Q1 2024 Honeywell International Inc Earnings Call

Yes.

Speaker Change: Thank you for standing by and welcome to the Honeywell first quarter 'twenty 'twenty four earnings conference call.

Operator: At this time, all participants are in a listen-only mode. Please be advised that today's call is being recorded.

At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: Please be advised that today's call is being recorded.

Speaker Change: I would now like to hand, the call over to Sean make them.

Sean: Vice President of Investor Relations. Please go ahead.

Sean: Thank you.

Sean: Good morning, and welcome to Honeywell's first quarter 2024 earnings conference call on.

Speaker: This webcast and the presentation materials, including non-CAP reconciliations, are available on our Investor Relations website.

Sean: On the call with me today are Chief Executive Officer, Emily Gabor, Senior Vice President and Chief Financial Officer, Greg Lewis.

Sean: This webcast and the presentation materials, including non-GAAP reconciliations are available on our Investor Relations website.

Vimal M. Kapur: As expected, our long-cycle aerospace and energy-oriented businesses led the way with healthy organic volume growth. We are starting to see recovery in some areas of our short-cycle portfolio, including consecutive quarters of order growth in productivity, solutions, and services, while the other short-cycle businesses continue to normalize as the effects of de-stocking fade, consistent with our second half acceleration framework.

Sean: I'm trying to tie them, we post new information that may be of interest or material to our investors on this website.

Sean: Our discussion today includes forward looking statements that are based on our best view of the world and of our business as we see them today.

Sean: They are subject to risks and uncertainties, including the ones described in our SEC filings.

Sean: Good morning, We will review our financial results for the first quarter share our guidance for the second quarter and provide an update on full year 2024 as always we'll leave time for your questions up yet.

Sean: That I will turn the call over to CEO, Jim OCA for.

James Currier: Thank you Sean and good morning, everyone. We delivered a very strong first quarter exceeding the high end up our first quarter adjusted earnings per share guidance and meeting the high end up on organic sales and segment margin guidance ranges.

Vimal M. Kapur: Second, we are evolving the Honeywell Accelerator to drive incremental value through deploying a global design model across the portfolio to enhance our growth capability. Following the great integration inside of Honeywell over the past several years, we are now an integrated operating company that deploys world-class digital supply chain and technology development capabilities at scale, along with multiple growth drivers that benefit the entire enterprise. Third, we are executing on our portfolio optimizing goals, upgrading the quality of our business and financial profile by executing on strategic bolt-on acquisitions while divesting non-core lines of business to accelerate value creation.

James Currier: The disciplined execution of our workshop exited their operating system and differentiated portfolio of technology enabled this strong performance amidst a dynamic microeconomic backdrop.

James Currier: As expected our long cycle aerospace and energy oriented businesses led the way with LD organic volume growth, we are starting to see recovery in some of the other parts of our second portfolio, including conductive quarters of orders growth and productivity solutions and services.

James Currier: Other short cycle businesses continue to normalize.

James Currier: The effects of Destocking feet consistent with us they can hop exploration framework.

James Currier: Before we get into a more detailed discussion on the first quarter of 2024 does an update to our full year 2024 expectation, let me take a minute to revisit my priorities for Honeywell.

James Currier: We are keenly focused on accelerating organic sales growth toward the upper end up our long term target range of 47%.

Vimal M. Kapur: Over the last few years, we have accumulated several quality bolt-ons and tuck-in assets that strategically add to our technological capabilities, enhancing our alignment to compelling meta-trends, and provide accretive growth that supports Honeywell's overall long-term financial framework. CVT&AVI technology will reinforce our leading navigation solutions across aerospace, defense, and industrial platforms. This acquisition, which is in direct concert with Honeywell's alignment with the megatrend of automation and the future of aviation, furthers our ability to create value for our customers from nose to tail, whether they are traditional operators seeking to increase the autonomous capability of their existing fleets or new entrants in the advanced air mobility space. Before I hand it off to Greg, let's turn to slide four to review some of our exciting recent videos.

James Currier: Doing this by enhancing our innovation playbook.

James Currier: <unk> sustainability and software offering increasing penetration of our installed base and leveraging our leadership position in high growth regions.

James Currier: Second we are evolving Honeywell accelerator to drive incremental value to deploying global design model across the portfolio to enhance our growth capability.

James Currier: Following the great integration inside of Honeywell over the past several years, we are not an integrated operating company that deploys word cloud digital supply chain and technology development capability that scale, along with multiple growth drivers that benefit the entire enterprise.

James Currier: This includes limiting generating AI to maximize the potential benefit of our operating system boss.

James Currier: For our customers and internally.

James Currier: This strong digitally enabled foundation exited is providing to be a powerful source of profitable growth across all of our businesses and potential addition to our portfolio.

Vimal M. Kapur: In aerospace, we will invest more than $80 million to expand our Olathe plant in Kansas. This project will enable the production of next-generation avionics technology and directly create hundreds of jobs at the site and in the local economy. This facility upgrade is another example of the resources we are committing to unlock the supply chain and our ongoing investment in the aerospace technology business to drive growth. Finally, Honeywell will be incorporating its hydrocracking technology in the new DG Fuel SAF refinery to convert hydrocarbon liquids into SAF. This technology is a low-capital solution that facilitates a 90% reduction in CO2 intensity versus traditional fossil fuel-based jet fuels by using biomass as a feedstock.

James Currier: Third we are executing on our portfolio optimizing goes.

James Currier: Upgrading the quality of our business and financial profile bags recruiting on strategic bolt on acquisition, while divesting non core lines of business accelerate value creation.

James Currier: We expect to deliver profitable growth and strong cash generation as we demonstrate progress against these priorities, creating a compelling long term value proposition for our shareowners.

James Currier: In the spirit of that progress, let's turn to slide three to discuss the latest accident portfolio shaping goals.

James Currier: Our M&A playbook is yielding positive results.

James Currier: Over the last few years, we have accumulated several quality bolt ons and tuck in asset that's strategically add to our technological capability enhancing our alignment to compelling mega trends and provide accretive growth that supports Honeywell overall long term financial framework.

James Currier: We remain focused on creating a flywheel of bolt on M&A transaction roughly in the 1% to $7 billion purchase price range.

Gregory Lewis: Thank you, Vimal, and good morning, everyone. Let me begin with slide five. We delivered a very strong first quarter, exceeding the high end of our adjusted earnings per share guidance and meeting the high end of our organic sales and segment margin guidance ranges. Despite a dynamic macro backdrop, Honeywell-disciplined execution and differentiated solutions enabled us to deliver on our commitment. Improved Business Mix, our focus on commercial excellence, and benefits from productivity, allowed us to expand margins in line with the high end of our guidance. While tax was a bit lighter relative to our first quarter guidance, our full year tax expectations have not changed.

James Currier: We have successfully executed on meaningful deals that add technological adjacencies to our portfolio and are accretive to our growth and margin rate profile with attractive business characteristics. The most recent example of this game in the fourth quarter, when we announced our intention to acquire <unk> global access solution business by nearly 5 billion.

James Currier: <unk>.

James Currier: Enabling honeywell to become a leader in security solution for the digital age.

James Currier: The transaction further enhances our equipment agnostic high margin product business makes it within building automation.

James Currier: Last year's acquisition of compressor controls calibration or CCC, a leading provider of turbo machinery control and optimization solution that will play a critical role in energy transition aligns with this playbook as well.

James Currier: <unk> technologies, including control hardware software and services bolster Honeywell high growth sustainability, and <unk> portfolio with new carbon capture control solution TTC.

Gregory Lewis: Orders were $10.2 billion in the quarter, down 1% year on year, which supported our backlog growth of 6% to a new record of $32 billion. This was led by quarter over quarter growth in aero, building automation, and industrial automation, including in key short cycle product businesses, namely Productivity Solutions and Services in IA and FIRE in BA. This setup gives us confidence in our back half 2024 outlook, which I'll discuss in a few minutes.

James Currier: PTC has seamlessly integrate into our process solutions business and we are already seeing meaningful revenue synergy benefit with Honeywell forge.

James Currier: Second acquisition are also an important growth lever for us as we continue to evaluate a build buy or partner approach to add strategically important offering that solve our customers' toughest challenges.

James Currier: Last month, Honeywell announced our intention to acquire <unk> for approximately 200 million euros.

James Currier: Davidson <unk> technology will reinforce our leading navigation solutions across aerospace defense and industrial platform. This acquisition is a direct concert with Honeywell alignment, the megatrend of automation and future of aviation.

James Currier: Our ability to create value for our customer from nose to tail, whether they are traditional operators seeking to increase the autonomous capability of their existing fleets.

James Currier: Our new entries in the advanced capability space.

Gregory Lewis: We also continue to execute on our capital deployment strategy, putting our robust balance sheet to work through $1.6 billion, including $700 million in dividends, $700 million in share repurchases, and $200 million in high-return capital expenditures. As you saw in February, we successfully issued $5.8 billion in bonds during the first quarter, including our first-ever 40-year maturity, taking advantage of strong demand in both the euro and dollar markets and locking in attractive long-term spreads while extending our weighted average bond maturity from 7 to 10 years.

James Currier: Last year, we acquired <unk> business that delivered internet of things and operational technology cyber security solution for monitoring large scale network scaled.

James Currier: <unk> block proven declared these in asset recovery.

James Currier: Threat detection and security governance into RSV portfolio, all key components for critical infrastructure and industrial cyber is clearly.

James Currier: The acquisition has bolstered our strategic foundation in an attractive market for us to continue to bid on both organically and Inorganically.

James Currier: With our recent portfolio announcements, including carriers global access solution business and <unk>. We are on track to accelerate capital deployment in 2024 and exceed our commitment to deploy at least $25 billion of capital in 2023% through 2025 <unk>.

James Currier: Our robust balance sheet capacity enabled us to allocate capital to up for opportunistic share repurchases.

Gregory Lewis: This really demonstrates the attractiveness and strength of Honeywell in the capital markets that we have built over time. In defense of space, robust demand and improvements in our supply chain enabled us to grow sales 16% in the quarter. AT booked a bill of approximately $1.1 billion in the quarter as commercial demand and benefits from the impact of an increased global focus on national security support a strong growth trajectory. Process Solutions revenue was flat in the first quarter as growth in our aftermarket services business was offset by mega project timings. Building automation sales were down 3% organically.

James Currier: High return growth Capex and accretive M&A.

James Currier: As the deal environment remains relatively favorable in 2024, we will face an already strong pipeline of high value M&A opportunities supporting the execution of our portfolio shaping strategy.

