Honeywell International (HON) 27 Oct 222022 Q3 Earnings call transcript

Thank you for standing by, and welcome to the Honeywell Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Meakim, Vice President of Investor Relations. Please go ahead.

Liz. you, Thank welcome Call. and Third XXXX Quarter Good to Conference Earnings morning, Honeywell's

On investors interest Chairman are disclosing use should complying social Greg a and on XXXX our annual filings, today guidance for other the that affect performance presentation will which and provide Adamczyk; me website of media. webcasts including share Honeywell our on results preliminary quarter and our Vimal Those the be as following material of view which risks economic statements, best with SEC and call XXXX, interpret principal of Regulation year also and our some XXXX. monitor uncertainties and investors press our and forward-looking call filings. change are for business Form can our light. elements conference and Operating President see world fourth the factors, to XX-K our this webcast, financial may and we you means Relations website that for and Chief identify Kapur. of This on conditions, We our www.honeywell.com/investor. based This disclosure are President Accordingly, or report non-GAAP including Senior contain and them Note to under information, ask in Investor as and obligations thoughts in many that SEC the and review we morning, changing the on businesses with on full our Financial them based third our addition we quarter calls, of of in and Officer, today. reconciliations, website public Lewis; any Chief releases, Officer, available to Vice may Darius CEO, FD. our elements at

As With Chairman to I'll we'll Darius the and Adamczyk. CEO, your end. questions the that, time at call leave for always, turn over

good everyone. and morning, Sean, you, Thank

Slide X. Let's begin on

rigorous and enabled amid or our exceed $X.XX. guidance and constraints for quarter the execution discipline all headwinds. earnings quarter third us high share of meet per inflation exceeded guidance Our outstanding chain metrics range by third We supply adjusted to ongoing end

by X% While delivered excluding segments Advanced building down margin year-over-year and navigating the testament segment strong Russia the our remain of products by led XX% growth and impact continued high our XX.X%, the margin XX in through of basis ongoing all of a expansion backdrop, double-digit wind or four growth the a principles. range operations commercial organic aerospace year-over-year points resiliency excellence. with sales to Materials, we rigorous in challenging operating We end businesses, to curve our exceeding ahead expanded basis by commercial points, our inflation of guidance XX we of as in

basis Quantinuum, in year-over-year. investment our of was expansion impact the XX Excluding points margin the

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were we the talked orders the XX% about of of year-over-year. remainder reported have which impact the extensively, portfolio or Excluding orders, in X% organically up

commitment. fluid that strong the us the cash year year $X.X in flow will result of free spot another in free ago. backlog XXXX Our billion record support our more operating than bright growth was environment. positioned orders with to deliver leaves Cash well A our double full level trajectory quarter, to flow a cash

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and to by is month, to our The fuel. processing to Next, to ethanol-based announced technology convert this exciting let recent sustainable Earlier that ethanol turn aviation announcements. X jet me feedstock discuss producers new we a innovative to by allows Slide a feedstock other challenged aviation available, industry type basis widely fuel new used, cycle viable producers on feedstock. total life traditional reduce of petroleum-based process Depending on feedstocks ethanol ETJ economically greenhouse supplies compared the to a emissions XX% Honeywell offers can gas limited of ethanol fuel.

We two capacity use first Solstice this Solstice medical our global propellant warming opened near quarter. recently opened separate manufacturing we for large-scale in site respiratory for inhalers. for potential business expansion addition, In the Air, a zero

air used medicine. XX.X% GWP is to respiratory technology up currently Solstice's less than in propellants inhaled

which blowing has is Elsewhere for foam in pending we full working a into in portfolio, solution, begun their air India, our manufacturing our approval. in agents ZD technology AstraZeneca our chillers. and Solstice insulation for uses opened Solstice to Solstice regulatory refrigeration inhaler plant portfolio currently incorporate liquid

expectations year report future on of sheds sustainability showing first set plan Index, a XXXX past published decision-makers progress we kind some light progress, and week, global Environmental goals. targets XXX and S&P and emissions last Sustainability quarterly ahead the on has towards our reductions the goals. sentiment Finally, meeting X/X of these index

free this XX% Honeywell For least year category, of committed to a survey remains customers service. of and sustainability, that their initial to helping long of history unique our provide to found public plan increase achievements current one position achieve sustainability The organizations goals. in at sustainability Honeywell's budgets approximately

