petrochemical catalyst and gas processing shipments, while advanced materials benefited from continued double digit sales growth in life sciences and protective and industrial solutions.
In performance materials technologies sales were up 2% organically led by 7% growth in <unk>.
And 5% growth in advanced materials.
Sales growth was driven by higher petrochemical catalyst and gas processing shipments while advanced materials benefited from continued double digit sales growth in life Sciences and protective in industrial solutions.
Speaker 4: Process solution sales were down 3% organically with slower recovery in projects and supply availability, constraining smart energy.
Process solutions sales were down 3% organically with slower recovery in projects and supply availability constraining smart energy clutch.
Speaker 4: However, orders growth across the HPS portfolio, including double digit orders growth in the project services, provides confidence in the longer-
However orders growth across the <unk> portfolio, including double digit orders growth in the projects businesses provides confidence in our longer term outlook for the business orders in Europe were up 25% year over year, including triple digits in sustainable technology solutions. Another signal for strong 2022 growth.
Speaker 4: Orders in UOP were up 25% year over year, including triple digits and sustainable technology solutions, another signal for strong 2022 growth.
Speaker 4: PMT segment margins expanded 430 basis points to 23% in the fourth quarter driven by favor of pricing and productivity net of inflation.
PMT segment margins expanded 430 basis points to 23% in the fourth quarter, driven by favorable pricing and productivity net of inflation.
Speaker 4: Turning to safety and productivity solutions where sales were down 6% organically, mainly due to a 12 point impact from COVID-related mass.
Turning to safety and productivity solutions, where sales were down 6% organically, mainly due to a 12 point impact from Covid related masks.
Speaker 4: Intelligrated was flat year over year and down sequentially as expected as the level of delivery and installation came down from its two QP.
<unk> was flat year over year and down sequentially as expected as the level of delivery and installation came down from its <unk> peak.
Speaker 4: Productivity solutions and services continues to be a star in the portfolio, along with the fencing business, both of which had double digit sales growth.
Productivity solutions and services continues to be a star in the portfolio along with the sensing business, both of which had double digit sales growth in the quarter.
Speaker 4: SPS backlog remains above $4 billion as declines in the mass business, where mostly upset by triple digit growth in advanced sensing and technology and over 90% growth in productivity solutions and services, giving us confidence in the future growth.
S. P. S backlog remains above $4 billion as declines in the mass business were mostly offset by triple digit growth in advanced sensing technologies and over 90% growth and productivity solutions and services, giving us confidence in our future growth.
Speaker 4: SPS segment margins contracted 450 basis.
SPS segment margins contracted 450 basis points to 10, 8% driven by lower volume leverage and inefficiencies caused by ongoing supply chain challenges and is celebrated which we highlighted in our previous earnings call and I'll touch on again in a moment.
Speaker 4: 10.8% driven by lower volume leverage and inefficiencies caused by ongoing supply chain challenges in Intelligrated, which we highlighted in our previous earnings call. And I'll touch on again in a moment.
Speaker 4: So for overall Honeywell, we delivered 30 basis points of second margin improvement with margin expansion and PMT and arrow, and in the quarter which second margin is of 21.4%, a 20 basis points to sequential improvement versus the third quarter.
So for overall Honeywell, we delivered 30 basis points of segment margin improvement with margin expansion in PMT and Aero ending the quarter with segment margins of 21, 4%, a 20 basis point sequential improvement versus the third quarter.
Speaker 4: We drove targeted pricing again in the quarter across the portfolio to combat the accelerated impacts of inflation.
We drove targeted pricing again in the quarter across the portfolio to combat the accelerated impact of inflation.
Speaker 4: On EPS, we delivered 4 quarter gap earnings per share of $2.5 and adjusted earnings per share of $2.9, which was up to $0.00 year over year. A bridge for our adjusted earnings per share from 4K20 to 4K21 can be found in the appendix of this presentation.
On EPS, we delivered fourth quarter GAAP earnings per share of $2 five and.
And adjusted earnings per share of $2 nine.
Which was up <unk> <unk> year over year.
Bridge for our adjusted earnings per share from <unk> 20 to <unk> 21 can be found in the appendix of this presentation.
Speaker 4: Seventh profit was a three cent headwind driven primarily by lower volume due to fewer days, mass volumes, and supply change constraints, offset by price and cost actions. Higher effective tax rate, 19.7% this year, versus 18.9 last year, drove a two cent headwind. Share count reduction drove a four cent year over your tailwinder.
Segment profit was a 3% headwind driven primarily by lower volume due to fewer days mass volumes and supply chain constraints offset by price and cost actions higher effective tax rate 19, 7% this year versus $18 nine last year drove a two cent headwind share count reduction drove a four cent year over.
Year tailwind to earnings per share and we saw a <unk> <unk> benefit from below the line items due to higher pension income that was partially offset by increased repositioning and other.
Speaker 4: And we saw three set benefits from below the line items to the higher pension income that was partially offset by increased repositioning in others.
Speaker 4: Repositioning others specifically was approximately $160 million just below the midpoint of our 4Q guidance of 140 to 215 million and included $105 million charge in the fourth quarter due to incremental long-term contract labor cost overages and interrogated caused by severe supply chain disruptions from COVID-19.
Repositioning other specifically was approximately $160 million just below the midpoint of our <unk> guidance of $140 million to $215 million and included $105 million charge in the fourth quarter due to incremental long term contract labor cost Overages and <unk> caused by severe supply chain.
Disruptions from COVID-19.
Speaker 4: The accelerating challenges of supply chain disruptions and labor shortages in the second half of 21 Coupled with the hyper growth of the business and the length between material supply and installation efficiency in the integrated model Drone-specific identifiable non-recurring costs which were recorded in repositioning in others
The accelerating challenges of supply chain disruptions and labor shortages in the second half of 'twenty, one coupled with the hyper growth of the business and is linked between material supply and installation efficiency in the Intel rated model drove specific identifiable nonrecurring costs, which were recorded in repositioning and other this charges forward looking and accounts for <unk>.
Speaker 4: This charge is forward looking in accounts for projects which are yet to be completed.
<unk>, which are yet to be completed in 2022, we expect roughly $30 million to $50 million of carryover costs the impact of which is incorporated into our 2022 repositioning and other guidance. Other inefficiencies were reflected in the <unk> and Sps P&L as I mentioned earlier in the discussion of the Sps margins.
Speaker 4: In 2022, we expect roughly $30 to $50 million of carry-over costs, the impact at which is incorporated into our 2022 repositioning another guidance.
Speaker 4: Other inefficiencies were reflected in the integrated and SPSPNL, as I mentioned earlier in the discussion of the SPSMARG.
Speaker 4: Moving on to cash, we generate $2.6 billion of free cash flow in the quarter of 4% year over year.
Moving on to cash we generated $2 $6 billion of free cash flow in the quarter up 4% year over year.
Speaker 4: This increase was driven by lower working capital, including strong collections and world-class fables, offset by higher inventory as we continue to work through the constrained supply chain environment and extended weeks.
This increase was driven by lower working capital, including strong collections and world class payables offset by higher inventory as we continue to work through the constrained supply chain environment and extended lead times.
Speaker 4: We also had a $211 million accelerated cash receipt in the quarter from Garrett for our contractual claims under the plan of reorganization signed last year. As a reminder, we include cash receipts from Garrett within free cash flow in order to be comparable to prior periods where the cash proceeds from the indemnification and reimbursement agreement were requisites.
We also had a $211 million accelerated cash receipt in the quarter from Garrett per our contractual claims under the plan of reorganization signed last year.
As a reminder, we include cash receipts from Garrett within free cash flow in order to be comparable to prior periods, where the cash proceeds from the indemnification and reimbursement agreement were recognized.
Speaker 4: Finally, as Darius mentioned earlier, we deployed $2.1 billion towards high return opportunities for our shareholders. We paid $680 million in dividends, repurchased $880 million in shares, over-delivering on our commitment of a minimum 1% share count in 21, and we deployed a profit $280 million in CAPEX, and invested $270 million in continuing.
Finally, as Darius mentioned earlier, we deployed $2 1 billion towards high return opportunities for our shareholders, we paid $680 million in dividends and repurchased $880 million of shares over delivering on our commitment of a minimum 1% share count in 'twenty, one and we deployed approximately $280 million on Capex and invested 200.
$70 million in <unk>.
Speaker 4: So overall, we managed successfully through another challenging quarter and closed out 2021 on a strong note.
So overall, we managed successfully through another challenging quarter and closed out 2021 on a strong note.
Speaker 4: Now let's turn to slide seven to talk about our markets and segment outlook for 2022.
Now, let's turn to slide seven to talk about our markets and segment outlook for 2022.
Speaker 4: We continue to see promising signs of the recovery unfold as well as encouraging wins in our key markets.
We continue to see promising signs of the recovery unfold as as well as encouraging wins in our key markets.
Speaker 4: The backdrop for 2022 does have a number of uncertainty.
The backdrop for 2022 does have a number of uncertainties in the ongoing global pandemic continued supply chain constraints accelerated inflation and labor market challenges and at each turn our rigorous operating principles have enabled us to demonstrate our agility and resiliency.
Speaker 4: The ongoing global pandemic continues supply chain constraints, accelerated inflation, and later market challenge.
Speaker 4: And at each turn, our rigorous operating principles have enabled us to demonstrate our agility and resiliency battling these situations.
Battling these <unk> situations.
Speaker 4: Across our end markets, the macro set of continues to be strong. Increased COVID-19 vaccination rates and higher immunity should lessen infection rates, pointing to signs of the pandemic subsiding and leading to continued improvement in global flight hours and returns to building.
Across our end markets. The macro set of continues to be strong increased COVID-19, vaccination rates and higher annuity should lessen infection rates pointing to signs of the pandemic subsiding and leading to continued improvement in global flight hours and returns to builders.
Speaker 4: Investments will continue to flow towards transition in global energy production to a low carbon future, and Honeywell will continue to lead that evolution as we invest in our strategically differentiated and sustainable technology.
Investments will continue to flow towards transitioning global energy production to a low carbon future and Honeywell will continue to lead that evolution as we invest in our strategically differentiated and sustainable technologies.
Speaker 4: We expect supply chain impacts to remain as challenging in the first half of the year as they were in the third and fourth quarter, and they'll start to evade as the aero supply base ramps up and capacity for electronic components comes online in third quarter.
We expect supply chain impacts to remain as challenging in the first half of the year as they were in the third and fourth quarter and they'll start to abate as the Aero supply base ramps up and capacity for electronic components comes online in third quarter.