James Currier: I hand, it off to Greg, Let's turn to slide four to review some of our exciting recent wins.

Gregory Lewis: Let me take this opportunity to highlight our recent commercial wins and strategic actions. We are taking that demonstrated innovation across our portfolio and support alignment with three compelling mega trends automation future of aviation and energy transition all underpinned by robust digitalization capability and solution.

Gregory Lewis: In the automation space Honeywell was chosen to provide automation cyber security and safety solution to a multibillion dollars plant expansion project for a major energy company in Middle East, We will deploy our flagship distributed control system and safety manager technologies amongst other solution. We remain excited about the various automation opportunities across.

Speaker: We had another strong quarter of growth in our long cycle building solutions business, while we worked through the volume challenges and the short cycle building products. On a year-over-year basis, orders and building projects were up double digits, with strength in our core business and robust performance in energy and airports. Sequentially, orders for building automation improved in the first quarter, highlighted by a seasonal lift in building services and modest improvement in fire, resulting in an overall building automation book-to-bill of 1.1.

Gregory Lewis: Our portfolio.

Gregory Lewis: In aerospace, we will invest more than $80 million to expand our OLED plant in Kansas.

Gregory Lewis: This project will enable the production of next generation avionics technology and directly create hundreds of jobs that site and in the local economy. This facility upgrade is another example of the resources, we are committing to unlock the supply chain and our ongoing investment in the aerospace <unk> technology business to drive growth.

Gregory Lewis: Finally, Honeywell will be incorporating our hydrocracking technology in the new <unk> SaaS refinery to convert hydrocarbon liquids into SaaS. This technology is a low capital solution, which facilitates 90% reduction in seo to intensive versus traditional fossil fuel based jet fuels by using biomarker as a feedstock.

Speaker: Segment margins contracted 120 basis points to 24% due to mixed headwinds from softer product volumes and cost inflation. Advanced materials gained 6%, primarily driven by double-digit growth in fluorine products. ESS book-to-bill was 1.2 in the first quarter, the second consecutive quarter of a book-to-bill above 1.

Gregory Lewis: When completed the refinery is expected to produce 600000 tons of SaaS every year as demonstrative here Honeywell remains committed to actively solving both our customer and adverse toughest challenges.

Gregory Lewis: Now, let me turn it over to Greg on slide five to discuss our first quarter results in more detail as less pruritus or views in second quarter and full year 2024 guidance. Thank you demo and good morning, everyone. Let me begin on slide five.

Speaker: Segment margin contracted 70 basis points on a year-over-year basis to 19.8% as one-time factory restart costs were partially offset by favorable business. Growth across our portfolio was supported by another quarter of double-digit sales growth in Honeywell Connected Enterprise, a powerful indicator of our strong software franchise powered by our differentiated Forge AI IoT platform. Our offerings in cyber, life sciences, and connected industrials all grew by more than 20% year-over-year in the quarter.

Gregory Lewis: As a reminder, we're now reporting our results using the new segment structure, which went into effect in the first quarter.

Gregory Lewis: With that let's discuss the results we delivered a very strong first quarter exceeding the high end of our adjusted earnings per share guidance and meeting the high end of our organic sales and segment margin guidance ranges.

Gregory Lewis: Despite a dynamic macro backdrop, honeywell disciplined execution and differentiated solutions enabled us to deliver on our commitments.

Gregory Lewis: First quarter, our organic sales growth were up 3% year over year led by 18% organic growth in aerospace technologies. This was the 12th consecutive quarter of double digit growth in our commercial aerospace business. In addition to double digit growth in defense and space segment.

Speaker: The ongoing tailwinds in our long-cycle end markets and the strength of our backlog give us confidence in our ability to navigate the current operating environment. We continue to execute in our proven value creation framework, underpinned by our accelerator operating system, which will enable us to drive compelling growth in earnings and cash for quarters to come. We delivered on our 1Q commitments while maneuvering through known risks, and as we look to the rest of 2024, our original guidance framework continues to be solid. We expect the environment to remain dynamic, as we were reminded again by recent geopolitical events. Now, let's discuss how these dynamics come together for our 2024.

Gregory Lewis: Segment profit grew 4% year over year and segment margins expanded by 20 basis points to 22, 2% driven by expansion in aerospace.

Gregory Lewis: Improved business mix, our focus on commercial excellence and benefits from productivity allowed us to expand margins in line with the high end of our guidance range.

Gregory Lewis: Earnings per share for the first quarter was $2 23.

Gregory Lewis: Up 8% year over year and adjusted earnings per share was $2 25.

Gregory Lewis: Up 9% year over year.

Gregory Lewis: While taxes, a bit lighter relative to our first quarter guidance, our full year tax expectations have not changed a bridge for adjusted EPS from <unk> 23 to <unk> 24 can be found in the appendix of this presentation.

Gregory Lewis: Orders were $10 2 billion in the quarter down 1% year on year, which supported our backlog growth of 6% to a new record of $32 billion.

Gregory Lewis: Given the backdrop I just laid out, in total, for 2024, we continue to expect sales to be in the range of $38.1 to $38.9 billion, which represents overall organic sales growth of 4 to 6% for the year, with a greater balance between volume and price. We expect sequential improvement in the second half of 2024 over the first as aerospace continues to grow its supply capability. For the second quarter, we anticipate sales in the range of $9.2 to $9.5 billion, up 1% to 4% organically. We anticipate our overall segment margin to expand 30 to 60 basis points. Price Cost Discipline and Productivity Actions, including our precision focus on reducing raw material costs.

Gregory Lewis: This was led by quarter over quarter growth in Aero building automation and industrial automation, including in key short cycle product businesses, namely productivity solutions and services Nia and fire and BS.

Gregory Lewis: This setup gives us confidence in our back half 2024 outlook, which I'll discuss in a few minutes.

Gregory Lewis: Free cash flow was approximately $200 million up $1 2 billion versus the first quarter of 2023 due to the absence of last year's onetime settlement of legacy legal matters that derisked our balance sheet.

Gregory Lewis: Excluding the impact of these settlements net of tax free cash flow was up approximately $200 million as higher net income was partially offset by higher working capital due to lower payables. However, we see working capital, becoming a tailwind in the coming quarters as we unwind the multiyear buildup of excess inventory.

Gregory Lewis: We also continued to execute on our capital deployment strategy, putting a robust balance sheet to work through $1 6 billion.

Gregory Lewis: Similar to last year, building automation margins will lead the group in margin expansion, followed by industrial automation and energy and sustainability solutions. For aerospace, margins should remain relatively comparable to the last few years as volume leverage covers higher sales from the build-out of our original equipment install base, which is driving robust year-over-year growth. For the second quarter, we expect overall segment margin in the range of 22.0 to 22.4 percent, roughly flat sequentially, but down 40 basis points to flat year over year, primarily due to volume de-leverage in IA and the expiration of the Zebra license. Importantly, our guidance for both the second quarter and full year 2024 does not consider the planned acquisition of Carrier's Global Access Solutions business. Now, let's spend a few minutes on Outlook by design.

Gregory Lewis: Including $700 million dividends $700 million of share repurchases and $200 million in high return capital expenditures.

Gregory Lewis: As you saw in February we successfully issued $5 8 billion in bonds during the first quarter, including our first ever 40 year maturity, taking advantage of strong demand in both the euro and dollar markets and locking in attractive long term spreads while extending our weighted average bond maturity from seven to 10 years.

Gregory Lewis: Proceeds will be used primarily to fund our acquisition of the carrier global access solutions business and to address current debt maturities.

Gregory Lewis: Really demonstrates the attractiveness and strength of Honeywell in the capital markets that we have built overtime.

Gregory Lewis: Now, let's spend a few minutes in the first quarter performance by business.

Gregory Lewis: In aerospace technologies sales were up 18% organically year on year matching the third quarter of last year as among our strongest performances in over a decade.

Gregory Lewis: Increases in commercial aviation were led by original equipment, which saw over 20% growth in both air transport and business in general aviation as supply unlocks in deliveries continued to increase.

Gregory Lewis: Looking ahead for aerospace technologies, demand remains very encouraging across our end market. However, we expect these sales to come at a lower margin, driving a sequential and year-over-year decrease in margin rate following the first quarter's strong results. We'll continue to work through our healthy order book in defense and space, generating sequential sales improvement throughout the year. Additionally, ongoing supply chain improvements will continue to support double-digit output growth in AT throughout 2024. 2024 segment margins should be relatively comparable to 2022 and 2023, as volume leverage is mostly offset by higher sales of lower margin products, a dynamic that likely leaves the first quarter at the high point for aero margins. In industrial automation, the timing of short cycle recovery will remain an important factor in our 2024 results, leading a back half-weighted year.

Gregory Lewis: We also saw significant growth in air transport aftermarket as global flight activity remains strong.

Gregory Lewis: In defence and space robust demand and improvements in our supply chain enabled us to grow sales, 16% in the quarter.

Gregory Lewis: <unk> had book to Bill of approximately $1 one in the quarter as commercial demand and benefits from the impact of an increased global focus on national security support our strong growth trajectory.

Gregory Lewis: Supply chain continues to show sustained modest sequential improvement leading to a 15% increase in output year on year, marking the seventh consecutive quarter of double digit output growth.

Gregory Lewis: Segment margin in aerospace expanded 150 basis points year over year, driven by commercial excellence and volume leverage partially offset by cost inflation and mixed pressures within our original equipment business.

Gregory Lewis: For industrial automation sales decreased 13% organically in the quarter, primarily as a result of lower volumes and warehouse and workflow solutions as investments in warehouse automation remains subdued.

Gregory Lewis: Our short cycle sensing and safety technologies, and productivity solutions and services sales were stable, but lower year over year with orders in our productivity solutions and services business growing sequentially and year over year for the second consecutive quarter of positive sign that we're nearing a return to growth in that business.

Gregory Lewis: For the full year, Process Solutions will grow sequentially each quarter to build on last year's strong performance driven by the aftermarket services business. Warehouse and workflow solutions will improve as we move through the trough of warehouse automation spending, while also benefiting from easing communications throughout the year. Our Sensing and Safety Technologies business will benefit as the effects of distributor destocking fade throughout the year.

Gregory Lewis: <unk> solutions revenue was flat in the first quarter as growth in our aftermarket services business was offset by Mega project timing.

Gregory Lewis: Segment margin in industrial automation contracted 200 basis points to 16, 8% driven by lower volume leverage and cost inflation, partially offset by productivity actions and commercial excellence.