X operating our turn to Now Vimal performance more Slide discuss quarter on let me detail. in over to it third

morning, good and Darius, you, Thank everyone.

highlighted, strong to we our Disciplined quarter with agility or third framework results provided delivered despite operating adherence Darius metrics. us best-in-class value operational environment. financial meet a our guided tough creation Honeywell to exceed As

PMT excluding down Aerospace. with near the our trend wind X% Third quarter was operations of grew HBT, record in or remains driven double-digit strong sales The Russia. backlog in and by organically levels. performance growth by organic Demand XX%,

chain temper sequential to to sourcing. PMT proactive volume improvement qualify we benefit as overall volume our backlog partnering We to growth. alternative our HBT see our suppliers However, modest causing did ongoing from continue and effort with alternative positive priority in constraints ensure to reengineering decrease and supply in and distributors parts SPS,

also single-digit aero output. improvement enables sequential Our efforts in in readiness

by XX inflation to reap actions, over and stay digital years. points ahead We to continue which us year-over-year benefits to curve leverage tools We transformation help these few the operational to commercial of drive margin digital made segment past expand and investments us of XX.X%. enabled basis Honeywell

digital in and starting some our also see to sideline. planning are and in process benefits We from improvements inventory

on Aerospace aviation grew performance challenges. ongoing quarter Now let as by third supply XX% the double few commercial me comments share third for quarter business. year-over-year chain despite sales digits were sixth sales quarter organically up consecutive the for a

portfolio, this years. inflation. defense backlog business Technologies basis system continued in backlog in organically organic quarter, business increased original and sequentially commercial spending effort more demand for in robust Sales in XX% strong, the points transport growth XX% elevated In aftermarket XX.X% including grew the fact, as recovery general Commercial ongoing remains of payer by part products flight aviation Commercial our shipment and over as in Building Building XX% our of in consecutive position and was support growth quarter management air Defense if flat increase delivered down in growth. original double-digit sales. shipset building third growth. were our shortages. business year-over-year than in margin we sales customers. believe to could our and would aftermarket increased held growth. air cost to of offset with volumes these will volume and had segment In increased our repair to an organic X% but transport we recovery Products fastest-growing grew quarter an be fire for we coming XX% Solutions, XXXX trough despite XX% resulting past remains sales project third our excellence deliveries due Building approximately with aftermarket sales XX XX% driven organic equipment, expected Both increased quarter, sales overhaul sales the or the equipment Aero expanded leading additional quarter. the the and as

we supply supply volumes fully material and right chains did consecutive third Services significant that Backlog in not Projects remain, improvement in are the sign a chains business unlocked continued sequential strength in moving Orders X% the quarter, and Asia. and Building see third direction. part While the our constraints have but remains organic XXXX robust, quarter by of reported, U.S. quarter an above and with China, in roughly growing X% flat second on Europe in to down levels. softening and basis, X% diluted somewhat were for

in PMT for Growth business. third machine led Products Marine in a increased top year-over-year led XX% we underpinned PMT orders. by approximately basis Materials XX.X%. commercial offsetting grew driven the Russia. quarter quarter UOP second gas consecutive Process net and headwind and by processing see grew Solutions margin were Segment the sales. accretive. quarter, basis demand, orders processing third Solutions. continue the -- both despite line agile organically in points bottom continues in Advanced in for cost points for be digits in and sustainable by Sparta margin Materials growing grew an as to strength and were approximately leading earnings continued sales favorable Systems double lost Technologies demand XX% quarter led gas quarter Orders growth over X% inflation. solutions triple in by to to and in XX% returning from the Materials line technology demand digit and organically and overcoming grew sales the and growth consecutive X% our Our year-over-year. UOP life expanded grew to to in actions solutions to the on expanded XX% XX X% XX.X%, Advanced a and services Thermal XX approximately contributor for excellence, in growth catalyst sales quarter, segment UOP in offset refining quarter from by Performance XX% headwind commercial X% organically, cycle and specifically