Speaker 4: Inflation will continue to be a significant headwind. However, our agile pricing actions will dampen the impact to margin throughout the year.
Inflation will continue to be a significant headwind, however, agile pricing actions will dampen the impact of the margin throughout the year.
Speaker 4: Corporate tax legislation continues to be a watch area for both earnings and cash. We'll talk about a little bit later.
Corporate tax legislation continues to be a watch area for both earnings and cash while I'll talk about a little bit later.
Speaker 4: As for the segments, in 22, we expect aerospace to continue to benefit from the recovery in flight hours leading to robust growth in commercial aftermarket.
As for the segments in 'twenty, two we expect aerospace to continue to benefit from the recovery in flight hours, leading to robust growth in commercial aftermarket sales commercial build rates will continue to improve especially in air transport providing growth in original equipment sales of creating some mixed headwinds on margins differ.
Speaker 4: Commercial build rates will continue to improve, especially in air transport, providing growth in original equipment sales, but creating some mixed headwinds on March.
Speaker 4: Defense and space sales will experience progressively improved performance at supply chain challenges debate, returning the business to growth in the second half and ending the year roughly flat.
Defense and space sales will it will experience progressively improved performance as supply chain challenges abate returning the business to growth in the second half and ending the year roughly flat in.
Speaker 4: In total, we expect aerospace sales to be up high single digits for the year.
In total we expect aerospace sales to be up high single digits for the year. Despite.
Speaker 4: Despite some mixed pressure and the ramp up in R&D expenses for the long-term programs, margins will expand as Honeywell Quantum Solutions' business investment moves out of Arrow and into corporate costs.
Despite some mixed pressure and the ramp up in R&D expenses for the long term programs margins will expand as Honeywell quantum solutions business investment moves out of arrow and into corporate costs.
Speaker 4: HBT will see continued strong demand in 2022 as the world continues to reopen and sustainable solutions see increased use.
HPT will will see continued strong demand in 'twenty two as the world continues to reopen and sustainable solutions fee increase use.
Speaker 4: We expect that markets to gradually recover throughout the year, including government, education, and office building.
We expect end markets to gradually recover throughout the year, including government education and office buildings.
Speaker 4: Increased government funding for infrastructure, both in the US and Europe , provide further opportunities across the portfolio.
Increased government funding for infrastructure, both in the U S and Europe provide further opportunities across the portfolio.
Speaker 4: Pressure from supply chain constraints, particularly semiconductors, will impact the business, especially in the first half, but we'll continue to execute on our mitigation actions and expect the business to grow high-signal digits for the year.
Pressure from supply chain constraints, particularly semiconductors will impact the business, especially in the first half, but will continue to execute on our mitigation actions and expect the business to grow high single digits for the year.
Speaker 4: We expect our margins to expand driven by higher sales than our streamlined cost.
We expect our margins to expand driven by higher sales on our streamlined cost base.
Speaker 4: Performance Materials and Technologies has one of the most favorable macro setups in our portfolio, and we will see growth accelerate throughout the year.
Performance materials and technologies has one of the most favorable macro macro setups in our portfolio and we will see growth accelerate throughout the year.
Speaker 4: We expect process solutions sales to sequentially improve. Process solutions project orders will continue to grow at a healthy rate following the double digit orders growth we saw in the fourth quarter of 21 as traditional energy projects begin to gradually recover. And we see strength across new verticals like life sciences and sustainable energy storage that are driving increased demand.
We expect process solutions sales to sequentially improve process solutions project orders will continue to grow at a healthy rate following the double digit orders growth. We saw in the fourth quarter of 'twenty, one as traditional energy projects begin to gradually recover and we see strength across new verticals like life Sciences, and sustainable energy storage that are <unk>.
<unk> increased demand.
Speaker 4: The increase in UOP engineering and licensing orders over the past few months give us confidence in the follow-on process solutions projects growth over the medium term.
The increase in your P engineering and licensing orders over the past few months gives us confidence in the follow on process solutions projects drove over the medium term.
Speaker 4: UOP catalyst shipments will remain strong as demand shifts from petrochemicals to refining, where we expect a reload cycle to emerge in the energy.
<unk> catalyst shipments will remain strong as demand shifts from petrochemicals refining, where we expect a reload cycled to emerge in the energy space.
Speaker 4: Advanced materials demand remains robust and we expect sales to increase throughout the year, especially as we complete production capacity expansion projects, such as our planned increase in our solstice line of ultra-low global warming potential solutions.
Advanced materials demand remains robust and we expect sales to increase throughout the year, especially as we complete production capacity expansion projects such as our planned increase in our solstice line of ultra low global warming potential solutions.
Speaker 4: In addition to solstice, our other sustainable offerings and renewable fuels, carbon capture, energy storage, and plastics recycling will benefit from the increased customer focus on environmental responsibility and efficiency.
In addition to the solstice, our other sustainable offerings and renewable fuels carbon capture energy storage in plastics recycling will benefit from the increased customer focus on environmental responsibility and efficiency.
Speaker 4: In total, we expect PMT sales to be up mid to high single digits for the year. We expect PMT margins to expand as well as a result of continued pricing and productivity actions as well as increased volume leverage.
In total we expect PMT sales to be up.
Mid to high single digits for the year, we expect PMT margins to expand as well as a result of continued pricing and productivity actions as well as increased volume leverage.
Speaker 4: In safety and productivity solutions, demand for productivity solutions and services, advanced sensing technologies, and gas detection all remain strong. And their increased backlogs create strong runway for 22 growth.
In safety and productivity solutions demand for productivity solutions and services advanced sensing technologies and gas detection, all remained strong and their increased backlogs create strong runway for 'twenty two roads.
Speaker 4: Lower COVID-related mass demand will affect the first quarter most heavily, driving a 9% drag on SPS and Q1, and then will abate throughout the year.
Lower COVID-19 related mass demand will affect the first quarter, most heavily driving a 9% drag on Sps in Q1, and then will abate throughout the year and.
Speaker 4: In Intelligrated, after ending 2021 with approximately 50% year-over-year hyper growth, we expect sales to be flat as year-over-year in 22 as we adjust our portfolio towards a better balance of growth and near-term profitability.
And in <unk> after ending 2001, 2021 with approximately 50% year over year hyper growth, we expect sales to be flattish year over year and 'twenty two as we adjust our portfolio towards a better balance of growth and near term profitability we're targeting.
Speaker 4: We're targeting substantial margin expansion and integrated in 2022.
Substantial margin expansion in <unk> in 2022 and.
Speaker 4: and expect sequential improvement throughout the year with the second half revenue being higher than the first, the opposite dynamic versus what we saw in 2021.
And expect sequential improvement throughout the year with second half revenue being higher than the first the opposite dynamic versus what we saw in 2021.
Speaker 4: So overall, we expect SPS sales to be flattish year over year, with sales growth higher in the second half versus the first half, and margins expanding materially as business mix and supply chain challenges subside.
So overall, we expect Sps sales to be flattish year over year with sales growth higher in the second half versus the first half and margins expanded materially as business mix and supply chain challenges subside.
Speaker 4: So overall for Honeywell, we see improvement across most of our end markets throughout 22, and we have confidence in our continued operational execution. We'll manage through another challenging operational environment with accelerating growth as the year progresses.
So overall for Honeywell, we see improvement across most of our end markets throughout 'twenty, two and we have confidence in our continued operational execution will manage through another challenging operational environment with accelerating growth as the year progresses.
Speaker 4: Now let's move to slide eight to discuss how these dynamics come together for our 2022 financial data.
Now, let's move to slide eight to discuss how these dynamics come together for our 2022 financial guidance.
Speaker 4: In total for 22, we expect sales of $35.4 to $36.4 billion, which represents overall organic sales growth in the range of 4% to 7%.
In total for 'twenty, two we expect sales of 35, 4% to $36 4 billion.
Which represents overall organic sales growth in the range of 4% to 7%.
Speaker 4: We'll continue to drive pricing actions to combat this inflationary environment, and we expect approximately 4% of our sales growth to come through price.
We will continue to drive pricing actions to combat this inflationary environment, and we expect approximately 4% of our sales growth to come through price.
Speaker 4: Excluding the impact of the lower COVID mass demand, which will approximately be a one-point headwind, we expect organic growth of 5 to 8...
Excluding the impact of the lower Covid mass demand, which will approximately a one point headwind, we expect organic growth of 5% to 8%.
Speaker 4: The first half will be slower, and as additional supplier capacity comes online, we'll see significant sequential improvement and stronger growth in the back half of the year.
The first half will be slower and as additional supplier capacity comes online, we will see significant sequential improvement and stronger growth in the back half of the year.
Speaker 4: Segment margins are expected to expand 10 to 50 basis points, despite a robust investment year, supported by higher sales volumes, price cost management, and our continued rigor on fixed costs.
Segment margins are expanded are expected to expand 10 to 50 basis points. Despite a robust investment year supported by higher sales volumes price cost management, and our continued rigor on fixed costs.
Speaker 4: Excluding the 30-basis point headwind from continuum OPEX that Darius mentioned earlier, we expect margins to stand 40 to 80 bases.
Excluding the 30 basis point headwind from continuum Opex that Darius mentioned earlier, we expect margins to expand 40 to 80 basis points. We are excited about the trajectory of continuum and the value creation that this investment will bring we expect margin expansion across all of our businesses in 'twenty, two with Sps, leading the pack as we prioritize.
Speaker 4: We are excited about the trajectory of continuum and the value creation that this investment will bring. We expect margin expansion across all of our businesses in 22 with SPS leading the pack as we prioritize profitability versus...
<unk> profitability versus growth.
Speaker 4: For the year, we expect earnings per share of $8.40 to $8.70, up 4% to 8% adjustment.
For the year, we expect earnings per share of $8 40.
The $8 70.
4% to 8% adjusted.
Speaker 4: We see free cash flow in the range of $4.7 to $5.1 billion in 22, or $4.9 to $5.3, excluding quantinuum, which I'll walk through in a couple of minutes.
We see free cash flow in the range of $4 seven to $5 $1 billion in 'twenty, two or $4 90 to $5 three excluding continuum, which I'll walk through in a couple of minutes.
Speaker 4: For now, let's turn to slide 9 and talk through our 2022 EPS.
For now, let's turn to slide nine and talk through our 2020 to EPS.
Speaker 4: On EPS, segment profit is expected to be a key driver of our earnings growth, contributing $0.58 per share at the midpoint of our guidance, or about 7%.