Speaker: Two consecutive quarters of orders growth in our Productivity Solutions and Services business provide confidence in a back half ramp, excluding the impact of the absence of additional zebra payments. We still expect segment margin to expand, particularly in the second half, as short-cycle recovery leads to positive volume. Moving to building automation.

Gregory Lewis: Building automation sales were down 3% organically, we had another strong quarter of growth in our long cycle building solutions business, while we worked through the volume challenges in the short cycle building products area.

Gregory Lewis: Solutions grew 7% in the quarter led by double digit growth in building projects driven by strong execution of our backlog.

Gregory Lewis: On a year over year basis orders in building projects were up double digits with strength in our core business and robust performance in energy in airports.

Speaker: We remain confident in the overall outlook and execution of this plan. For the second quarter, sales should improve sequentially as the channel further normalizes, and our long cycle businesses continue to benefit from strong backlog and aftermarket services tailoring. We anticipate VA will be the segment with the largest margin expansion, primarily driven by productivity actions and commercial excellence net of inflation. Finally, in energy and sustainability solutions, the geopolitical environment will remain a key focus as we move through the year.

Gregory Lewis: Sequentially orders for building automation improved in the first quarter highlighted by a seasonal lift in building services and modest improvement in fire, resulting in an overall building automation book to Bill of one one.

Gregory Lewis: Segment margins contracted 120 basis points to 24% due to mix headwinds from softer product volumes and cost inflation.

Gregory Lewis: We offset by productivity actions and commercial excellence.

Gregory Lewis: Energy and sustainability solutions sales grew 5% organically in the first quarter <unk>.

Gregory Lewis: Advanced materials gained 6%, primarily driven by double digit growth in flooring products and <unk> sales.

Speaker: In the second quarter, we expect sales to remain roughly flat year over year and sequentially, as sustained demand for fluorine products and catalysts will offset remaining volume headwinds from challenging comps and gas processing. For Sustainable Technology Solutions, robust demand will lead to another strong year of growth. Margins should improve throughout the year from a 1Q bottom driven by a combination of commercial excellence and productivity action. Moving on to other key guidance metrics, pension income in 2024 will be roughly flat to 2023 at approximately $550 million.

Gregory Lewis: Sales were up 3% year over year as robust demand led to a double digit increase in both petrochemical catalyst shipments and refining equipment more than offset expected challenging year over year comps and gas processing equipment projects.

Gregory Lewis: <unk> book to Bill was one two in the first quarter the second consecutive quarter of a book to bill above one.

Gregory Lewis: Segment margin contracted 70 basis points on a year over year basis to 19, 8% as onetime factory restart costs were partially offset by favorable business mix and productivity actions.

Gregory Lewis: Across our portfolio was supported by another quarter of double digit sales growth in Honeywell connected enterprise, our powerful indicator of our strong software franchise powered by our differentiated forge AI Iot platform.

Gregory Lewis: Our offerings in cyber life Sciences, and connected industrials, all grew by more than 20% year over year in the quarter.

Gregory Lewis: ETE continues to generate not only value for our customers, but accretive growth and profitability for Honeywell.

Speaker: We anticipate net below-the-line impact to be between negative $550 million and negative $700 million for the full year and between negative $120 million and negative $180 million in the second quarter. This guidance includes repositioning spend between $200 million and $300 million for the full year and between $25 million and $75 million in the second quarter as we continue to invest in high-return projects to support our future growth and productivity. We expect the adjusted effective tax rate to be around 21% for both the full year and the second quarter.

Gregory Lewis: The ongoing tailwind in our long cycle end markets and the strength of our backlog gives us confidence in our ability to navigate the current operating environment. We continue to execute on our proven value creation framework underpinned by our accelerator operating system, which will enable us to drive compelling growth in earnings and cash for quarters to come.

Gregory Lewis: Now, let's turn to slide six and talk about our second quarter and full year guidance.

Gregory Lewis: We delivered on our <unk> commitments, while maneuvering through known risks and as we look to the rest of 2020 for our original guidance framework continues to be solid.

Gregory Lewis: We expect the environment to remain dynamic as we were reminded again by recent geopolitical events. However, our accelerator operating system that enables us to move quickly and decisively our exposure to attractive megatrends and a record backlog will continue to support organic growth for the business.

Gregory Lewis: This outlook includes continued progress among our long cycle portfolio as well as a modest back half recovery in short cycle as markets continue to normalize.

Speaker: We anticipate the average share count to be around 656 million shares for the full year as we execute our commitment to reduce the share count by at least 1% per year through opportunistic buyback. As a result of all these inputs, we are maintaining our previously provided full year adjusted earnings per share range of $9.80 to $10.10, up 7% to 10% year-over-year. We anticipate second quarter earnings per share between $2.25 and $2.35, up 1% to 5% year-over-year.

Gregory Lewis: Overall, we have a strong setup that will drive growth within our long term financial framework for sales margin earnings and cash in 2024.

Gregory Lewis: Now, let's discuss how these dynamics come together for our 2020 for guidance.

Gregory Lewis: Given the backdrop that I just laid out in total for 2024, we continue to expect sales to be in the range of $38 one to $38 9 billion.

Gregory Lewis: Which represents overall organic sales growth of 4% to 6% for the year with a greater balance between volume and price.

Gregory Lewis: We expect sequential improvement in the second half of 2024 over the first as aerospace continues to grow its supply capabilities, coupled with a modest short cycle recovery that should build momentum in the second half of the year, albeit with different rates of improvement for our various end markets.

Speaker: We also expect free cash flow to grow in line with earnings, excluding the after-tax impact of last year's one-time settlement from de-risking our balance sheet. We are progressing on the multi-year unwind of working capital, where our efforts to improve demand planning and optimize production and materials management are yielding some early operational benefits, another indicator of the power of our digitalization capability through acceleration. In addition, we will continue to fund high-return projects focused on creating uniquely innovative, differentiated technology.

Gregory Lewis: For the second quarter, we anticipate sales in the range of nine two to $9 5 billion up 1% to 4% organically.

Gregory Lewis: We anticipate our overall segment margin to expand 30 to 60 basis points. This year supported by improving business mix price cost discipline and productivity actions, including our precision focus on reducing raw material costs.

Gregory Lewis: Similar to last year building automation margins will lead the group in margin expansion, followed by industrial automation and energy and sustainability solutions.

Gregory Lewis: For aerospace margins should remain relatively comparable to the last few years as volume leverage covers higher sales from the build out of our original equipment installed base, which is driving robust year over year profit growth.

Speaker: As a result, our free cash flow expectations remain $5.6 to $6 billion for the year, up 6 to 13 percent, excluding the impact of prior year settlements. Our robust balance sheet and strong cash generation will support accretive capital deployment. And while we're happy with our recently announced transaction... We will further build on our active M&A pipeline as we continue to optimize the portfolio. So, in summary, we executed a strong first quarter and anticipate delivering a strong second quarter and 2024, benefiting from our alignment to the compelling aerospace, automation, and energy transition. Our record backlog and rigorous operating principles give us confidence in our track record of execution. So, let me turn it now back to Vimal on slide seven.

Gregory Lewis: For the second quarter, we expect overall segment margin in the range of $22 <unk>.

Gregory Lewis: To 22, 4% roughly flat sequentially, but down 40 basis points to flat year over year, primarily due to volume deleverage Nia and the exploration of the zebra licensing payments.

Gregory Lewis: Importantly, our guidance for both the second quarter and full year 2024 does not consider the planned acquisition of carriers Global access solutions business. We anticipate the closing of the deal by the end of the third quarter and we will update our guidance accordingly at that time.

Gregory Lewis: Now, let's spend a few minutes on the outlook by business.

Gregory Lewis: Looking ahead for aerospace technologies demand remains very encouraging across our end markets.

Gregory Lewis: <unk> should grow sequentially in the second quarter, particularly in commercial original equipment as chipset deliveries continued to increase however, we expect these sales to come at a lower margin driving a sequential and year over year decrease in margin rate. Following the first quarter strong result.

Gregory Lewis: Increased build rates in ships that deliveries will carry on throughout the year, leading commercial OE to be our strongest growth business in 2024.

Gregory Lewis: And commercial aftermarket volume strength and further improvement in wide body flight hours will support additional growth.

Vimal M. Kapur: Thank you, Greg. Let's take a minute to zoom out from the near-term dynamics and talk about the tremendous progress Honeywell has made across our key metrics since 2016. We remain keenly focused on delivering our long-term growth algorithm and remain confident in our ability to accelerate growth, achieve 25% plus segment margins, expand gross margins to above 40%, and generate free cash flow margins to mid-teens plus. This framework will enable us to deliver what matters, consistent, compelling EPS growth.

Gregory Lewis: We will continue to work through our healthy order book in defense and space generating sequential sales improvement throughout the year.

Gregory Lewis: Ongoing supply chain improvements will continue to support double digit output growth throughout.

Gregory Lewis: Throughout 2024.

Gregory Lewis: For the year, we still expect aerospace technologies to lead organic growth for total Honeywell with sales in the low double digit range.

Gregory Lewis: 2020 for segment margins should be relatively comparable to 2022 and 2023 as volume leverage is mostly offset by higher sales of lower margin products, a dynamic that likely leave the first quarter as the high point for Aero margins this year.

Gregory Lewis: In industrial automation, the timing of short cycle recovery will remain an important factor in our 2024 results, leading a back half weighted year.

Gregory Lewis: In the second quarter IAA should be roughly flat sequentially, we expect growth in process solutions to be offset by warehouse automation demand that remains near trough levels and the end of the $45 million quarterly license and settlement payments. We have received for the past two years and our productivity solutions and services business.

Vimal M. Kapur: Our annual 4-7% organic sales growth rate and 40-60 basis points of margin expansion, coupled with 1-2% of EPS accretion from both share buyback and consistent M&A execution, is a powerful combination that will allow us to generate double-digit adjusted EPS growth on through a cycle-based basis. 24 is no different.

Gregory Lewis: For the full year process solutions will grow sequentially each quarter to build on last year's strong performance driven by the aftermarket services business.

Gregory Lewis: Warehouse and workflow solutions will improve as we move through the trough of warehouse automation spending while also benefiting from easy comps throughout the year.

Gregory Lewis: Our sensing and safety technologies business will benefit as the effects of distributor destocking paid throughout the year.