Productivity and X% We Technologies sensing the of our Solutions Safety Services double-digit and and also in Sensing the Solutions sales saw in Productivity organically in portion and advanced decreased quarter. organically expected, growth quarter. gas and detection Safety business, As grew

continue of this to key automation improve as area However, was expansion equipment. by in focus growth in offset a be personal and volumes and softness Intelligrated drive will warehouse me expected that our for we margin protective lower business. in operations

across to and since fourth brought business quarter in productivity seeing the with highest along we expanding growth Honeywell level year-over-year of over XX% pricing XXX the was mix, Part again our double-digit growth. Connected the actions, and its a and margins portfolio. segment seeing Recurring XXXX, within favorable out XX%. stand CE, underpin revenue SPS cyber to organic approximately system connected continues XX% in growth growing are basis grew XX.X%. strategic for over quarter Our was with also SaaS the points quarter building once in Enterprises

the supply $X.XX, SPD for operational quarter this share Adjusted the the growth. quarter for time overall, market us quarters. performance exceeded great result recent of of our So we increase to outstanding was XXX% resiliency a quarters in to principles, come. driver which quarters, that capable in despite dynamics, by and challenges to was per strong attractive Honeywell operating delivering combined our expected which positive chain a quarter, to our our playbook been we X Honeywell key in XX% the continued supply end billion results our a third us battling to and EPS guidance maintain exposure first these due the free encouraging driven solutions The high adjusted for flow generated end working and for was of lead grew our earnings times is reduce continues the example matching to Honeywell On allow $X.X with will capital collections results an range inventory demand, cash for portfolio to cash differentiated contribution and The focus of deliver on up the of year-over-year. by have $X.XX. from enabled and

XXXX it Greg and to to depth turn our provide quarter me outlook. update Let on an earnings in discuss third more share over per

Thank you, Vimal.

year-over-year adjusted bit a share which repurchase by from third $X.XX, $X.XX of turn items, we'll provided little year-over-year including benefit, towards story a German drove was up unpack X, delivered to $X.XX EPS law. our progress In to discrete tax and further. onetime $X.XX a March Day $X.XX Slide reduction, we our change a Let's from a our the in quarter, EPS and per tailwind headwind XX.X% quarter. count A share driven Share the commitment Investor EPS. tailwind $X.XX earnings GAAP a a foreign a in despite $X.XX tax this last income. profit, adjustment primarily throughout adjusted execution rate, business Increased due strengthen EPS positive $X.XX dollar provided the lower We strong down saw uplift $X.XX year higher as wind to was pension an to to our below-the-line from year, year-over-year. Russia. by lower our versus XX.X% headwind segment than exchange commercial $X.XX effective to of continued driven EPS our of due related

overall, seamlessly quarter So our strong operate at results above we another to delivered ability or demonstrating through with economic conditions. our challenging expectations,

full and our can quarter fourth guidance. So We now about Slide X. turn year to let's talk

and the rapidly While demand Since a rigorous interest in supply we're initial battled contended chain environment, rates. encountered the profile. unprecedented guidance a entering with have number principles provided with disruption constraints, we each very operating of have operating strong enabled XXXX to inflation, our experienced us current our turn, challenges fourth rising quarter we persist continue February, At deliver. to geopolitical in