On EPS segment profit is expected to be a key driver of our earnings growth contributing 58 per share at the midpoint of our guidance or about 7% growth.
Speaker 4: Next, below the line, which is the difference between segment profit and income before tax is expected to be in the range of negative $100 million to positive $50 million, which reserves capacity for 300 to $425 million of repositioning and others.
Next below the line, which is the difference between segment profit and income before tax is expected to be in the range of negative $100 million to positive $50 million, which.
<unk> capacity for $300 million to $425 million of repositioning and other.
Speaker 4: This includes between $30 and $50 million related to the carryover costs from supply chain disruptions in IntelliGrid.
This includes between 30% and $50 million related to the carryover costs from supply chain disruptions in a calibrated.
Speaker 4: On the pension front, we expect approximately $1 billion and $50 million of pension and open income in 2022, down approximately $100 million from 2021, as we have adjusted our plans for higher discount rates to the interest rate movements and the adjustment of our expected return.
On the pension front, we we expect approximately $1 billion and $50 million of pension and <unk> and 'twenty two down approximately $100 million from 2021, as we have adjusted our plans for higher discount rates to the interest rate movements and the adjustment of our expected returns.
Speaker 4: Our diligent management and strong returns have been an important value driver for the company, putting us in a position where our pension-funded status continues to be robust, ending the year at approximately 120%.
Our diligent management and strong returns have been an important value driver for the company, putting us in a position where our pension funded status continues to be robust ending the year at approximately 120%.
Speaker 4: With these inputs, below the line and other items are expected to be down 15 cents per share year over year at the midpoint, mainly driven by the lower pension.
With these inputs below the line and other items are expected to be down 15.
Per share year over year at the midpoint, mainly driven or driven by the lower pension income.
Speaker 4: Continuum will result in a headwind of approximately $0.03 per share as the net P&L investment is partially offset with non-controlling investment.
Continuum will result in a headwind of approximately <unk> <unk> per share as the net P&L investment is partially offset with noncontrolling interests.
Speaker 4: For taxes, we expect an effective rate of 22%. And our base case is that our minimum 1% share count reduction program will result in a benefit of $0.09 per share, reducing our weighted average shares from 700 to at least $693 million.
For taxes, we expect an effective rate of 22% and our base case is that our minimum 1% share count reduction program will result in a benefit of <unk> <unk> per share, reducing our weighted average shares from 702 at least $693 million.
Speaker 4: So in total, we expect 22 earnings per share to be in the range of $8.40 to $8.70, up 48% year-over-year adjusted. However, excluding the impact from quantum and below the line and other items, we would see year-over-year earnings per share growth of 8% at the mid-term.
So in total we expect 22 earnings per share to be in the range of $8 40 to $8 70.
Up 48% year over year, adjusted however, excluding the impact from quantum and below the line in other items, we would see year over year earnings per share growth of 8% at the midpoint.
Speaker 4: Now let's turn to slide 10 and discuss the driver's or free cash flow guidance for 22.
Now, let's turn to slide 10, and discuss the drivers of our free cash flow guidance for 'twenty two.
Speaker 4: As we outlined on this bridge, 2022 cash flow will be the tail of three dynamics.
As we outlined on this bridge 2022 cash flow will be the tail of three dynamics healthy net income growth to meaningful non operational adjustments and an increase in investment in exciting growth vectors.
Speaker 4: healthy net income growth, two meaningful non-operational adjustments, and an increase in investment in exciting growth vectors. The two main detractors are
The two main detractors are lower Garrett cash receipts due to an elevated payment of $375 million in 2021, and higher cash taxes between four and $600 million as current R&D capital as they are capitalization tax legislation and other law changes may result in meaningful year over year headwinds.
Speaker 4: due to an elevated payment of $375 million in 2021. And higher cash taxes between $400 million. As current R&D capitalization tax legislation, another law change is may result in meaningful year over year. Head...
Speaker 4: While there is still a possibility that legislation will be enacted that defers the requirement to capitalize R and D, we are including higher cash taxes in our current outlook, as will be required to make these payments unless existing laws amended by legislation before the end of March.
While there is still a possibility of that legislation will be enacted that defers the requirement to capitalize R&D, we are including higher cash taxes and our current outlook as we'll be required to make these payments and less existing law as amended by legislation before the end of March.
Speaker 4: As you would expect from Honeywell, we'll continue investing in our long-term growth with between 200 and 300 million incremental capital expenditures in 22 to build solutions that will help us solve challenging problems for our customers and address critical global sustainability issues.
As you would expect from Honeywell will continue investing in our long term growth with between 200 and $300 million incremental capital expenditures and 22 to build solutions that will help us solve challenging problems for our customers and address critical global sustainability issues and.
Speaker 4: In addition, as Darius highlighted, we're investing in incremental $100 million in cutting-edge technology like, it's quite continu-
In addition, as Darius highlighted we're investing an incremental $100 million and cutting edge technology like continuum.
Speaker 4: These strategically important investments are building on the momentum we have with the recent wins, both in sustainable solutions and more broadly across Honeywell, creating value for our shareholders.
These strategically important investments are building on the momentum we have with our recent wins, both in sustainable solutions and more broadly across Honeywell, creating value for our shareholders.
Speaker 4: This outlook could, of course, get better if tax law changes play out differently, and our capex this year should be a bit of a peak. So I'm very confident it will continue to be a strong cash generator perspective.
This outlook could of course get better of tax law changes play out differently and our Capex. This year should be a bit of a peak. So I am very confident we will continue to be a strong cash generator prospectively.
Speaker 4: Now let's turn to slide 11 for a preview of the first quarter.
Now, let's turn to slide 11 for a preview of the first quarter.
Speaker 4: We're entering one key with a very strong backlog and a number of challenges persisting in this operating environment and some evolving economic and geopolitical uncertainty.
We're entering <unk> with a very strong backlog in a number of challenges persisting in this operating environment and some evolving economic and geopolitical uncertainties.
Speaker 4: We expect organic growth in the first quarter in the range of down 2% to up 1% driven by the ongoing supply constraint.
We expect organic growth in the first quarter the range of down 2% to up 1% driven by the ongoing supply constraints current COVID-19 dynamics, which have dampened travel somewhat versus <unk> and evolving geopolitical uncertainties.
Speaker 4: current COVID dynamics, which have dampened travel somewhat versus 4Q, and evolving geopolitical and
Speaker 4: We'll continue to deploy pricing actions to combat rising costs, and we expect price increases to drive approximately 4% of sales growth in the quarter.
We will continue to deploy pricing actions to combat rising costs, and we expect we expect price increases to drive approximately 4% of sales growth in the quarter.
Speaker 4: This quarter will be our toughest comp for the year, as the first quarter of 2021 was near the peak of our COVID-related mass.
This quarter will be our toughest comp of the year as the first quarter of 2021 was near the peak of our Covid related mass demand.
Speaker 4: excluding the two percentage point impact of lower maps, we would expect organic growth in the range of flat to a three percent.
Excluding the two percentage point impact of lower masks, we would be we would expect organic growth in the range of flat to up 3%.
Speaker 4: We expect segment margins in the range of 20.6% to 21% in the first quarter, down 40 basis points to flat year over year.
We expect segment margins in the range of 26% to 21% in the first quarter down 40 basis points to flat year over year <unk>.
Speaker 4: Excluding the impact of continuum, we expect segment margins to be down 10 to up 30 basis points as our price-cost actions and cost management mostly offset the volume leverage challenges we're facing in this supply-constrained environment.
Excluding the impact of continuum, we expect segment margins to be downturn to up 30 basis points as our price cost actions and cost management, mostly offset the volume leverage challenges we're facing in this supply constrained environment.
Speaker 4: The net below the line impact is expected to be between 30 to $75 million expense, with a range of repositioning between 120 and $160 million in the quarter, as we continue to provide capacity to fund ongoing restructuring.
The net below the line impact is expected to be between 30% to $75 million expense with a range of repositioning between 120 and $160 million in the quarter as we continue to provide capacity to fund ongoing restructuring we.
Speaker 4: We expect the effective tax rate to be in the range of 22 percent and average share count to be approximately 697 million shares.
We expect the effective tax rate to be in the range of 22% and average share count to be approximately 697 million shares.
Speaker 4: As a result, we expect first quarter EPS between $1.80 and $1.90, down 6% to down 1% year over year.
As a result, we expect first quarter EPS between $1 80.
And $1 90.
Down 6% to down 1% year over year.
Speaker 4: And lastly, first quarter is historically our lowest from a cash perspective. And with the supply chain impacts that we have been facing, those will continue to drive higher inventory levels, dampening our cash generation in the short term.
And lastly, first quarter is historically, our lowest from a cash perspective and with the supply chain impacts that we have been facing those will continue to drive higher inventory levels dampening, our cash generation in the short term.
Speaker 4: Now let's take a moment to walk through our expectations by segment. In arrow, we expect flight hours remain relatively flat, support quarter. Though COVID made dampen it.
Now, let's take a moment to walk through our expectations by segment in.
In Aero, we expect flight hours remain relatively flat to the fourth quarter, though COVID-19 may dampen it some it will be up significantly year over year, leading to another quarter of strong growth in both air transport and business in General aviation.
Speaker 4: It will be up significantly year over year, leading to another quarter of strong growth in both air transport and business and general aviation.
Speaker 4: Air transport original equipment should return to growth as build rates begin to improve, and in defense and space, international defense will continue to grow and stable us defense spending will lead to volumes that are relatively flat to the fourth quarter, so down slightly year on year.
Air Transport original equipment should return to growth as build rates begin to improve.
And in defense and space International Defense will continue to grow and stable U S defense spending will lead to volumes at a relatively flat to the fourth quarter, so down slightly year on year.
Speaker 4: In building technologies, we expect business conditions to remain similar to fourth quarter with strong demand but continued supply.
In building technologies, we expect business conditions to remain similar to fourth quarter with strong demand, but continued supply constraints.
Speaker 4: Demand for our healthy building solution should remain strong as the world continues to combat COVID-19 and the Omicron variant.
Demand for our healthy building solutions should remain strong as the world continues to combat COVID-19, and the <unk> the.
Speaker 4: The business should see sequential and year-over-year growth as we execute in our robust backlog in building solutions and see continued demand for fire and security products.
The business should see sequential and year over year growth as we execute on our robust backlog in building solutions and see continued demand for fire and security products.
Speaker 4: In PMT, we expect continued year-over-year sales growth in the first quarter. Strong demand for thermal solutions will drive growth in process solutions while the project business begins to move past its pre-COVID decline.