Vimal M. Kapur: As we continue to make steady, consistent improvement to the quality of Honeywell's financial profile, the organization is aligned to my key priorities of accelerating organic growth, deploying the operational power of accelerator 3.0, and executing on a robust portfolio optimization strategy, all of which will enable us to achieve our long-term targets. I'm incredibly optimistic about the high-value opportunities we are already uncovering during the next phase of our transformation. We'll continue to track our progression closely as our efforts to drive incremental sales growth, expand margins, and generate more cash transfer into our enhanced financial profile. Let's turn to slide 8 for closing thoughts before we move into questions and answers.

Gregory Lewis: Lifecycle solutions and services orders grew sequentially and year over year in the first quarter and we expect that strength to continue throughout the rest of the year.

Gregory Lewis: Two consecutive quarters of orders growth in our productivity solutions and services business provide confidence in a back half ramp excluding the impact from the absence of additional zebra payments.

Gregory Lewis: As a result of these dynamics, we continue to see flattish sales growth in 2024 for IAA.

Gregory Lewis: We still expect segment margin to expand particularly in the second half as short cycle recovery leads to positive volume leverage.

Gregory Lewis: Moving to building automation, we remain confident in the overall outlook and execution of business for the second quarter sales should improve sequentially as the channel further normalizes and our long cycle businesses continued to benefit from strong backlog and aftermarket service a tailwind.

Gregory Lewis: The timing of the short cycle recovery remains one of the key drivers of business performance throughout the year and our expectation for a more back half weighted recovery NBA has not changed.

Gregory Lewis: As such we will anticipate our long cycle businesses to outpace our short cycle portfolio as both project and services benefit from strong demand and backlog.

Vimal M. Kapur: Our value creation framework is working. While the economic backdrop remains fluid, we are deploying our rigorous operating playbook to effectively manage near-term challenges to meet our performance targets. Record backlog levels, ongoing strength in our biggest end market, aerospace and energy, as well as an impeding recovery in our short-cycle businesses, will allow us to achieve our strong results as we progress through 2024. This includes our margin expansion guidance, which will benefit from improving business mix, in addition to our continued focus on commercial excellence and productivity.

Gregory Lewis: Additionally, high growth regions remain a core part of the growth strategy for this business and encouraging signals from regions like India, and the Middle East support our full year sales forecast, which remains low single digit growth for the year.

Gregory Lewis: We anticipate <unk> will be the segment with the largest margin expansion, primarily driven by productivity actions and commercial excellence net of inflation.

Gregory Lewis: Finally in energy and sustainability solutions, the geopolitical environment will remain a key focus as we move through the year.

Gregory Lewis: In the second quarter, we expect sales to remain roughly flat year over year and sequentially as sustained demand in fluorine products and catalysts will offset remaining volume headwinds from challenging comps and gas processing equipment.

Gregory Lewis: For the full year strong performance in those businesses is expected to offset volume declines in our legacy stationary products due to well telegraph quarter reduction within the U S.

Vimal M. Kapur: It's no secret I'm excited about the future of Honeywell and believe our company is on track to drive the innovation needed to solve some of the world's most challenging problems and enhance the lives of people around the world. As we move to Q&A, I want to take a moment to thank our 95,000 future shapers, whose dedication and capabilities enable us to deliver the best for our customers, partners, and communities every day. With that, Sean, let's take a look.

Gregory Lewis: In sustainable technology solutions robust demand will lead to another strong year of growth.

Gregory Lewis: We continue to monitor the ongoing short cycle recovery, particularly from semiconductor fab, a key component to achieving our unchanged top line expectation of flat to up low single digits for the year.

Gregory Lewis: Margins should improve throughout the year from a <unk> bottom driven by a combination of commercial excellence and productivity actions.

Gregory Lewis: Moving on to other key guidance metrics pension income in 2024 will be roughly flat to 2023 at approximately $550 million. We anticipate net below the line impact to be between negative $5 50, and negative $700 million for the full year and between negative 120 <unk>.

Sean Christopher Meakim: Thank you, Vimal. Vimal and Greg are now available to answer your questions. We ask that you please be mindful of others in the queue by only asking one question and one related follow-up. Operator, please open the line for Q&A. Thank you.

Gregory Lewis: <unk> $180 million in the second quarter.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue, and you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Scott Davis at Melius Research. Your line is now open.

Gregory Lewis: This guidance includes repositioning spend between 200 and $300 million for the full year and between 25 and $75 million in the second quarter as we continued to invest in high return projects to support our future growth and productivity.

Gregory Lewis: We expect the adjusted effective tax rate to be around 21% for both the full year and the second quarter.

Gregory Lewis: We anticipate average share count to be around 656 million shares for the full year as we execute our commitment to reduce share count by at least 1% per year through opportunistic buybacks.

Gregory Lewis: As a result of all of these inputs we are maintaining our previously provided full year adjusted earnings per share range of $9 80.

Scott Reed Davis: Hey, good morning, Vimal, Greg, and Sean. Good morning, Scott.

Gregory Lewis: To $10 10 up 7% to 10% year over year.

Gregory Lewis: We anticipate second quarter earnings per share between $2 25.

Vimal M. Kapur: Guys, in the spirit of kind of looking at the outliers here, you know, warehouse automation is still really a tough spot. What's on the other side of this, you know? Is this just a deeply cyclical business, and we're going to see a big bounce back? Have you structurally changed your cost structure? You know, what's kind of on the other side of this?

Gregory Lewis: And $2 35.

Gregory Lewis: Up 1% to 5% year over year.

Gregory Lewis: We also expect free cash flow to grow in line with earnings excluding the after tax impact of last year's onetime settlement from Derisking our balance sheet.

Gregory Lewis: We are progressing on the multi year unwind of working capital, where our efforts to improve demand planning and optimized production and materials management are yielding some early operational benefits another indicator of the power of our digitalization capability through accelerator.

Vimal M. Kapur: Yeah, so, Scott, if I can get your question, just that I've missed the front row, did you mention industrial automation or? Warehouse automation. Warehouse automation. Okay, thank you. Warehouse, sorry about that.

Gregory Lewis: In addition, we will continue to fund high return projects focused on creating uniquely innovative differentiated technologies as.

Gregory Lewis: As a result, our free cash flow expectations remain five $6 billion to $6 billion for the year.

Gregory Lewis: Up 6% to 13%, excluding the impact of prior year settlements.

Vimal M. Kapur: Now I understand it; now I understand it. The need for warehouse automation is strong. There is no doubt that it drives labor productivity, so there is no debate about the basics of it.

Gregory Lewis: Our robust balance sheet and strong cash generation will support accretive capital deployment and while we're happy with our recently announced transactions. We will further build on our active M&A pipeline as we continue to optimize the portfolio.

Vimal M. Kapur: The interesting part is our pipeline remains strong, but order conversion is weak, particularly on the project side. Another fact which encourages me about the business is the aftermarket continues to grow, which means once the systems are deployed, people use them well. And our aftermarket business is in excess of half a billion. We have also rationalized our cost base. All in, I would say the business is in a trough right now, and we are waiting for its recovery, but net-net, we remain very optimistic and confident about the business prospects.

Gregory Lewis: So in summary, we executed a strong first quarter and anticipate delivering a strong second quarter and 2024 benefiting from our alignment to the compelling aerospace automation and energy transition Megatrends, a record backlog and rigorous operating principles gives us confidence in our track.

Gregory Lewis: Third of execution.

Speaker Change: So let me turn it now back to <unk> on slide seven.

Speaker Change: Let's take a minute to zoom out from the near term dynamics and talk about the tremendous progress <unk> has demonstrated across our key metrics. Since 2016, we remain keenly focused on delivering our long term growth algorithm and remain confident in our ability to accelerate growth achieved 25% plus segment margin.

Vimal M. Kapur: Okay, I appreciate that Vimal, and you've been in the seat kind of long enough to have a good sense to, well, at least review the portfolio. Do you anticipate further portfolio actions, Vimal? It's still a relatively complex portfolio. We certainly get that feedback. Frequently, I'm sure you do as well, but

Speaker Change: <unk> gross margins to above 40% and generate free cash flow margins to mid teens plus.

Speaker Change: This framework will enable us to deliver what matters consistent compelling EPS growth, our annual 4% to 7% organic sales growth rate and 40 to 60 basis points of margin expansion, coupled with 1% to 2% of EPS accretion from both share buyback and because it's an M&A execution.

Vimal M. Kapur: Has your view on the portfolio evolved at all since you took the role? Scott, I will say it in two parts. I've committed that we will take action on about 10% of our portfolio, which doesn't fit with the three meta trends, and we are absolutely taking action on that. We will make progress one step at a time because that constitutes, you know, a few businesses and no one big thing. On a broader basis, I will review with both, as I did last year on a broader Honeywell portfolio, and we will continue to be our own activists. And wherever there's a case to look at things differently, we'll absolutely do that.

Speaker Change: As a powerful combination that will allow us to generate double digit adjusted EPS growth onto our cycle basis.

Speaker Change: <unk> is no different as we continue to make steady consistent improvement to the quality of honeywell's financial profile.

Speaker Change: In addition to the line to my key priorities of accelerating organic growth deploying the operational part of exited a threep arnaud and executing on a robust portfolio optimization strategy, all of which will enable us to achieve our long term targets.

Speaker Change: I'm incredibly optimistic about the high value opportunities you had already focusing during the next phase of our transformation.

Speaker Change: Continue to track our progression closely as our efforts to drive incremental sales growth expand margins and generate more cash sources into an enhanced financial profile.

Speaker Change: Let's turn to slide eight for closing thoughts before we move into the Cushing and answers.

Gregory Lewis: Yeah, if I just build on that, I would say our pipeline on inbounds as well is very healthy. You know, you saw the Citizen Avi announcement, you know that the carrier deal is on its way, you know, so we're on pace to deploy $10 billion this year with just what we know about. And you know, we're not done.

Speaker Change: Our value creation framework is working while the economic backdrop remains fluid we are deploying our rigorous operating playbook to effectively manage near term challenges to meet our performance targets.

Speaker Change: Backlog levels ongoing spend in our biggest end market aerospace and energy as well as an impeding recovery in our short cycle businesses that allow us to achieve strong results as we progress through 2024. This includes our margin expansion guidance, which will benefit from improving business mix. In addition to our continued focus on commercial excellence.

Gregory Lewis: makes sense. Thanks, Greg. Thanks, Vimal. Good luck, guys. Thank you. Thank you. Our next question comes from the line of Stephen Tusa.