U.S. the materially a dollar which been foreign guidance, from to offset the level. the strengthening impacts headwind consistently higher and currency has we EPS XQ has saw bridge, ongoing have at of you our the As driven significant

impact lost range to For the full of up up basis an billion $XX.X XX% from decrease be guidance, of to X sales. of on $X.X million billion, point now $X.X to to end impact. of or $XXX we sales on million currency $XXX a represents in and billion year to organic We expect the which end our $XX.X in expect Russian XX%, our XQ excluding XX% sales billion the greater XX% foreign incorporating low prior high the guidance,

low However, overall raising versus now prior X% range X%, to at increasing guidance the midpoint organic the our and end growth we're range. the narrowing of our

on and lower and COVID-related The entirely by sales driven of currency growth between X to demand Excluding impact points, organic mass we guidance incremental is challenge, substantial this X To X% headwind, further to point we've basis, of I for X would difference sales, is X%. growth lost reported mentioned, translation. expect sales impact guidance the foreign dimensionalize Russian foreign a of be full range year-over-year as $X.X organic point our from which, headwinds compared million which a approximately year, billion of $XXX February our on EPS. original overcome a currency, from

guidance. margin segment our to Moving

in the volume the of HBT. high-margin SPS year-over-year fourth to XXX to due to in shipments be leverage points and of resulting XX.X%, increased of expect quarter in expansion and in in productivity XXX business range basis PMT, mix margin to We catalyst stable XX.X% timing

For our XX XX range basis end to points basis expansion. to and XX.X% the by expectations a XX.X% end new in full XX basis year segment of or XXXX, year-over-year upgrading to the points we are high low of on margin expansion points XX

Our remain of price us disciplined key rigorous expansion. operating elements cost playbook, and to cost actions management drive margin fixed our helping

expand we basis XQ XX XQ year. the margins for XXX basis to the points headwinds points to and full XXX XX year from basis XXX in to Quantinuum, point Excluding and full expect

growth our be should we year-over-year modest. quarter largely aftermarket OE by of another commercial will will -- growth double-digit which fourth determined we the businesses be and anticipate Now quarter let's In sales Both and growth in to demand see commercial supply The of fourth anticipate the trajectory to take leading segment. a remain Orders strong, demand approximately moment sales expectations our full across defense by to path are inflection quarter. in through walk third as year aero, we point, in sequential chain XQ year year-to-date, build the close sequential remains us improvement chain as up to strong as deliver the modest and rates recovery. to in and will view hours supply leading single-digit continue quarter In volumes. X% and XQ an high allow defense, to greater on space growth their improvements the flight in to third the in quarter. recovery, including

supply-impacted to So lap we sales growth healthy comparison as built backlog very similarly period. a we've support

year-over-year, as quarter, segment Building a expectations to are year expect with declines stronger on Our be full to third modest year-over-year. we margins to up to quarter sequential single sales organic . now year a mid-single in for of full continued slightly growth improved in digits Aerospace and sales double-digit volumes lead improvement another we In expect mix Technologies, result OE of organic high

Our the backlog in this we anticipate capacity levels, for in has supply prepandemic encouraging building the backlog enabled supporting business a in supply remains expect strong quarter growth above for the Building improves. projects XQ. quarter and year, sequentially in the same drop sales Products We as Modest in quarter improvement third well as of pass-through recovery. normal chain post-pandemic indicator grown growth each an our projects fourth sequential

and sales growth third demand we growth for we UOP, improvement the year-over-year. up in a to and margin for growth P&C, sequentially supports refining allow quarter volume double-digit for benefit. provide controls. processes organic increased sequential healthy will our expansion strong catalyst support for overall. In Process HBT, supported solutions In reload markets continued favorable and full end fourth thermal the In segment demand overall and outlook Solutions, continued still the in sales expect quarter year expect increased should by leverage XXXX quarter For fourth and margin be with from

in quarter. across the be PMC double demand Advanced outperform overall outlook expect high strong to Russia the quarter and be a portfolio. an due upgrade quarter. for our last segment the from in year, to for in to However, digits strong fourth to fourth year-over-year expand of margin expect quarter and we single both Materials digits up sales Thanks up we sequentially of the third the headwind now quarter, will the to fourth loss continue will a continue to