In PMT, we expect continued year over year sales growth in the first quarter strong demand for thermal solutions will drive growth in process solutions, while the projects business begins to move past its pre COVID-19 declined comps increased catalyst shipments and process technologies licensing will support growth in ERP built will be partially offset by lower equipment volumes.
Speaker 4: Increased catalyst shipments and process technology licensing will support growth in UOP, though they'll be partially offset by lower equipment volumes due to project life cycle.
Due to project lifecycle timing advair.
Speaker 4: Advanced material sales will continue to increase in the quarter due to sustained high demand across the product line, as well as pricing actions implemented to offset commodities.
Advanced materials sales will continue to increase in the quarter due to sustained high demand across the product lines as well as pricing actions implemented to offset commodity inflation.
Speaker 4: Finally, in SPS, Q1 will be its most difficult quarter. We expect sales to be down year over year due to the nine-point impact of mass demand and integrated sales that will be near the second half exit rate as opposed to the very strong starting Q1 of last year.
Finally in Sps Q1 will be its most difficult quarter, we expect sales to be down year over year due to the nine point impact of mass demand and <unk> sales that will be near the second half exit rate as opposed to the very strong start in Q1 of last year.
Speaker 4: We'll see strong double-digit growth in the first quarter from productivity solutions and services, advanced sensing technologies and gas detection as they execute on the robust path.
We will see strong double digit growth in the first quarter from productivity solutions and services advanced sensing technologies and gas detection as they execute on our robust backlog.
Speaker 4: Productivity Solutions and Services has been a star in the portfolio, and we expect this business to continue to gain market share.
Productivity solutions and services has been a star in the portfolio and we expect this business to continue to gain market share.
Speaker 4: So overall, the road ahead remains challenging, but we're confident in our ability to navigate through this operating environment in the first quarter, and we're extremely optimistic about our prospects for the future. So with that, I'll turn the floor over to
So overall the road ahead remains challenging, but we're confident in our ability to navigate through this operating environment in the first quarter and we're extremely optimistic about our prospects for the future. So with that I'll turn the call back over to the areas.
Speaker 3: Thank you, Greg. Let's turn to slide 12 and talk about our corporate governance at Honeywell integrity and ethics inclusion, diversity and workplace respect our foundational principles are core to our strategy.
Thank you, Greg, let's turn to slide 12, and talk about our corporate governance at Honeywell integrity, and ethics inclusion and diversity in the workplace respect our foundational principles are core to our strategy at Honeywell or.
Speaker 3: Our focus on these principles is evident in our corporate governance efforts throughout the entire organization, from top to bottom. We have a diverse and independent board of directors overseeing the business and an executive team that is committed to fostering a culture built on these foundational principles.
Our focus on these principles, it's evident in our corporate governance efforts throughout the entire organization from top to bottom.
We have a diverse and independent board of directors overseeing the business and an executive team that is committed to fostering a culture built on our on these foundational principles.
Speaker 3: We are annual training to follow our employees in educate on our code of business conduct and promote honest business practice We compliance to our laws and regulations and respect the work
Through our annual training to all of our employees can educate on our code of business conduct and promote honest business practices compliance to all laws and regulations and respect in the workplace.
Speaker 3: We recently launched Honeywell Accelerator, a revitalized operating system that provides a centralized source of training programs designed to further develop our employees, enhance the way we manage, govern, and operate.
<unk> launched Honeywell accelerator of revitalized operating system that provides a centralized source of training programs designed to further develop our employees enhanced the way we manage we manage governance operate the business accelerator allows us through educating standardize around a best practices that will empower our employees with that knowledge.
Speaker 3: Accelerator allows us to educate and standardize around our best practices and will empower our employees with the knowledge and tools needed to perform their roles. In January , we announced a new edition
Tools needed to perform their roles in January we announced a new addition to our board of Directors Rose Lee was elected to join the board as an independent director Rose is currently President and Chief Executive Officer of cornerstone building brands, a leading manufacturer of exterior building products in North America.
Speaker 3: Rose Lee was elected to join the board as an independent director. Rose is currently president and chief executive officer of Cornerstone Building Brands, a leading manufacturer of exterior building products in North America.
Speaker 3: Growth is a unique blend of leadership skills, deep knowledge of operations and technology, and a passion for environmental, social, and governance.
<unk> has a unique blend of leadership skills deep knowledge of operations and technology and a passion for environmental social and governance experts prior to joining cornerstone building brands Rose served as president of the Dupont water and protection businesses, focusing on improving sustainability throughout through the company's water.
Speaker 3: Prior to joining Cornerstone Building Brands, Rose served as president of the DuPont Water and Protection
Speaker 3: focusing on improving sustainability throughout through the company's water, shelter and safe.
<unk> and safety solutions. She is also spearheaded initiatives to advance minorities women and veterans Roses perspective will be invaluable addition to our board as we further advanced Honeywell's transformation now.
Speaker 3: She's also spearheaded initiatives to advance minorities, women and veterans. Rose's perspective of the invaluable addition to our board is we further advanced honeymoon transformation. Now let's turn this slide 13 for some closing thoughts before we move into Q&A.
Let's turn to slide 13 for some closing thoughts before we move into Q&A.
Speaker 3: And the first year of recovery was not without its challenges. However, we effectively managed to use macroeconomic difficulties and overdelivered on our financial committee.
In the first year of recovery was not without its challenges. However, we effectively managed to use Max macroeconomic difficulties and over delivered on our financial commitments, we didn't stay on the sidelines, but instead, we took actions to grow the business, including increasing our capital deployment.
Speaker 3: We didn't stay on the sidelines, but instead we took action to grow the business, including increasing our capital to point. Our balance sheet remains strong. We'll continue to invest for the future of honey.
Our balance sheet remains strong and will continue to invest for the future of Honeywell, while several COVID-19 related headwinds will drag into early part of 2022 the macro setup.
Speaker 3: While several COVID related headwins will drag into early part of 2022, the macro setup is trending favorably for most of our end markets. We're optimistic about our future.
Trending favorably for most of our end markets. We are optimistic about our future our recent innovations, including new safety and sustainability offerings will drive long term growth in order to meet some of the world's most pressing needs one.
Speaker 3: Our recent innovations, including new safety and sustainability offerings, will drive long-term growth and loss to meet some of the world's most pressing needs.
Speaker 3: One last item before we move to Q&A. I'm pleased to announce that our 2022 investor day will be held on March 3rd at our corporate headquarters in Charlotte. At this investor day, I, along with members of the senior management team, will discuss Honeywell's business strategy, exciting new growth opportunities, and an updated long-term growth algorithm.
One last item before we move to Q&A I'm pleased to announce that our 2022 Investor day will be held on March 3rd at our corporate headquarters in Charlotte at.
At this Investor day, I, along with members of the senior management team will discuss honeywell's business strategy exciting new growth opportunities and an updated long term growth algorithm we.
Speaker 3: You look forward to sharing more with you about Honeywell's future at that time. So that's Sean, let's move to Q&A.
We look forward to sharing more with you about honeywell's future desktop that Sean let's move to Q&A.
Speaker 2: Thank you, Darious. Darious, Greg, and and Torsten are now available to answer your questions. We ask you, please be mindful of others in the queue by only asking one question. Ari, please open the line for Q&A.
Thank you Darius Darius Greg and <unk> are now available to answer your questions. We ask you. Please be mindful of others in the queue by only asking one question Ari. Please open the line for Q&A.
Speaker 1: The floor is now open for questions. If you have a question, please click on the raise hand icon at the bottom of your screen. Once you're called to ask your question, please make sure you unmute your.
The floor is now opened for questions. If you have a question. Please click on the racing icon at the bottom of your screen.
It was a call to ask a question. Please thanks Leon Yoga Mike.
Speaker 5: We will now take our first question from Scott Davis from Milius Research. Scott, good morning, and over to you. Good morning, everybody. Can you hear me? Yep. Good morning, Scott.
We will now take our first question from Scott Davis from Melius Research Scott Good morning, and over to you.
Good morning, everybody can you hear me now good morning, Scotland.
Speaker 5: Guys, the guidance seems conservative, I guess. And when you back out price, 4% price, you're not expecting a whole lot of unit volume recovery. Is that because of the first half being so weak and you expect just a modest improvement in the second half? I mean, I guess just a little bit of color. I look at slide seven and it looks so bullish, and then you look at slide eight and say, oh, you know, it doesn't feel as bullish.
I guess the guidance seems conservative I guess.
When you back out price, 4% price, you're not expecting a whole lot of unit volume recovery is that because of the first happy. So so we can you expect a.
And just a modest improvement in the second half I mean, I guess, just a little bit of color I've I look at slide seven and I'll look so bullish and then you look at slide eight in Seo.
Feel as bullish.
Speaker 3: Just trying to get a sense of how you're thinking about the year playing out and how conservative the guide is. Yeah, I mean, you know, I think, first of all, a couple of comments on that. We do have to take, first of all, masks into account, which adds a point to the growth rate. So now we're at 5 to 8%, because I think, frankly, the masks are a bunch of noise into our numbers, at least for the first half. Second of all, you know, we, the first half will be slow, which actually.
I'm, just trying to get a sense of.
How youre thinking about the year, playing out and how conservative the guidance, yes, I mean, I think first of all a couple of comments. So that we do have to take first of all masks into accounts, which had to point to the growth rate. So now we're at 5% to 8% because I think frankly, the masks are a bunch of noise into our numbers at least for the first half second of all.
The first half will be slow which actually.
Speaker 3: means that we've got to have substantial acceleration in the second half. And although we're bullish on improved supply chain flow, it is a bit of an unknown. And even with sort of the kind of a slow first half, that implies a pretty aggressive growth in the second half. And, you know, for us, you know, 5 to 8% growth, which, you know, it takes 6 and a half, 7% at the midpoint.
Means that we got to a substantial acceleration in the second half and although we're bullish on improved supply chain flow. It is a bit of an unknown and even with sort of the kind of a slow first half that implies a pretty aggressive growth in the second half and.
For us, 5% to 8% growth, which you know it takes a $6 five 7% at the midpoint.
Speaker 3: I think it's a fairly reasonable guide to start the year. A lot of uncertainty on the supply chain. I am optimistic and we have some very specific data points. You know, for example, we have about just shade over 90% of our semiconductor.
<unk> is a fairly reasonable guide to start the year, but a lot of uncertainty along the supply chain.
Am optimistic and we have some very specific data points. For example, we have about just shade over 90% of our semiconductor.