Speaker Change: Productivity is still a secret I am excited about the future of Honeywell and believe our company is on track to drive the innovation needed to solve some of the world's most challenging problem and enhance the lives of people around the world as we move to Q&A I want to take a moment to tanks are 95000, future shippers, whose dedication and cab.

Charles Stephen Tusa: Our next question comes from the line of Stephen Tusa at J.P. Morgan. Your line is now open.

Vimal M. Kapur: Yeah, so I would say the earnings guidance, as we guided here, we gave you the guidance for Q2 and the rest of the year. So I think the headline is that H2 will be stronger than H1, and that's built upon our order spacing.

Speaker Change: <unk> enable us to deliver the best of our customers partners and communities every day, but that Sean let's say pushes.

Sean: Thank you Bill.

Speaker Change: And Greg are now available to answer your questions. We ask that you. Please be mindful of others in the queue I only asking one question and one related follow up.

Vimal M. Kapur: If you see, our orders performance in Q1 was on expected lines, our book-to-bill is 1.1, and our backlog is up 6%. Long cycle remains strong across the board in aerospace and building solutions, and we expect the same trends in European process solutions. And short cycle is recovering on expected lines. You saw the results of ESS; the chemical business did perform well on the strength of short cycle. We saw recovery in the scanning and mobility business.

Speaker Change: Operator, please open the line for Q&A.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate that your line is in the question queue.

Speaker Change: And you May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please pull for questions.

Speaker Change: Thank you.

Speaker Change: Our first question comes from the line of Scott Davis Melius Research. Your line is now open.

Speaker Change: Okay.

Speaker Change: BMO Greg Sean.

Gregory Lewis: Good morning, Scott.

Scott Reed Davis: Guys in the spirit of kind of looking at the outliers here warehouse automation is still really a tough spot.

Speaker Change: What's on the other side of this.

Scott: Just a deeply cyclical business, so we're going to see a big bounce back.

Vimal M. Kapur: We saw some early green shoots in the fire business. So things are progressing as we expected, and that's the basis of our guide for the rest of the year. So the punchline is we're going to have a stronger second half versus the first half, and that's reflected in the earnings guide for the year. Yeah, and we know that that's outside of the normal, you know, historical concept you've seen, but that's not really different than the way we've modeled the year.

Scott: Structurally change your cost structure.

Speaker Change: Kind of on the other side of this.

Speaker Change: This tough period.

Speaker Change: Yes, so Scott.

Scott Reed Davis: I'll get to your question just that I missed the front voted the video mentioned in industrial automation or <unk>.

Speaker Change: Our house greenhouse on image, Okay. Thank you alright.

Speaker Change: Alright.

Speaker Change: Got it got it.

Speaker Change: Okay.

Speaker Change: The need for greater automation is strong there is no doubt that it drives labor productivity. So there is no debate on the basics of it.

Vimal M. Kapur: Yeah, and we know that that's outside of the normal, you know, historical concept you've seen, but that's not really different than the way we've modeled the year so far. And to Vimal's point, we are starting to see some of those short cycle order patterns. And we said that those were going to be different by end market as the year progressed. So there was no real change, Steve, to, you know, what we outlined in the original guidance. So,

Speaker Change: The interesting part is our pipeline remains strong, but the order conversion is weak.

Speaker Change: The project site with another fact that encourages me about the businesses. After a market continues to grow which means bundled systems are deployed people use it well and our aftermarket businesses in excess of $5 billion.

Speaker Change: We also have to exercise our cost base all in I would say the business is in trough right now.

Speaker Change: And we are waiting for its recovery, but net net we remain very optimistic and confident about the business prospects.

Vimal M. Kapur: You know, from a timing perspective, you know, 2Q to 3Q, what do you think? Yeah, so we're going to have a ramp.

Speaker Change: Okay.

Speaker Change: I appreciate that.

Speaker Change: You've been in the seat and kind of a long enough to.

Speaker Change: Have a good sense to at least review the portfolio.

Vimal M. Kapur: Yeah, so we're gonna have a ramp from 2q to 3q as opposed to a flat line, and then the ramp from 2q to 4q will be greater than the 2q to 3q.

Speaker Change: Yes.

Speaker Change: Do you anticipate further portfolio actions similar it's still relatively complex portfolio, we certainly get that feedback.

Speaker Change: Frequently I'm sure you do as well but.

Julian C.H. Mitchell: Our next question comes from the line of Julian Mitchell with Barclays. Your line is now open.

Speaker Change: Is your view on the portfolio evolved at all since you've.

Speaker Change: Taking the role thanks, and I'll pass it on.

Gregory Lewis: Hi, good morning. You know, I think a lot of that second half pickup rests with the IA segment, so maybe I just wanted to home in on that for a second. I think you'd guided full year sales there flat-ish, so about $10.8 billion, and it sounds like you're doing $2.5 billion a quarter in the first half, so you've got a sort of high-teens, half-on-half step-up in the second half in IA revenue from sort of $5 billion to $5.8.

Speaker Change: So Scott I would say in two parts I have committed that we will take action on about 10% of our portfolio, which doesn't fit with the three mega trends and we are absolutely taking action on that we will make progress one step at a time because that constitutes.

Speaker Change: Fuel businesses.

Speaker Change: While no one big thing on a broader basis I will review with both as I did last year on a broader Honeywell portfolio and we will continue to be our own activist and wherever there is a case to look at things differently with absolutely we'll do that.

Speaker Change: Yes, if I just build on that I would say our pipeline inbounds as well as very healthy you saw the <unk> announcement, you know that the carrier deal is on its way.

Gregory Lewis: Maybe it will help us understand which of the pieces inside IA will lead or lag that delta, and, you know, if it's similar to the firm-wide, where there's some pickup in Q3 and then a steeper one in Q4 sequentially.

Speaker Change: So we're on pace.

Speaker Change: Deploy $10 billion this year with just what we know about.

Speaker Change: And we're not done.

Speaker Change: Makes sense. Thanks, Greg Thanks, Tim Good luck guys.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Steven Tusa.

Speaker Change: J P. Morgan your line is now open.

Charles Stephen Tusa: Hi, good morning.

Charles Stephen Tusa: Good morning, Steve.

Charles Stephen Tusa: Can you just talk about maybe just sequentially, how you see the earnings trajectory in three and <unk>.

Gregory Lewis: Thanks Julian. The ramp for the company actually is in IA and in BA, and then we'll get sort of a nice ramp in the fourth quarter in ESS as well. So it really does come back to all the products and businesses inside of each of those portfolios. So think about IA, PSS, the sensing business. In BA, think about fire and the BMS business, and then, as Vimal mentioned earlier, in ESS, you're going to get the continued step up in electronics and chemicals, as well as our normal sort of fourth-quarter move in our catalyst business.

Charles Stephen Tusa: Yes, so I would say the earnings as we guided here. We give we gave you the guide for Q2 and rest of the year. So I think the headline is that <unk> will be stronger than <unk> and <unk>.

Charles Stephen Tusa: Built upon an artist spacing if you see our orders performance in Q1 was unexpected line on book to Bill is one one on backlog is up 6% long cycle remains strong across the board in aerospace in building solutions and we expect the same trend in European proposition and short cycle is a governing unexpected line.

Charles Stephen Tusa: You saw the results of the chemical business did perform well on the strength of sharp cycle.

Gregory Lewis: So it's really not all predicated on any one segment overall, and it's going to be... You've got your numbers approximately right in terms of the IA, first half, second half overall, but you're going to see it across the portfolio. It's not going to be concentrated in any one specific business across the portfolio. The only thing I'll add, Julian, there is...

Charles Stephen Tusa: Sorry recovery and scanning and mobility business, we saw some early green shoots and fire business. So things are progressing as we expected and thats the basis of our guide for the rest of the year. So the punch line is we are going to have stronger second half versus first half and thats affected on earnings guide for the year.

Charles Stephen Tusa: We know that thats outside of the normal.

Charles Stephen Tusa: Historical comps that you've seen but that's not really different than the way we modeled the year. So far in the demos point, we are starting to see some of those short cycle order patterns.

Charles Stephen Tusa: And we said that those were going to be different by end market as the year progresses, So no real change.

Charles Stephen Tusa: E to what we outlined in the original guidance.

Charles Stephen Tusa: So I guess just normally you guys are up I think a little bit <unk>.

Vimal M. Kapur: The only thing I'd add, Julian, is that in IA, the HPS continues to perform very well. It's going to measure the performance it had in 2023, so similar growth rates.

Speaker Change: Youre up like I think.

Speaker Change: I don't know low to mid singles from <unk> to <unk> should we think about like.

Charles Stephen Tusa: Just to kind of frame this.

Charles Stephen Tusa: The ramp because it is.

Charles Stephen Tusa: From a timing.

Charles Stephen Tusa: Okay.

Speaker Change: <unk>, what do you think.

unknown: Yes, so we're going to have a ramp from <unk> as opposed to flat and then the ramp from <unk> to <unk> will be greater than <unk>.

unknown: Okay.

Speaker Change: Great. Thanks for the color.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Julian Mitchell with Barclays. Your line is now open.

Vimal M. Kapur: The bookings remain very strong, and the Aftermarket is performing extremely well. That's the biggest constituents of the newly framed IA business, and the short cycle is recovering. I remain very confident in short cycle recovery. We have seen that in ESS's business, it has had two successive quarters of artist growth. We see that in the early cycle in other businesses. So, net-net, we are going to see strong exit rates in the IA business at the end of the year.

Julian C.H. Mitchell: Hi, good morning.

Julian C.H. Mitchell: I think a lot of that.

Julian C.H. Mitchell: That second half pickup rests on the IAA segment. So maybe just wanted to home in on that for a second I think you had guided full year sales that flattish. So about 10 8 billion.

Julian C.H. Mitchell: And it sounds like Youre doing $2 5 billion a quarter and the first half so you've got a sort of high teens half on half step up in the second half in IAA revenue from sort of $5 billion to $5 eight maybe.

Gregory Lewis: That's helpful. And then just my quick follow up on the building division margins. So I think they're guided to be up maybe 100 bps or so for the year, you know, above the firm's wide margin expansion. First quarter clearly starting, you know, down Tricky down over 100 bips. So the slope of that, maybe help us understand kind of how we think about the building's margins in the second quarter, and how quickly we start to see that flip to margin expansion in the rest of the year.

Julian C.H. Mitchell: Maybe help us understand which of the pieces inside IAA will lead or lag.

Julian C.H. Mitchell: That delta.

Julian C.H. Mitchell: If it's similar to the firm wide, where there's some pick up in Q3, and then a steep one in Q4 sequentially.

Speaker Change: Yes, so thanks, Julian I mean, the ramp for the company actually is in IAA and MBA.

Speaker Change: And then we will get it will get sort of a nice ramp in the fourth quarter DSS as well. So it really does come back to you all of the products businesses inside of each of those portfolios. So think about Nia PSS.

Speaker Change: Sensing business.

Speaker Change: In VA think about fire and and the BNS business and then as <unk> mentioned earlier and DSS youre going to get the continued step up in electronics and chemicals.

Gregory Lewis: Sure. So again, you're going to see that tie a lot to product volumes because the volume leverage that comes with that and the margin rates associated with it are going to be very helpful in that margin ramp, as well as the work that we've done on productivity, particularly around direct materials this year. So that's, you know, our last two quarters were in the same neighborhood, right around 24 points, with the lower products mixed. And as the year progresses, you're going to see that move up, you know, sequentially throughout the remaining three quarters of the year.

Speaker Change: As well as our normal sort of fourth quarter.

Speaker Change: And in our catalyst business. So it's really not all predicated on any one.

Speaker Change: <unk> overall.

Speaker Change: And it's going to be you got your numbers approximately right in terms of the IAA first half second half overall, but youre going to see it across the portfolio, it's not going to be concentrated in any one specific business around the portfolio. One of the thing I'll add Julien there is that in the Sps continue.

Speaker Change: <unk> performed very well, it's going to mirror the performance. It had in 2023, so similar growth rates. The bookings remain very strong after market is performing extremely strong and thats. The biggest constitutes of the newly framed IAA business and the short cycle is recovering item being very confident on short cycle recovery, we have seen that in.

Gregory Lewis: That's great. Thank you.

Andrew Burris Obin: Our next question comes from the line of Andrew Obin with Bank of America. Your line is now open. Hey, good morning.

Speaker Change: BSS business. It has two successive quarters of artist good we see that in early cycle in other businesses. So net net we haven't.

Andrew Burris Obin: Hey, good morning guys; good to hear that ShortCycle is finally starting to move. Good morning. Yeah, just a question on defense and space. That picked up very nicely, nice lever. Can you just talk specifically, and I know there are a lot of programs there, but what is driving that, and what's the outlook specifically for defense and space into the second half, because this is a very, very impressive performance there.

Speaker Change: We see strong exit rates in IAA business at end of the year.

Speaker Change: That's helpful. And then just my quick follow up on the the buildings Division.

Speaker Change: And so I think that guidance would be up maybe 100 bps or so for the year.

Speaker Change: Above the firm wide margin expansion first quarter clearly starting.

Speaker Change: Down.

Speaker Change: Ricky down over 100 bps.

Speaker Change: The slope of that maybe help us understand kind of how do we think about the buildings margins in the second quarter. How quickly we start to see that slipped to margin expansion in the rest of the year. Please.

Vimal M. Kapur: Thanks, Andrew. Look, the Q1 performance of Defense in Space was more linked to the supply chain unlock. That remains the biggest variable in aerospace, even in 2024. We are very pleased with the strong growth in Q1. We expect high single-digit growth in Defense in Space revenue, but order booking will be much stronger. And that's given by the fact that not only is demand in the US but the international demand which is coming up in this business. And those trends are extremely favorable. So, net net, we do expect to finish the year strong, not only on the revenue side but equally strong on the order side in defense.

Speaker Change: Sure. So again youre going to see that tie a lot to the products volumes because the volume leverage that comes with that.

Speaker Change: And the margin rates associated with it are going to be very helpful. In that margin ramp as well as the work that we've done on productivity, particularly around direct materials.

Speaker Change: This year. So that's our last few quarters. We are in the same neighborhood right around 24 points with the lower product mix and as the year progresses as youre going to see that move up.

Speaker Change: Sequentially throughout the remaining three quarters of the year.

Speaker Change: That's great. Thank you.

Speaker Change: Thanks Julien.

Speaker Change: Our next question comes from the line of Andrew Open with Bank of America. Your line is now open.

Andrew Alec Kaplowitz: Hey, good morning, guys. Good to hear that short cycle is finally starting to move.

Vimal M. Kapur: And maybe, shifting to ESS, can you just talk about the visibility of UOP? I know you guys were optimistic about some of the green projects coming in, and I think due to regulatory issues, it's just taking time. What does the pipeline look like, and what does the ramp up look like in this business into the year, and how do you balance this visibility on these projects and just the time it takes to get them approved? So, I'm very bullish on you, Biagra.

Andrew Alec Kaplowitz: Good morning.

Andrew Alec Kaplowitz: Yes, just a question on defence and space.

Andrew Alec Kaplowitz: That picked up very nicely nice lever.

Andrew Alec Kaplowitz: Can you just talk specifics that I know there are a lot of programs there, but what is driving that and what's the outlook specifically for defense and space Center.

Andrew Alec Kaplowitz: The second half because this is very very impressive performance there.

Speaker Change: Okay. Thanks, Andrew.

Speaker Change: Q1 performance of Defence and space was more linked to the supply chain unlock that.

Vimal M. Kapur: So, very bullish on UOP, I would say, you know, this business is headed for a great time ahead. The traditional project continues to remain active, while the new energy project on sustainability, strong pipeline, and we see decisions now maturing. You saw one of our exciting wins, we mentioned here, a new way to make SAF with biomass now, which is a new technology we have launched. So, net-net, with the strength in traditional energy, strength in renewable technologies, and catalyst, we are going to have a strong year for UOP, both in orders and revenue. And that's not only 2024. Look ahead, for business remains extremely, extremely positive in the times ahead.

Speaker Change: The biggest.

Andrew: Video balloon in aerospace even in 2024, we're very pleased with the strong growth in Q1, we expect high single digit growth in defense and space in the revenue, but audio booking will be much stronger and thats driven by the fact of not only the demand in U S, but international demand, which is coming up in this business.

Speaker Change: And those trends are extremely favorable so net net we do expect to finish the year strong noted not only the revenue side, but equally strong on the auto side on the defense.

Speaker Change: Gotcha, and maybe to shifting to SaaS.

Speaker Change: Can you just talk about visibility of.

Speaker Change: I know you guys were optimistic about some of the green projects coming in and I think due to regulatory issues. It's just taking time.

Sheila Karin Kahyaoglu: Our next question comes from the line of Sheila Kahyaoglu with Jeffreys. Your line is now open.

Speaker Change: Does the pipeline look like and what does the ramp.

Speaker Change: This business until the year end and how do you balance this visibility on these projects and just the time it takes to get them approved.

Sheila Karin Kahyaoglu: Good morning, Vimal, Greg, and Sean. I wanted to ask you something about aerospace. Commercial OE was really strong, up 24% in the quarter. How are you thinking about that for the full year, just given the slower max production we're seeing and the new news about the 787 also slowing down production there? Any top-line margin or cash impact that you foresee? And then I just wanted to clarify the comment about margins for aerospace. You said it would dampen just given the OE mix, but I would think the aftermarket would accelerate as we progress through the year. Okay, so I think there were three questions there.

Speaker Change: So very bullish on youll be I would say.

Speaker Change: This business is headed for our great time ahead for traditional projects continues to remain active while the new energy project on sustainability strong pipeline NBC decisions now maturing you saw in one of our exciting wins, we mentioned are new ways to make SaaS with the biomarker <unk>, which is a new technology, we have launched.

Speaker Change: So net net it does strengthen traditional energy strength in renewable technologies and catalyst, we're going to have a strong year for <unk>, both in orders and revenue and Thats not only 2024.

Speaker Change: Look ahead for the business remains extremely extremely positive in the times ahead.

Speaker Change: Thank you very much.

Speaker Change: Thanks, Andrew.

Speaker Change: Our next question comes from the line of Sheila <unk> with Jefferies. Your line is now open.

Vimal M. Kapur: Okay, so I think there were three questions there, Sheila, I'll try to pick them up. Sorry about that. Oh, no, no problem.

Sheila: Good morning demo, Greg and John.

Sheila: <unk> talked about Eric Hey.

Sheila: Hey, guys I wanted to ask about aerospace commercial <unk>.

Sheila: It was really strong up 24% in the quarter. How are you thinking about that for the voluntary just given our next production, we're seeing and the new news of the settlement Southern also slowing down production there.

Vimal M. Kapur: So, overall, we do expect Commercial OE to grow double digits, both on the Commercial OE side and aftermarket. So, we'll maintain the strong growth trend as indicated in our guide for the rest of the year. To your comment specifically on 787 MAX, I'm not going to give you specific input on one particular platform, but I would say that our demand for Boeing hasn't changed. We know that we all heard their earnings call yesterday, and there are different drivers for that.

Sheila: Topline margin cash impact that you foresee and then I just wanted to clarify the comment about margins for aerospace.

Speaker Change: Got it.

Speaker Change: Just given <unk> mix, but.

Speaker Change: I would think aftermarket would accelerate as we progress through the year.

Speaker Change: Okay. So I think there were three questions there Sheila and try to pick sorry about that.

Sheila: No no problem.

Sheila: Overall, we do expect commercial to grow double digits, both on the commercial though we did grow double digit.

Sheila: And after market. So we will maintain the strong growth trend as is indicated in our guide for the rest of the year do you comment specifically on <unk>, seven Max and I'm going to give you a specific input on one particular platform, but I would say that our demand for our Boeing Hasnt changed.

Vimal M. Kapur: But for Honeywell, we are present on multiple platforms, and the demand for them remains unwavered. I personally talked to Boeing leadership, and I'm very confident that it's going to trend that way. On margins, you know, Q1 was strong. It's a mixed driver. As the year progresses, we have different product mix and mix between OE and aftermarket. So, net-net, we are still guiding a flattish margin for the year, and that's what we have given in our guidance.

Sheila: We know that we all heard their earnings call yesterday, and there are different drivers for that part of the Honeywell <unk>.

Sheila: Our president and multiple platforms and the demand for them domain unveiling a personally talked to Boeing do tissue.

Sheila: And I'm very confident that's going to trend that way on margins.

Sheila: Q1 was strong it's a mix driver.

Sheila: As the year progresses, you have different product mix.

Joseph Alfred Ritchie: Our next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is now open.

Sheila: And mix between OEM and aftermarket so net net we are still guiding flattish margin for the year.

Joseph Alfred Ritchie: Hey guys, good morning. Good job, honey.

Sheila: And that's that's what we have given in our guidance.

Speaker Change: Great. Thank you.