Speaker 3: now confirmed for the year. The problem is not necessarily confirmed when we want it, she will be in the first half, it's more concerned for the second half. But you know, you would have to be sort of betting on the future and sometimes the future is unpredictable until we see that. So you know, we came out with guidance that I think is
Now confirmed for the year.
<unk> necessarily confirmed when we want it.
We'll be enough first half it's more concern for the second half.
You would have to be sort of betting on the future and sometimes the futures unpredictable until we see that so we came out with a guidance that I think is.
Fair.
Speaker 3: You know, I don't know if you want to call it aggressive or conservative, but it does assume a pretty good step up in the second half, probably not inconsistent with some of those peers. But what none of us know, and that includes Honeywell and others, is exactly what will happen in the second half. So we've built in a ramp, but we also feel like it's a ramp that can be met. So, and we'll adjust as we go through the year.
I don't know if you want to call it aggressive or conservative, but it does assume a pretty good step up in the second half probably not inconsistent with some of those tiers, but what none of US know that includes Honeywell and others is exactly what will happen in the second half. So we've built in a ramp.
We also feel like it's a ramp that.
Can be met so and.
We'll adjust as we go through the year.
Speaker 5: That's fair. I'll stick to the one question. Thank you guys and good luck in 22.
Okay. That's fair I'll stick to one question. Thank you guys and good luck in 2002, Thanks, Scott Thanks Scott.
Speaker 1: Our next question comes from Steve Tusa from J.P. Morgan. Steve, over to you.
Our next question comes from Steve Tusa from Jpmorgan, Steve over to you.
Okay.
Hey, guys good morning.
Hey, good morning, Susan.
Speaker 6: Just on the investment side, it looks to me like R&D growing 15%, you have this digital investment you're making. You talked about the CapEx and how I think you said that that's kind of getting close to a peak.
Just on the on the investment side.
It looks to me like.
R&D growing 15% you have this digital investment Youre, making you talked about the Capex and how I think you said that thats kind of getting close to a peak.
Speaker 6: What is the kind of normal run rate of these investments now going forward? It seems like they grew meaningfully ahead of sales this year. Are these investments that will continue to grow ahead of sales or will they be more kind of flat, you know, with sales or even flat on an absolute basis? You know, what's the outlook for those R&D and this digital spending?
What is the kind of normal run rate of these investments now going forward. It seems like they grew meaningfully ahead of sales. This year are these investments that will continue to grow ahead of sales or will they be more kind of flat.
With sales or even flat in absolute basis.
What's the outlook for those R&D and digital spending yes, let me, let me kind of split that up steeped. The first one is I think you know from a capex perspective, we think that this is a bit of op.
Speaker 3: Yeah, let me let me kind of split that up, Steve. The first one is, I think, you know, from a Catholic perspective, we think that this is a bit of a.
Speaker 3: higher than normal year by call it two to 300 million. So I think that that's probably a bit unusual. But you know, look,
Higher than normal year by call it $2 million to $300 million. So I think that that's probably a bit unusual but look.
Speaker 3: I think there's a key point here that's missing. I think our investors should want us to spend money and capital and our need. It is the highest IRR return we can have anything we do. And with the pricing for M&A today, if you can get double digits IRR returns on M&A, you're doing well.
I think theres a key point here, that's missing I think our investors should want us to spend money in Capex and R&D. It is the highest IRR return we can have on anything we do and with the pricing for M&A today.
Q can get double digit IRR returns on M&A youre doing well.
Speaker 3: So, you know, I think this is the point, is that we have great projects, both CapEx and OpEx, which will generate tremendous return for investors, especially in sustainability technology.
So.
I think this is the point is that we have great projects, both capex and Opex, which will generate tremendous return for investors, especially in sustainability technology solutions I mean that business is poised to be multibillion dollars by the end of the century and or by the end of the decade and I think some of the wins that you've seen here our proof point.
Speaker 3: I mean, that business is poised to be multi-billion dollars by the end of the century, or by the end of the decade. And I think some of the wins that you've seen here are proof points of that. And I see nothing but acceleration from this point forward. So I think that's the story on CapEx.
So that and I see nothing but acceleration from this portfolio.
So I think that's the story on Capex on <unk>.
Speaker 3: OpEx, you know, obviously we have some items around quantinium. We're investing there. I mean, you know, we've got about a almost a
Opex, obviously, we have some items around continuing we're investing there.
We've got about almost.
Speaker 3: $200 million headwind just from Optics investment that business, but I mean, you know, this is sort of another appealing thing to our investors I mean you you can pick up the best quantum computing company in the world at an industrial multiple You know, obviously I think we're you know, whether or not that stays within the portfolio I think it's to be determined but probably keeping it longer term within the portfolio is not the path would go So obviously that will also create some headwinds
$200 million headwind just from Opex investment that business, but I mean, this is sort of another appealing thing to our investors I mean, you can pick up the best quantum computing company in the world at an industrial multiple obviously I think were whether or not that stays within the portfolio I think is to be determined but probably keeping it.
Longer drove into portfolio is not the path would go. So obviously that will also create some headwinds and then sort of R&D investment other than I think that's a little bit to be determined we are going to continue to invest in innovation.
Speaker 3: You know, and sort of R&D investment other, you know, I think that's a little bit to be determined. I mean, we are going to continue to invest in innovation.
Speaker 3: And as long as we have good projects, that investment is going to continue. We have some great investments in sustainability, aerospace, forge, we're going to continue to make.
And as long as we have good projects.
That investment is going to continue we have some great investments the sustainability aerospace or <unk>.
We're going to continue to make them.
Speaker 6: right so i i i guess what kind of hard for us to see is that you know uh...
Right. So I guess, what is kind of hard for us to see is that.
Speaker 6: the years you're spending this money but obviously in the in the fourth quarter than the first quarter uh... you know you're really not being in sales so uh... will there be at the you know can you guys give us any color on you know how much they'll like if we do the math on the returns but
You said you are spending this money, but obviously in the in the fourth quarter and in the first quarter.
Yes, you are really not seeing it in sales so.
Will there be.
Can you guys give us any color on.
How much sales I guess, we can do the math on the returns, but that will just add a point or 2% of sales over the next couple of years per year like at some point it has to show up in the in the.
Speaker 3: Will this add a point or two to sales over the next couple of years per year? Like, you know, at some point it has to show up in the, uh, in the top line to make it down to the bottom line. So that, I think that's what is a little bit juxtaposed. Yeah. Yeah, no, I, I get that. I mean, but I mean, you know, there's no sort of instant gratification. I mean, as you know, quantum computing, we're projecting to do more than 20 million this year in revenue could do more than that.
The top line to make it down to the bottom line, so I think thats what.
<unk> is a little bit juxtapose, yes.
Get that but I mean, theres no sort of instant gratification I mean, as you know quantum computing, we projected to do more than $20 million. This year in revenue could do more than that.
Speaker 3: You know, but we're also saying it's going to do, you know, billion by 2026. So that's sort of a pretty attractive 2 billion by 2026. So, you know, I argue that's a pretty attractive curve there.
But we're also saying it's going to do $1 billion by 2026, So that's sort of a pretty attractive $2 billion by 2026.
Arguably it's a pretty attractive curve there sustainability technology solutions think about it as a $700 million business within three years to give you. Some very specifics now it's still view it as a couple of hundred million dollars this year, but.
Speaker 3: Sustainability technology solutions. Think about it as a $700 million business within three years to give you some very specifics. Now it's still, you know, like view it as a couple of hundred million this year, but.
Speaker 3: It's going to accelerate very, very quickly to give you some curves.
It's going to accelerate very very quickly to give you some curves.
Speaker 3: You know, and the big scope of Honeywell, are they gonna show up dramatically in Q1, Q2? Probably not, but as you look at 23, 24 and 25, we're very, very confident. These things will show up and, you know, we've talked a little bit more about that investor day. And I think the sustainability technology solutions business has been on fire.
The big scope of Honeywell are they going to show up dramatically in Q1, Q2, probably not but as you look at 'twenty three 'twenty four 'twenty five.
Very very confident these things will show up and we'll talk a little bit more about at Investor day, and I think the sustainability technology solutions business has been on fire and involve the wins and some of them. We can't even talk about that we've had particularly in our green fuels gives us a lot of confidence to invest a lot more money.
Speaker 3: Then with all the winds and some of them we can't even talk about that we've had, particularly in our green fuels gives us a lot of confidence.
Speaker 3: to invest a lot more money into that business, given the kind of demand we're seeing and interest in our technologies. Great, thanks.
That business given the kind of demand, we're seeing an interest in our technologies.
Great. Thanks, a lot thanks.
Okay.
Speaker 1: Our next question comes from Julian Mitchell from our place Julian.
Our next question comes from Julian Mitchell from Barclays Julian.
Speaker 7: Hi, good morning. Thank you. Maybe just a good morning, maybe just a question around sort of cash generation and cash uses. So just wondered, you know, what your perspective was on, you know, whether Honeywell can be a sort of 100% free cash flow conversion business.
Hi, good morning, Thank you.
Maybe just good morning, maybe just a question around sort of cash.
Cash generation and cash uses.
So just wondered what your perspective was on what the Honeywell can be sort of 100% free cash flow conversion business.
Speaker 7: in the medium term, understood that maybe CapEx normalises, but you know you've still got that pension income in the P&L aspect there. And then the second part is on the cash.
In the medium term understood that maybe capex normalizes, but you've still got that pension income in the P&L aspect there.
And then the second part is on the cash uses.
Speaker 7: I think investors might say, look, you've got very high IRR investments being made. The share price isn't embedding.
I think investors might say look <unk> got very high IRR investments being made the share price is and embedding the high IRR.
Speaker 7: high IRR, your balance sheet's unlevered, so why don't you do a big share buyback right now in advance of those high IRR projects becoming visible?
LNG on leverage so why don't you do a big share buyback right now in advance of those high IRR projects, becoming visible.
Speaker 4: OK, so so thank you, Julian. And when you look at our cash generation capability, you know, I think you've seen over the last four years plus, we have dramatically improved that to be right around, if not above 100 percent and 16 to 17 percent cash margin, which we think is actually a better measure.
Yes.
Okay. So so.
Thank you Julian and when you look at our cash generation capability.
I think you've seen over the last four years, plus we have dramatically improved that to be right around if not above 100% in 16% to 17% cash margin, which we think is actually a better measure.
Speaker 4: uh you know with with this investment that is going in now obviously that takes it down this year uh which would you know compute into something probably in the high 80s mid to high 80s.