Speaker Change: The next question comes from the line of Joe Ritchie with Goldman Sachs.

Joseph Alfred Ritchie: Yeah, I just want to really focus my question on margins. So, you know, just making sure that I understand some of the comments already. If you think about the rest of the year, I guess how much of the margin expansion you're expecting in both VA and IA is really dependent on short cycle acceleration. And then, Vimal, just a quick clarification on the answer you just gave on the AERO side of the business.

Joseph Alfred Ritchie: Your line is now open.

Joseph Alfred Ritchie: Hey, guys good morning, Hey.

Joseph Alfred Ritchie: Hey, Joe.

Joseph Alfred Ritchie: Yes, just wanted to really focus my question on margin. So just.

Joseph Alfred Ritchie: Making sure that I understood some of the comments already.

Speaker Change: If you think about the rest of the year I guess, how much of the margin expansion you're expecting in both VA and IAA is really depending dependent on short cycle accelerating and then.

Speaker Change: Just a quick clarification on the answer you just gave on the Aero side of the business the OE business was up.

Joseph Alfred Ritchie: The OE business was up, you know; I think it was over 24% or something like that in AERO. I'm just curious, like, what were some of the kind of mixed tailwinds you saw this quarter in AERO? And again, why didn't that continue?

Speaker Change: I think it was over 24% or something like that in Aero I'm, just curious like what were some of the kind of.

Speaker Change: Nick tailwind you saw this quarter in Aero and again why doesn't that continue going forward.

Gregory Lewis: Yeah, Joe, as it relates to the mix, I'm not going to bore you with the details, but it's actually quite deep between the different OEs, the ship sets within each of them, and so forth. So, you know, that is going to migrate up and down during the course of the year, you know, as it goes. So there's not one particular thing happening there.

Speaker Change: Okay, Yes, Joe I mean, as it relates to the mix.

Speaker Change: I'm not going to bore you with the details, but it's actually quite a bit between the different Oems.

Joe: Ship sets within each of them and so forth. So that is going to migrate up and down during the course of the year.

Joe: As it goes so there's not one particular thing happening there.

Gregory Lewis: You know, as Vimal mentioned, though, we're going to continue to see very strong OE margins, or excuse me, OE volumes, during the year. In fact, I wouldn't be surprised if the growth in OE actually accelerates in the next couple of quarters, not dramatically so, but in terms of, you know, its relative mix inside of the overall portfolio. So that's what I would say about Arrow.

Joe: The momentum we're going to continue to see very strong OE margins or excuse me.

Joe: Volumes during the year in fact, I wouldn't be surprised if the growth in OE actually accelerates in the next couple of quarters not dramatically so but in terms of.

Joe: Its relative mix inside of the overall portfolio.

Joe: So that's what I would say about Aero and then in terms of the margin rates.

Gregory Lewis: And then, you know, in terms of the margin rates, in NINBA, both of those businesses are seeing mixed down with product software. And so absolutely, you know, mixed up with product growth is going to be a driver of those margins. But that also comes with a lot of the work we've been doing on the productivity side, both in direct materials, as well as in our continued, you know, repositioning of the cost base that we have been doing.

Joe: Nia NBA both of those businesses are seeing mixed down with product softer and so absolutely mixed up with products growth is going to be a driver.

Joe: Those margins, but that also comes with a lot of the work we've been doing on the productivity side.

Joe: Both indirect materials as well as in our continued repositioning of the cost base that.

Gregory Lewis: So, you know, our margin story is going to be, you know, the combination of the volume leverage, the product mix, and our productivity actions that we continue to take, which as you know, is always a strength for Honeywell. Got it.

Joe: That we have been doing so our margin story is going to be combination of the volume leverage product mix and our productivity actions that we continue to take as you know.

Joe: There's always a strength for Honeywell.

Gregory Lewis: Got it. Okay, that's clear. Thank you, Greg.

Speaker Change: Got it okay. That's clear thank you Greg.

Speaker Change: Thank you.

Nigel Edward Coe: Our next question comes from the line of Nigel Coe with Wolf Research. Your line is now open.

Speaker Change: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

Nigel Edward Coe: Great. Thanks for the question, guys. Sorry to bore you.

Nigel Edward Coe: Thanks for the thanks for the question guys.

Nigel Edward Coe: Obviously, the error margins were great. But was the timing of Boeing shipments to customers affected? I'm just curious if there was a timing issue there.

Nigel Edward Coe: Sorry to pull you in another <unk> Aero margins were great.

Nigel Edward Coe: What's the timing of boeing's shipments to customers effectively I just was curious if that's a timing issue there, but mainly my question is around <unk> margin.

Gregory Lewis: But mainly, my question is around 2Q margin dynamics and thinking about that drop-off in the Zebra royalty income in the second quarter. Are we looking at maybe margins down like three to base points year-over-year in the second quarter for IA? And therefore, the balance of the segment margin performance is actually probably more like on trend. So, just any more color on the TQ margins by segment would be helpful.

Nigel Edward Coe: <unk> thinking about that drop off in the zebra royalty income in the second quarter are we looking at maybe margins.

Nigel Edward Coe: I don't know down like 300 basis points year over year.

Nigel Edward Coe: And in the second quarter for IAA and therefore, the balance of the segment margin performance is actually probably more like on trend. So just any any any more kind of on the TQ margins by segment would be helpful.

Gregory Lewis: Yeah, no, we don't expect IA margins to be down 300 basis points in CQ on a year-over-year basis. You know, we talked about the Zebra impact, you know, again, it's $45 million a quarter on the revenue side. There are some costs associated with that, as we've talked about over the last two years as we've, you know, had that impact on our P&L. So you guys can do the math on the direct impact of just that item all by itself.

Speaker Change: Yes no.

Nigel Edward Coe: We don't expect IAA margins to be down 300 basis points in <unk> on a year over year basis.

Nigel Edward Coe: We talked about the zebra impact again.

Nigel Edward Coe: Again, it's $45 million a quarter on the revenue side. There are some costs associated with that as we've talked about over the last two years as we've.

Nigel Edward Coe: Had that impact into our P&L.

Nigel Edward Coe: So you guys can do the math on the direct impact of just that item all by itself.

Gregory Lewis: But we have other, you know, actions in place to, you know, continue to offset that. I don't expect margins to necessarily be up year-on-year in IA, but nothing to the degree that you described in terms of, you know, 300 basis points.

Nigel Edward Coe: But we have other.

Nigel Edward Coe: Actions in place to continue to offset that I don't expect margins to necessarily be up year on year, NIH, but nothing to the degree that you.

Nigel Edward Coe: You described in terms of 300 basis painful.

Gregory Lewis: Okay, and then any color on the aero margins in the second quarter? Yeah, just that I would expect them to be down.

Speaker Change: Okay, and then any color on Aero margins in.

Nigel Edward Coe: In second quarter.

Nigel Edward Coe: Okay.

Gregory Lewis: Yeah, just that I would expect them to be down sequentially from Q1, that Q1 is going to be the high point. And, you know, as we go through the year, again, our overall expectation is, you know, flat-ish on a year-on-year basis, but, you know, Q1 will be the high point. Okay, that's helpful, thanks.

Speaker Change: Yes, just said I would expect them to be down sequentially from Q1 that Q1 is going to be the high point.

Speaker Change: And.

Speaker Change: As we go through the year again, our overall expectation is flattish on a year on year basis, but.

Speaker Change: One will be the HIFU.

Speaker Change: Okay. That's helpful. Thanks.

Operator: Our next question comes from the line of...

Speaker Change: Our next question comes from the line of Andy Kaplowitz with Citi.

Andrew Alec Kaplowitz: Our next question comes from the line of Andy Kaplowitz. Your line is now open. Hey, good morning, everyone. And maybe you can talk a little bit more about what you're seeing by region? I think you mentioned strengthening.

Andrew Alec Kaplowitz: Your line is now open.

Andrew Alec Kaplowitz: Hey, good morning, everyone.

Andrew Alec Kaplowitz: And then maybe can you talk a little bit more about what you're seeing by region. I think you mentioned strength in India.

Andrew Alec Kaplowitz: How important is that we can be coming in what are you seeing in China and Europe.

Vimal M. Kapur: Yeah, so I would say, you know, if I go around the corner, we continue to see strength in our high growth regions, specifically in India and the Middle East. Those remain strong. China also did well for us; we grew high single-digit on the strength of our aero and energy business. So, net net, we do see a strong continuous strong trend in emerging markets. Europe has stabilized, I would say the worst is definitely behind us, we see more recovery and positive trends, specifically in the short cycle, we talked about it earlier, in Europe, and US forces are a balance here. So net net, the high growth region remains a tailwind in the overall revenue mix for Honeywell. Great.

Speaker Change: Yes, so I would say.

Speaker Change: If I go around the corner, we continue to see strength in our high growth regions, particularly in India and Middle East those remain strong China also did better for US we grew high single digits on the strength of our Aero and energy business. So net net we do see.

Speaker Change: Strong continued strong trend in emerging markets Europe has stabilized I would say the worst is definitely behind us we see more recovery and positive trends specifically in short cycle, we've talked about that earlier in Europe and U S of course is a balance there so net net.

Speaker Change: High growth regions remain the tailwind in overall revenue mix for Honeywell.

Vimal M. Kapur: And I just want to follow up on the process business. I think you mentioned delays. Is it, you know, you're seeing more geopolitical uncertainty or election fears, higher rates? I think you still have a good outlook for that business. I'll maybe talk about it a little bit more.

Speaker Change: Great and then just wanted to follow up on the process business.

Speaker Change: I think you mentioned delays is it.

Speaker Change: Seeing more geopolitical uncertainty or election periods higher rates.

Speaker Change: I think you still have a good outlook for that business that maybe you talk about it a little bit more.

Speaker Change: Yes.

Vimal M. Kapur: Oh, so process solution business, absolutely, you know, we are booking, we have a strong backlog, and our booking trend remains strong. Their aftermarket is double-digit growth for several quarters in a row. So that business will, as I mentioned before, repeat the 2023 pattern of high growth, and we expect to do, continue to do well in that segment. Monetizing the install base, aftermarket software, all our strategies are really working, and also diversification into new verticals as new energy segments are emerging like battery storage, gigafactories, all are becoming attractive growth optionalities for us in that business.

Speaker Change: So process solution business absolutely.

Speaker Change: We are booking week added a strong backlog in our booking trends remained.

Speaker Change: Strong after market is double digit growth for several quarters in a row, so that business model as I mentioned before the feed 2023 pattern of high growth.

Speaker Change: And we expect to continue to do well in that segment.

Speaker Change: Monetizing installed base aftermarket software all our strategy is really working and also diversification into new verticals as the new energy segment that emerging like battery storage Giga factories.

Speaker Change: All are becoming attractive growth optionality for us in that business.

Jeffrey Todd Sprague: Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Your line is now open.

Speaker Change: I appreciate them all.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jeff Sprague with vertical Research partners. Your line is now open.

Vimal M. Kapur: Hey, thank you. Good morning, everyone. Hey, Vimal, good morning. Hey, Vimal, just back to kind of the ongoing portfolio review and, you know, you said it could be many things and not just one big thing. Can we take that, or should we take that to mean, you know, as we look at kind of your revenue disaggregation, right, there's kind of 11 buckets we track would be gone at some point in time in your thought process?

Jeffrey Todd Sprague: Hey, Thank you good morning, everyone.

Speaker Change: Hey.

Jeffrey Todd Sprague: Good morning, Hey, Ben will just back to kind of the ongoing portfolio review and you said it could be many things not one big thing can we take that or should we take that to mean is.

Jeffrey Todd Sprague: As we look at kind of your revenue disaggregation right. There is kind of 11 buckets, we track and model too.

Jeffrey Todd Sprague: That none of those entire sleeves.

Jeffrey Todd Sprague: Be gone at some point in time in your thought process.

Vimal M. Kapur: Whenever we complete any action of addition and subtraction, we'll give you an early guide for that. As I mentioned, this is no one-step change, so it's not that we're going to take action on a $4 billion type of thing in a single move. But whenever we are ready to communicate, we'll give you a heads-up on what's likely coming in. For example, carrier business will likely come in, city tsunamis will likely come in, and what are the implications on the guide.

Jeffrey Todd Sprague: So.

Jeffrey Todd Sprague: We compete any action operation in subsection will give you an early guide for that.

Jeffrey Todd Sprague: As I mentioned this is no one one.

Jeffrey Todd Sprague: Change so it's not that we're going to.

Jeffrey Todd Sprague: Take action over $4 billion type of thing in a single move but whenever we are ready to communicate we will give you a heads up on what.

Jeffrey Todd Sprague: What is likely coming in for example carrier business will likely come in <unk> with IV come in and one of the indications on the guide and then what goes out if it if and when this happens and variety of the date, but what I can share you with you is there is no more to be one megawatt EBIT on divestiture, it's going to be combination of multiple small events.

Vimal M. Kapur: And then what goes out, if and when this happens, we'll provide you with the guide. But what I can share with you is there is not going to be one mega-event for divestiture. It's going to be a combination of multiple small events.

Jeffrey Todd Sprague: And one thing you have been clear on is ultimately.

Jeffrey Todd Sprague: A monetization play on Colombia.

Jeffrey Todd Sprague: Where are we there where the spending tracking.

Vimal M. Kapur: and you know, one thing you have been clear on is that ultimately, you know there's a monetization play on quantinium. Where are we there? Where's the spending tracking? And, you know, can you kind of give us an idea of maybe the timeline of a monetization event?

Jeffrey Todd Sprague: Can you kind of give us an idea of maybe the timeline of our monetization events.

Jeffrey Todd Sprague: The quantum is then I would say exciting times.

Jeffrey Todd Sprague: <unk> completed a major event of free money regard valuation excess of $5 billion dot, but people invested there we talked about that in the last earning call. We also another major milestone I don't know if you.

Vimal M. Kapur: So, Quantum is in, I would say, exciting times. We completed a major event of pre-money, we got a valuation in excess of $5 billion, got more people invested there. We talked about that in the last earnings call. We also met another major milestone. I don't know if you read that.

Jeffrey Todd Sprague: You read that.

Jeffrey Todd Sprague: Honeywell and Microsoft announced a major milestone.

Jeffrey Todd Sprague: Sure.

Jeffrey Todd Sprague: Testing different scenarios to deliver reliable.

Jeffrey Todd Sprague: Doug So Microsoft gave ran 14000 experiments on X to come.

Jeffrey Todd Sprague: Quantum computer and we've been able to prove that every time, all 14000 times, we were able to deliver those that equity feet wide matters is in quantum that a beta ability our equity matters more than the speed at this point once we are able to solve the problem solving with accuracy. We can work on to speed thoughts so thats a <unk>.

Vimal M. Kapur: Honeywell and Microsoft announced a major milestone of testing different scenarios to deliver reliable results. So, that's a major milestone, and that's what matters in the Quantum business. We continue to hit these milestones, one after another, and we score some wins on the commercial side, and that will set us for the next event of demonetization, somewhere in 2025. It's contingent upon hitting that, but I remain confident that we are on the right track with that.

Jeffrey Todd Sprague: Is there a milestone.

Jeffrey Todd Sprague: And Thats what matters in quantum business, we continue to hit these milestones one after another and we scored some gains on the commercial side and that will set us for.

Jeffrey Todd Sprague: The next event of demonetization.

Jeffrey Todd Sprague: All of it in 2025.

Jeffrey Todd Sprague: And then upon hitting those but I remain confident that we are on the right track on that.

Vimal M. Kapur: By the way, the last comment I'll make there is that AI is definitely giving us a lot more momentum. There is a deeper understanding and appreciation why Quantum is necessary, and that's going to certainly help us when we are ready for an IPO or something similar in 2025. Great, thank you for the color.

Jeffrey Todd Sprague: By the way the last comment I would make there is AI is definitely giving us a lot more.

Jeffrey Todd Sprague: Momentum.

Jeffrey Todd Sprague: There is a deeper understanding and appreciation by quantum as necessary.

Jeffrey Todd Sprague: That's going to certainly help us when we are ready for it.

Jeffrey Todd Sprague: An IPO or something similar in 2025.

Speaker Change: Great. Thank you for the color.

Brett Logan Linzey: Our next question comes from the line of Brett Linzey with Mizuho. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Brett Linzey with Mizuho. Your line is now open.

Gregory Lewis: Hey, good morning, all. Hey, I just wanted to come back to the ESS. You noted the margin contraction on some of this one-time factory restart cost. Maybe could you quantify that and then any detail on the nature and just the timing of some of these pressures?

Brett Logan Linzey: Hey, good morning, all.

Brett Logan Linzey: Hey.

Brett Logan Linzey: Just wanted to Hey, I wanted to come back to DSS. You noted the margin contraction on some of this onetime factory restart costs, maybe you could you quantify that in any detail on the nature and just the timing of some of these pressures.

Gregory Lewis: Sure. So in our clean energy business, we had been operating in a trading manner, and we had shut down the major facility, the major facility, some number of years ago in that business, and we restarted it. And so, as you can imagine, that restart has some fits, you know, fits in it as we go through the course of the year to get the stabilization. And that's really the, you know, if you look at the ESS margin, I'm not going to give you an exit rate going into 2025 with a very strong business. And again, that business is think about it being around about $400 million on an annual basis.

Speaker Change: Sure so in.

Brett Logan Linzey: And our clean energy business, we had been operating.

Brett Logan Linzey: In a trading manner, and we had shut down the major the major facility some number of years ago in that business and we restarted it and so as you can imagine that restart.

Brett Logan Linzey: It has some fits.

Brett Logan Linzey: Fifth in it.

Brett Logan Linzey: As we go through the course of the year to get to stabilization and Thats really the if you look at the ESI margin I'm not going to give you precise numbers, but if you backed out the impact of that we would be roughly flat to maybe slightly up on a margin rate basis year on year in the first quarter and so that's going to take some time to get to.

Brett Logan Linzey: <unk> stability, but the good news is this is a great business.

Brett Logan Linzey: The long term dynamics for it from a pricing standpoint, a supply standpoint are very favorable.

Brett Logan Linzey: All right, I got it. Thanks.

Vimal M. Kapur: And then just one more on M&A, just thinking about the velocity there. I know last May, you talked about pipeline prioritization. I think you had 90 deals looking at, you know, within your markets and still in the top 10. I guess, how's that 90 compare today? I mean, it sounds like the, you know, the enthusiasm. It sounds a little bit more optimistic about some actionability, but maybe just talk about some of the, you know, the pipeline and the movement there.

Brett Logan Linzey: As we exit the year, we're going to have more stable operation.

Brett Logan Linzey: We internally and so we're going to have a very nice exit rate going into 2025.

Brett Logan Linzey: With a very strong business and again that business is think about it being round about $400 million on an annual basis.

Speaker Change: Alright got it thanks, and then just one more on M&A just thinking about the velocity. There I know last may you talked about the pipeline prioritization I think you had 90 deals looking at.

Brett Logan Linzey: Within your markets and is still at the top 10, I guess, how is that 90 compare today I mean, it sounds like the <unk>.

Brett Logan Linzey: <unk> it sounds a little bit more optimistic about some action ability, but maybe.

Brett Logan Linzey: Maybe just talk.

Brett Logan Linzey: Talk about some of the pipeline and the movement there.

Vimal M. Kapur: Absolutely. I would say the pipeline is very strong, as we said today. Of course, we compete for every target, and we remain very sensitive to both strategy fit and valuation fit. So, net-net, we do expect to continue to take some actions on adding new business to our portfolio. And overall, my tone is very positive on that.

Speaker Change: Absolutely I would say the pipeline is very strong as we sit today of course, we compete for every target and we remain very sensitive to both strategy fit and valuation.

Speaker Change: So net net we do expect to continue to take some.

Speaker Change: Actions on adding.

Speaker Change: New business to our portfolio and overall my dawn and.

Brett Logan Linzey: All right. Great. Best of luck.

Speaker Change: It's very positive on that.

Vimal M. Kapur: Okay, to wrap up here, I want to continue to express my appreciation to our shareholders for your ongoing support and again to our Honeywell future shapers who continue to drive differentiated performance. Our future is bright, and we look forward to sharing our progress with you as we continue to execute on our commitment. Thank you for listening, and please stay safe and healthy.

Speaker Change: Alright, great best of luck.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Up here I won't continue to express my appreciation to our shareholders for your ongoing support and again through our Honeywell Fuji shippers, who continue to drive differentiated performance. Our future is bright and we look forward to sharing our progress with you as we continue to execute on our commitments. Thank you for listening and please stay safe and healthy.

Speaker Change: This concludes today's teleconference.

Speaker Change: Thank you for participating you may now disconnect.

Speaker Change:

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Operator: This concludes today's teleconference. Thank you for participating. You may now disconnect.

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Operator: [inaudible]