With this investment that is going in now obviously that takes it down this year.
Which would compute into something probably in the high <unk> mid to high Eighty's.
Speaker 4: and probably, again, 13 to 14%, so-called mid-teens.
And probably again, 13% to 14% so call it mid teens on cash margin, but our our forward look is very is very positive I mean, as we've discussed in the Capex comes and goes we're usually right around 900, plus minus so this year, maybe we're going to be a $1 billion two or so billion one going into.
Speaker 4: on cash margin, but our forward look is very, is very positive. I mean, as we've discussed, I mean, the cap X comes and goes, we're usually right around 900.
Speaker 4: You know, plus minus. So this year, maybe we're going to be a billion, you know, two or so billion one.
Speaker 4: going to but there's some specific reasons why that is and and that will probably work its way back down.
But there are some specific reasons why that is and that will probably work its way back down and we will continue to drive income growth, which is going to fuel our cash generation. So so I feel very strongly about.
Speaker 4: And, you know, we'll continue to drive income growth, which is going to fuel our cash generation. So so I feel very strongly about, you know, the strength of our cash flow will be 100 percent. I don't know, but we feel like mid team's cash margin for us is a very strong place.
The strength of our cash flow will be 100% I don't know if thats, but we feel like mid teens cash margin for us is a very strong place and no reason to believe that we're not going to continue to be there as far as the share buyback is concerned.
Speaker 4: no reason to believe that we're not going to continue to be there. As far as the share buyback is concerned, you know, we've got we've got our powder dry. That's that is we've we've demonstrated again once again in the fourth quarter that we're we're willing to deploy our capital against that. We did almost a billion dollars and four to you. I think with the 800, you know, high 800.
We've got we've got our powder dry that as we've demonstrated again once again in the fourth quarter that were we're willing to deploy our capital against that we did almost a $1 billion and <unk> I think it was 800 high eight hundreds.
Speaker 4: Um, and if that opportunity, you know, really shows itself, um, you know, we'll, we'll go back in and, uh, and do so.
And if that opportunity really shows itself.
We will go back in and and do so so I think that's that's one of the things we're always having the right in our radar.
Speaker 3: That's one of the things we're always, you know, having right in our radar on our on our capital deployment puzzle. So I don't know if there is, you know, I think, you know, Julian, as you saw in Q4, we were pretty active in the market. And we think that the shares are.
<unk> on our capital deployment Pago side of their Skus.
I think Julian as you saw in Q4, we were pretty active in the market and we think that the shares are severely underpriced right now and we.
Speaker 3: severely underpriced right now, and we acted Q4, so we kind of did what we say. You know, in terms of cash conversion, I'll be honest. I hate that metric. It's not a good metric, because if you do a bunch of really expensive M&A and you have an underfunded pension plan, you're going to look really good on that metric.
Reactive Q4, so we kind of did what we say and in terms of cash conversion I'll be honest.
I hate that metric, it's not a good metric because if you do a bunch of really expensive M&A and you have an underfunded pension plan youre going to look really good on that metric and it is it's kind of a meaningless metric I like cash as a percent of your revenue I think that's a better metric and I think we're going to be the teams someplace in the teams.
Speaker 3: And it's kind of a meaningless metric. I like cash as a percent of your revenue.
Speaker 3: I think that's a better metric and I think we're going to be in the teens someplace in the teens, some years, mid to upper teens are some years lower, you know, but one thing we're not going to do.
Some years mid to upper teens, some years lower but one thing we're not going to do is not invest in the business. When we have these kinds of growth off returns I think that.
Speaker 3: not invest in the business when we have these kinds of growth opportunities. I think that, I think it's a great find that, Honeywell, these kinds of growth opportunities that provide these kinds of returns. And I wish that some of the revenue and returns would come sooner. I think we always step, but the fact is,
It's a great sign that Honeywell is these kinds of growth opportunities that provide these kinds of returns and.
And I wish that some of the revenue in returns would come sooner I think we all wish that but the fact is.
Speaker 3: These are attractive returns and whether it's quantum or sustainable technology solutions or others.
These are attractive returns and whether its quantum of sustainable technology solutions or others.
Speaker 3: You know, you don't get to this kind of margin performance year after year after year. And we're not exactly a low margin company to begin with. I mean, we're in our low 20s, so we're kind of in the top quartile of our peer group. And we have continued confidence in margin expansion. The reason is because we're investing in innovation, which is differentiated, where we can capture value.
You don't get this kind of margin performance year after year after year, and we're not exactly a low margin company to begin with them anywhere in our low twenty's. So we're kind of in the top quartile of our peer group and we have continued confidence in margin expansion reason is.
Because we are in investing in innovation, which is differentiated where we can capture out.
Proven.
Speaker 7: Yeah, I agree with that on the prime sea of the cash flow margin. Thanks very much. Thanks Julia, thanks Julia.
Yes, I agree with that on the primacy of the cash flow margin. Thanks, very much. Thanks, Julian Thanks Julien.
Speaker 1: Our next question comes from Nigel Cole from Wolf Research.
Our next question comes from Nigel Coe from Wolfe Research Nagel. Please go ahead. Thanks. Good morning, guys can you hear me Okay. Yes. Good morning, Nigel Good morning, Thanks for the question.
Speaker 8: Nagel, please go ahead. Thanks, good morning. Can you hear me okay? Yeah, good morning, Nagel. Good morning. Thanks for the question. Just wanna go back to cashflow and the point of 5 billion impact from the tax changes, Greg. Yeah. R&D, I think we all understand, but definitely a little bit heavier than what we expected. So maybe just break out, is it R&D, other things?
Just want to go to back to cash flow and be appointed 5 billion impact from the tax changes Greg yes.
R&D I think we all understand but definitely a little bit heavier than what we expected. So maybe just break out.
Other things and.
Speaker 4: And if Congress solves this issue, does that point come back or are there other things? Yeah, 100%. Listen, we could have, there's some of our peers who left out.
If <unk> does issue does that point come back over the.
100% listen we could've there as some of our peers, who left out the detriment of the extenders not occurring we did not do that most of our peers. Yes, I mean I can tell you that it's going to be $4 million to $500 million more cash flow and then if they don't do the needful and we're going to come back to you in April and take our guidance down so that.
Speaker 4: the detriment of the extender is not occurring. We did not do that because of our peers. Yeah, I mean, I could tell you that it's gonna be, you know, four to $500 million, you know, more cashflow. And then if they don't do the needful, then we're gonna come back to you in April and take our guidance down. So that was not a position we wanted to be in. We're being very transparent with what it is.
Was not a position we wanted to be and we're being very transparent with what it is we really hope that that legislation.
Speaker 4: You know, we really hope that that legislation, you know, gets extended. We feel very strongly that that R&D tax credit is important. It's important for us to invest here in the US.
Gets extended we feel very strongly that that R&D tax credit is important it's important for us to invest here in the U S and not in R&D protects jobs et cetera, and it's the underpinning of a lot of our.
Speaker 4: in R&D, protects jobs, et cetera. And it's the underpinning of a lot of our technology that we then export throughout the world. So we're very hopeful that that changes. But in the meantime, as it stands right now, it doesn't. And come March.
A lot of our technology that we then export throughout the world. So.
So we're very hopeful that that changes, but in the meantime, as it stands right now it doesn't come March.
Speaker 3: You know, we may be having to make a payment, and so, therefore, you know, we put it in our guidance as such. And the short story is, Nigel, is that if it does get passed.
We may be having to make a payment and so therefore.
We put it in our guidance as as such and the short story is Nigel is that if it does get passed expect 400 million roughly plus or minus increase to our cash outlook for the year.
Speaker 3: we expect a 400 million roughly plus or minus increase to our cash outlook for the year.
Okay, great great. Thanks, very much thank you.
Speaker 1: Our next question comes from Jeff Sprague from Vertical Research. Jeff, please go ahead.
Our next question comes from deaths Vega from vertical research. Please go ahead.
Speaker 9: Thank you. Good morning, everyone. Hey, Jeff. Hey, I want to come back to the growth investments. And I guess sitting here, we could probably just impute that the, the growth R&D and CapEx is, you know, CapEx two or three hundred million, right? And R&D a couple hundred million.
Thank you good morning, everyone, Hey, Joe, Jeff Hey, I, just wanted to come back to the gross investments and I guess sitting here, we could probably just imputes at the.
The gross R&D and Capex is capex, two or $300 million right in R&D, a couple hundred million dollars.
Speaker 9: But Darius, you've been talking about these, you know, initiatives for a while, some of the ones that you've laid out here. So maybe you could just actually scale for us what is truly growth CAPEX and growth oriented R&D. And have you found ways to kind of
Darius you've been talking about these initiatives.
Initiatives for a while some of the ones that you've laid out here so.
Maybe you could just actually scale for us what is truly gross capex and growth oriented R&D.
And if ever you found ways to kind of report repurpose those traditional spending buckets.
Speaker 9: those traditional spending buckets, you know, I think it.
Thank you.
Speaker 9: talked about kind of lowering the asset intensity of the business and other things, you know, so I think there's some movement inside that capex budget. But the nature of my question is really to try to get at, and I think Steve alluded to it, kind of imputing.
I've talked about kind of lowering the asset intensity of the business and other things. So I think there is some movement inside that capex budget, but the nature of my question is really to try to get at and I think Steve alluded to it kind of imputing the growth.
Speaker 9: growth inherent in this IRR number that you're giving us, which kind of hinges on what the growth spending actually is.
Harrington this IRR number that youre, giving us which kind of hinges on.
What the what the growth spending actually is yes, well I think sort of the incremental for this year is pretty much all sort of growth oriented spending and theres. A couple of other elements that are embedded so some of the classical sort of capex spending is going what is getting replaced by some of the spending that we're doing in things like automation for example.
Speaker 3: Yeah, well, I think, you know, sort of the increment for this year is pretty much all sort of growth oriented spending. There's a couple other elements that are embedded. So some of the classical sort of capex spending is going. What is getting replaced by some of the spending that we're doing on things like automation.
Speaker 3: But for example, our next phase of ISC transformation isn't so much a reduction in footprint and fixed costs and so on, but it's actually automation. So there's some capex that's embedded in there that doesn't necessarily help growth, but it helps margin expansion efficiency and so on. So there's some puts and takes.
<unk>, our next phase of ISC transformation isn't so much in a reduction in footprint and fixed costs and so on but it's actually automation. So there's some capex that's embedded in there.
That doesn't necessarily help growth, but it helps margin expansion efficiency and so on so there is some puts and takes.
Speaker 3: And but the incremental spend has really been on on really growth programs. And let me just give you a couple of specific examples.
And but the incremental spend.
It has really been on on really growth programs and let me just give you a couple of specific examples.
Speaker 3: You know, where we've actually spent and development, you know, we don't probably talk about it often enough, but our forge business, which we've invested in pretty heavily, you know, they're recurring their SAS growth 39% last year, the recurring revenue based double digit last year, overall software growth, double digit last year.
Where we've actually spent in development.
We don't probably talk about it often enough, but our <unk> business, which we've been investing in pretty heavily.
Our recurring their SaaS growth, 39% last year the recurring.
Revenue based double digit last year overall, our software growth double digit last year.
Speaker 3: Our solstice business, which as you may recall in the 15, 16, 17 timeframe, we've invested a lot of capital into it. Now, you know, billion dollar plus kind of a business and now we're investing even more because it's creative to our margins. It's growing very, very quickly and we're finding new applications. So.
Our solstice business, which as you may recall in the <unk>.
15, 16, 17 timeframe, we've invested a lot of capital into it now.
Billion dollar plus kind of a business and now we are investing even more because it's accretive to our margins. It's growing very very quickly and we're finding new applications. So.
Speaker 3: I hope the investors trust us that we make these investments become to fruition generate returns. They're not instantaneous. We made a solstice and
I Hope investors Trust us that we make these investments come to fruition generate returns they're not instantaneous we made.
Solstice investments for five six years ago, and now they are coming to fruition vendor per hour made towards investments three four years ago that's growing.
Speaker 3: four, five, six years ago, and now they're coming to fruition. And they're flowering. Made the Ford's investments three, four years ago, that's growing. You know, in two, three, four years, I'm very confident we're going to be talking to you about, you know, the kind of top line we're getting from sustainability technology solutions or quantum, whether it's part of Honeywell or not. But, you know, these are attractive things.
Three four years I'm very confident we're going to be talking to you about the kind of top line and we're getting from sustainability technology solutions or quantum whether it's part of honeywell or not but.
These are attractive things.
Speaker 9: You know, just a quick follow up if I could, you know, so much discussion on growth here today. Could you size.
Just a quick follow up if I could.
Much discussion on gross here today could you size.
Speaker 9: maybe the growth headwind that you experienced in Q4 and or the year on supply chain or other type of...
Maybe the gross headwind that you experienced in Q4 and the year on supply chain or other issues, yes, we talked about it in our last guide as three years to $500 million in the quarter.
Speaker 4: Yeah, we talked about it in our last guide as three to $500 million in the quarter in Q4 and having had experienced about 300 in Q3. And that's kind of what it turned out to be. It was probably more towards the high end of the 500. And you see that in our past few backlogs. It continues to be at an elevated level in three out of four businesses. And through the course of the year, that's probably a billion dollars more than where we began.
In Q4, and haven't had experienced about 300 in Q3, and Thats kind of what it turned out to be it was probably more towards the high end of the 500.
And you see that in our in our past due backlog.
Continues to be at an elevated level and three out of four businesses.
And through the course of the year, that's probably a $1 billion more than we began so again, that's not a precise not one for one exactly the number but.
Speaker 4: So, you know, again, that's not a precise not one for one exactly the number, but that will give you a good, you know, a good marker for some of the some of what was left on the table here in 2021, which, again, we have, we have high confidence that carries forward and as
But that will give you a good.
A good marker for some of that some of what was left on the table here in 2021, which again, we have we have hypothesis that carries forward and as the supply base opens up on the semiconductor side that should help free up the.
Speaker 4: The supply base opens up on the semiconductor side. That should help free up the, you know, the past use certainly in a little bit in PMT, but mainly in the HPT and SPS business. And then we've talked a lot about supply chain, and we're starting to hear more of our aero and defense peers speaking about it as well as that supply chain ramps up. You know, that should provide a lot of tailwind for us, you know, as we go throughout the year.
Past few certainly in.
<unk>.
A little bit in PMT, EBIT, but mainly in the HPT and Sps business and then we've talked a lot about supply chain and we're starting to hear more of our Aero and defense peers speaking about it as well is that supply chain ramps up.
That should that should provide a lot of tailwind for us as we go throughout the year great. Thanks.
Sure.
Speaker 10: Our next question comes from Sheila Kayyalu from Jeffries. Sheila? Hey. Good morning, guys. Thank you for the time.
Our next question comes from Sheila <unk> from Jefferies Sheila.
Hey, good morning, guys. Thank you Patrick good.
Speaker 11: Morning. So I want to ask about maybe aero margins and SPS margins because I think that's the two deltas versus our model and your long-term targets. Especially on aero margins when we look at your margins you did 27.7 in 2021 which is really good and 28.2 we exclude the quantinium loss. So you know how do we think about the drivers of that despite
Morning.
So I wanted to ask about maybe aero margins in Sps margins, because I think thats lets say delta versus our model in your long term targets, especially on Aero margins. When we look at your margins at that 27, seven in 2021, which is really guide on 28, <unk> exclude that quantity and loss self.
How do we think about the drivers of that despite.
Speaker 3: you know, headwinds that you have in the business that you're talking about margin expansion there for Aero. What's the reset higher? And then same for SPS, how do we think about a normalized margin rate there? Yeah, let me start and turn it over to Greg. You know, I think, you know, a couple.
<unk> wins that you have in a business that you're talking about margin expansion Napa are al what's the risk that higher and then same for Sps how do we think about a normalized margin rate there yeah, let me start and I'll turn it over to Greg I think a couple of things.
Speaker 3: You know, we are going to get much more OE growth in 2022 than we did in 2021. You know, it was a favorable mix in 21. But nevertheless, we're going to still continue to see aftermarket growth. We're also investing in R&D.
So we are going to get much more OE growth in 2022 than we did in 2021.
It was a favorable mix in 'twenty, one, but nevertheless, we're going to still continue to see aftermarket growth. We're also investing in the R&D.
Speaker 3: But, you know, given the volume leverage that we expect to see, and still, I wouldn't say as favorable a mix is in 21, but still a good mix in 22, we expect to see some more continued margin expansion in arrow despite further investments in our economy.
But given the volume leverage that we expect to see.
And still I wouldn't say as favorable mixes in 'twenty, one, but still a good mix in 'twenty. Two we expect to see some marked continued margin expansion and arrow. Despite further investments in R&D.
Speaker 3: That's the ARRA outlook. In terms of SPS,
<unk> Aero outlook in terms of Sps.
Speaker 3: And I think our big pressure was in the Intelligrated business, because as you know, that business grew over 50% last year. You know, frankly, and I've said this from multiple calls, probably the worst year to pick that level of growth. So we have, we will focus in Intelligrated in 22, not so much on growth, but there's more than enough that we could have if we wanted it. But we're going to focus on productivity and margin.
And I think our big pressure was in the.
The <unk> business, because as you know that business grew over 50% last year frankly.
Frankly, and I've said this on multiple calls probably the worst year to pick that level of growth.
So we have we will focus in and calibrated in 'twenty two not so much on growth with theres more than enough that we could have wanted it but we're going to focus on productivity.
Productivity and margin expansion, because we really have to position that business much better for further growth, which we expect to see in 2003 and 24.
Speaker 3: You know, we really have to position that business much better for further growth, which we expect to see in 23 and.
Speaker 4: So that's really the business that really hurt our margins in SPS especially in the second half of last year. And you picked the bookend. I mean, we expect the most margin expansion in SPS for those reasons. And, you know, I think Arrow is going to be on the lower end for exactly what Darius described between the investments we're making.
So that's really the business doesn't really hurt our margins in STS, especially in the second half and you pick the bookends, we expect the most margin expansion in FCS for those reasons and I think arrow is going to be on the lower end for exactly what Darius described between the investments, we're making in R&D as well as some of the.
Speaker 4: and R&D as well as some of the mixed pressures, we will get a little bit of that, you know, 40, 50 basis points benefit from continuing moving out.
The mixed pressures, we will get a little bit about 40, 50 basis points benefit from quanta and Youre moving out.
Speaker 4: But it'll be on the lower end of the of the scale and arrow and that's actually that's not a bad thing. I mean, we grew arrow margins dramatically in 2021 so it's not like we're slowing down off of a slow pace.
But it'll be on the lower end of the scale and arrow and that's actually that's not a bad thing I mean, we grew aero margins dramatically in 2021, so it's not like we're slowing down off of a slow pace.
Speaker 4: It was a huge contributor to our margin expansion in 2021. So I think it's right that this is the way we want to make sure that we're always investing in that business because it's got a very bright long-term future.
It was a huge contribute contributors contributor excuse me to our margin expansion in 'twenty. One. So I think it is right that this is the way we want to make sure that we're always investing in that business because it's got a very bright long term future.
Okay.
Thank you.
Speaker 5: Our next question comes from Andrew Obin from Bank of America. Andrew, please go ahead. Yes. Good morning. Hey, Andrew.
Our next question comes from Andrew <unk> from Bank of America, Andrew. Please go ahead.
Good morning, Andrew.
Speaker 12: So the question is, just follow up on guidance, at the lower end, right, you're getting to 4% top line growth with 4%. Pricing, you know, sort of implies flat volume.
So the question is just follow up on guidance at the lower end right. So you're guiding to 4% top line growth was 4% pricing.
Sort of implies flat volumes could you just talk about the scenario what would you view what does the work looks like in which this come true and what does that imply for second quarter. Thank you.
Speaker 12: Could you just talk about the scenario? What would lead you, you know, what does the world look like in which this come true and what does it imply for second quarter? Thank you. Yeah, well, I think first of all, I'd say.
I think first of all I'd say that.
Speaker 3: you got to take the masks noise out of it. So even at the low end, you know, we're growing the business because I think masks will still provide some noise, certainly in Q1 worth two points and even some in Q2. The scenario would be that, you know, there's no real improvement or deterioration in the supply chain situation. I mean, that is the biggest still unknown. And although we're optimistic.
You got to take the masks noise out of it so even at the low end, we're growing the business because I think <unk> masks will still provide some noise certainly in Q1 or two points and even some in Q2.
Scenario would be that there is no real improvement or deterioration in the supply chain situation. I mean that is the biggest still unknown. Although we are optimistic that the supply chain is getting better and we get better that we sort of bottomed out.
Speaker 3: that the supply chain is getting better and we have better, you know, that we've sort of bottomed out, you know, until we really see that, it's hard to lock that into some of those numbers. And that's why we kind of have the bottom where we do, but that would be the biggest sort of variable that's an unknown, is really the supply chain performance.
Until we really see that it's hard to lock that into some of those numbers and thats why we kind of have the bottom where we do but.
That would be the biggest sort of variable that's an unknown.
It's really the supply chain performance.
Speaker 3: Gotcha. So not a specific segment supply chain. No, the ones that were getting impacted the most.
Got you so not a specific segment supply chain.
The ones that where we're getting impacted the most.
Speaker 12: You know, I think in PMT for the most part, the impact there has been very mild. I would say HPT has been impacted relatively heavily, particularly in Q4. And I would say looking forward, that's probably the segment where we have the biggest impact, you know, Aero also. And SPS actually is getting better. So that's sort of how I would weigh the four different segments. Now, that makes perfect sense. Thanks so much.
I think.
PMT for the most part the impact there has been very mild.
Say HPT has been impacted relatively heavily particularly in Q4 and I would say looking forward is probably the segment, where we have the biggest impact.
Arrow also.
At STS actually is getting better.
So so that's sort of how I would weigh the four different segments now that makes perfect sense. Thanks, so much. Thanks.
Speaker 1: Our next question comes from Dean Dray from RBC Capital Markets. Dean, please go ahead. Thank you.
Our next question comes from Deane Dray from RBC capital markets. Please go ahead.
Thank you and good morning, everyone, Hey, good morning.
Speaker 3: Hey, just since it's been in the headlines over the past several weeks about the 5G rollout and issues with the risk of interference at airports, be interested in your comments. Has this impacted at all orders in aerospace? Has it required any retesting, any delays, any commentary there would be helpful. Thanks. Yeah, no, the short answer, Dean, it has not impacted orders. We're obviously working with
Hey, just since it's been in the headlines.
Over the past several weeks about the <unk> rollout issues with rest of interference at airports.
Be interested in your comments you how has this impacted at all orders in aerospace because it required any recasting any delays.
Any commentary there would be helpful. Thanks, the short answer Deane and it has not impacted orders. We are obviously working with both the Oems and the FAA to find the solution. We're actively involved in those discussions but in terms of orders and so on no I mean, if anything if.
Speaker 3: both the OEs and the FAA to find a solution. We're actively involved in those discussions, but in terms of orders and so on, no, I mean, if anything, if there's a hardware and or a software solution here, probably will probably improve our outlook for orders, not actually detract from it, but it would be a very.
There is a hardware and our software solutions are probably will probably improve our outlook for orders not actually detract from it but we've been very active in those discussions.
Speaker 4: Is there a risk of interference? There's lots of lots of debate there.
Is there a risk of interference is lots of lots of debate there.
Speaker 3: Yeah, you know, I think I'm going to leave that answer to the experts, and I'm not an expert in this topic, so I think I'm going to defer that one.
Yeah, I think I'm going to leave that answer to the experts.
I'm not an expert in this topic so.
I think I'm going to defer that one.
I appreciate it. Thank you. Thank you thanks.
Speaker 1: Our next question comes from John Walsh from Credit Suisse. So John , please go ahead.
Our next question comes from John Walsh from Credit Suisse. So John Please go ahead.
Hi, Good morning, Hey, John morning, Hey.
Speaker 13: Wanted to just dig in a little bit to slide 22 where you talk about the labor cost inefficiencies the 30 to 50 million.
Wanted to just dig in a little bit to slide 22, where you talk about the labor cost inefficiencies.
$30 million to $50 million would just love to know how youre actually calculating that as that absenteeism is it the impact of inefficiencies from doing changeovers. It would seem like we've heard that from many manufacturers but.
Speaker 13: We'd just love to know how you're actually calculating that. Is that absenteeism? Is it the impact of inefficiencies from doing changeovers?
Speaker 13: It would seem like we've heard that from many manufacturers, but
Speaker 13: I guess you're the first to size it and actually seemed a little bit low so maybe there's some other things.
You are the first to size it and actually seemed a little bit low so maybe theres. Some other things that's not being captured in that $30 <unk> million callout, yes. So think about that is again that's specific to <unk>. It's specific to projects that we began in 2021 that are now going to carryover into 2022 and.
Speaker 13: that's not being captured in that 30 to 50 million we call out.
Speaker 4: Yeah, so think about that as again that's specific to intelligrated, it's specific to
Speaker 4: Projects that we began in 2021 that are now going to carry over into 2022 and some of those costs are related to, you know, some of the demobilization and remobilization and the inefficiencies that come across it if you think about, you know, an installation project.
Some of those costs are related to.
Some of the demobilization and re mobilization and the inefficiencies that come across that if you think about it.
Speaker 14: materials come on site people come on site and do their do their job in a, you know, a certain defined timeframe and a certain set of steps and when that gets disrupted by material availability, you create havoc with.
Installation project materials come on site people come on site and do their do their job.
Certain defined timeframe and a certain set of steps and when that gets disrupted by material availability.
You create havoc with <unk>.
Speaker 15: you know, supply of labor on time and so forth. So these are these are very identifiable costs related to very specific projects.
Supply of labor on time, and so forth. So these are these are very identifiable cost related to very specific projects.
Speaker 16: And, you know, we have changed our operating cadence with some of our customers to lengthen lead times and so forth to make sure that that doesn't recur again in 2022. So this is really the carryover of completion of some of these larger jobs in 21. Yeah. And I think it's, Greg, you know, said it right, which is when the supplies don't arrive on time, you cause inefficiency in the installation rhythm because.
And we have changed our operating cadence with some of our customers to life and lead times.
And so forth to make sure that that doesn't recur again in 2022. So this is really the carryover of completion of some of these larger jobs in 'twenty one.
And I think it's Greg said right, which is when the supplies don't arrive on time, you cause inefficiency in the installation rate up because there is people are essentially waiting on supplies and thats kind of what would change going forward for 'twenty two as we will really be staging parts and components needed for the <unk>.
Speaker 17: There's people are essentially waiting on supplies and that's kind of what we change going forward for 22 is, you know, we will really be staging the parts and the components needed for the warehouse before we actually apply the labor. So the way we're going to execute these jobs, because you generally in a normal flowing supply chain environment, you kind of do that concurrently.
The house before we actually apply the labor so the way we're going to execute these jobs because generally in a normal slowing supply chain environment, you kind of do that concurrently but will be unpredictability in the supply chain.
Speaker 18: but with the unpredictability in the supply chain.
Speaker 19: it's really not possible, not prudent to do it that way. So we're gonna be doing much more staging before we actually apply labor to do the install.
It's really.
Not possible not prudent to do it that way so we're going to be doing much more stages before we actually apply labor to be installed.
Which will which will dramatically improve our <unk> efficiency.
Speaker 20: Great. Thanks for taking the question. I'll pass it along. You got it. Thank you.
Great. Thanks for taking the question I'll pass it along thank you.
Speaker 21: We'll take our last question from Andrew Kaplowicz from Citigroup. Andrew, please go ahead.
We'll take our last question from Andrew Kaplowitz from Citigroup, Andrew. Please go ahead.
Speaker 22: OK, we'll come back to Andrew. We'll take one more question from Marcus Minnermeyer from UVS. Marcus?
Okay, we will come back to Andrew we'll take one more question from Markus minimized.
From UBS Marcus Please go ahead.
Speaker 23: Yes. Hi, good morning, everyone. Hey, hi. One on PMT, if I could, obviously your piece is strong after your comments. You had a comment in the press release this morning that there was delayed project recovery and softness and smart energy in the fourth quarter. How should I think about the 22 guide here, mid-single digits to high-single digits?
Yes, hi, good morning, everyone.
Hey, Hi, one on PMT, if I could.
Obviously, Europe Houston is strong our senior comments.
You had a comment in the press release. This morning that there was a delayed project recovery and softness in smart energy in the fourth quarter, how should I think about the 22 guide here mid single digits to high single digits in the context of the automation business.
Speaker 24: in the context of the automation business? And what are the customer conversations here on budgets? And is the upside there if some of these project delays maybe aren't as bad as you expect? How should we think about that? Yeah, no, we're very bullish on PMT this year. Just to give you a very specific, some specific figures, our project business bookings were up double digits.
What are the customer conversations here around budgets and east outside there. If some of these project delays maybe arent the status. We expect how should we think about that yeah. No. We're very bullish on PMT. This year just to give you a very specific some specific figures our project business bookings were up double digits.
Speaker 25: in Q4, so we actually see a substantial acceleration in our automation business, and that's reflected in the booking rates.
In Q4, so we actually see a substantial acceleration in our automation business and that's reflected in the booking rates.
Speaker 26: PMT overall was up double digits in Q4 in the year. UOP business bookings were up.
PMT overall was up.
Double digits in Q4 and the year.
<unk> business bookings were up.
Speaker 27: over 20% in Q4. So really, really nice positioning for PMT. We were very bullish on PMT for 2022 and 2023. I mean, the investment cycle is certainly returning and we're seeing that in both our booking rates and that kind of performance we saw even in Q4.
Over 20%.
In Q4, so really really nice positioning for PMT were very bullish on PMT for 22% and 23 I mean, the investment cycle is certainly returning and we're seeing that in both of our booking rates and that kind of performance. We saw even in this report.
Speaker 28: think that that's kind of a thing. So I think TMP is as well positioned as any business we see for 22.
We think that that's kind of arc and so I think PMT is well positioned as any business, we see R 22.
Great. Thank you.
Speaker 29: Thank you very much. That concludes today's question and answer session. At this time, I would like to turn the conference back. There is a dance check for any additional skills.
Thank you.
Thank you very much and that concludes today's question and answer session. At this time I would like to turn the conference back Eric <unk> for any additional closing remarks.
Speaker 30: I want to thank our shareholders for your ongoing support. We delivered strong fourth quarter results and continue to navigate effectively to multiple uncertainties with the typical level of operational rigor you've come to expect from Honeywell. Our future is bright and we look forward to discussing this further upcoming investor day. Thank you all for listening and please stay safe and healthy.
I want to thank our shareholders for your ongoing support we delivered strong fourth quarter results and continued to navigate effectively through multiple uncertainties with a typical level of operational rigor we've come to expect from Honeywell, our future is bright and we look forward to discussing this further our upcoming Investor day. Thank you all for listening and please stay safe.
And healthy.
Speaker 31: Thank you. This does conclude today's conference call. You may disconnect at this time. Have a wonderful day.
Thank you <unk>.
Thus conclude today's conference call you may disconnect at this time have a wonderful day.
Okay.
Okay.