is demand advanced the push Looking Technologies and the ahead remain to soft investments and fourth and will right. robust. our business, favorable indicators where our to backlog warehouse remain growth for FPS, in Warehouse continued automation portion and the of detection we in expect see capacity Safety quarter demand gas sensing customers as sensing new

our by XXXX growing continue business which demand encouraged focus to automation our for we operational We to outlook digits. and for the double line and So services, warehouse on we be benefits in in bottom trough the expect efficiency continue improvements still our aftermarket positive. expect higher-margin long-term of to remains

continue XQ, to supply our businesses differentiated in service but the demand and to and us we lower solutions technology some outperform in moderation, shortages may our chain productivity seen which sequentially impact expect short-cycle peers. has result continue sales against with deal Our to allow to of

growth short-term to we digits we still decline rate confident the persist, mid-single SPS medium-term in remain headwinds While sales in in SPS, expect and XXXX.

see sequentially and to expect result improvements. operational both fourth the of margin as in we continued quarter our a mix expansion year-over-year strong shifting and However, business

range for range Turning a full profit to the to continue million million positive -- in properly million $XX a the quarter million million approximately the before financial segment Honeywell XQ our other $XXX million fourth between $XX for core negative year and net at $XXX guided in metrics $XXX is difference to million is and for the between which includes and restructuring to position in outcome we projects fund guidance for as to negative $XX expected Honeywell of be repositioning negative year. . to impact, tax, This million and -- $XX good $XXX of overall income in the attractive

for the share quarter reflecting least commitment XXXX. at We of repurchase to approximately Honeywell approximately rate XX% $X average to in to our in adjusted the for approximately million in XXX the full shares XQ billion be fourth at expect XXX year, XX% shares year, count effective approximately tax million shares and be the and the

our inputs, XX% between EPS fourth and up quarter, is adjusted guidance for $X.XX these the of result $X.XX range a to XX% As year-over-year.

headwinds $X.XX $X.XX, $X.XX low ability end X%, the in up reflecting new by are For than to confidence of the our full of offset foreign a EPS, our more to well macroeconomic X% year-over-year range year We exchange free range $X.XX billion we of ongoing to upgrading $X.XX and guide to guidance to excluding February versus to $X.X XXXX or $X.X our flow of Quantinuum. of $X.X risk. $X.X initial meet billion impact guidance billion, cash billion to the our as as original expect absorbing from in still

lost the we full total, margin our growth, versus absorbing of raising organic of presentation. from adjusted $X.XX guidance Russian environment. Details billion of sales a operating are while this and and sales $X.X can year our fluid XXXX the to and our midpoint and guidance found in year So FX successfully per incremental FX, ability our sales ranges on indicator in a earnings segment of guidance EPS full headwinds initial strong progression share appendix results in in adjusted deliver in XXXX be impacts

to let's next for preliminary thoughts discuss XXXX. to back turning Darius, and the turn page Before our

protect While execution decisively in signals deliver year downturns liquidity quickly ensure and to demonstrates and we growth, volatility, to of any the macro drive position backdrop ability another move to through environment. believe margins, our our Honeywell historical multiple

rigorous principles reinvestment help the will sector sustainability operating commercial and recovery resilient market infrastructure with capital upcoming exposure spending. in energy Our continuing, us aerospace remain and and increased favorable end

earnings a have that XXXX. in sales, in growth setup drive margin We will strong and

long-cycle We record in level PMT expect backlog aero, our and due in organic growth XXXX to businesses. in HBT in demand

offset lower year. automation by largest and which next believe our in will of In warehouse XXXX. headline demand will double-digit orders be seeing which in will growth backlog fact, and we trough growth, are both This volumes profitability businesses

gradually to dynamics supply remain versus chain We but improve prepandemic constrained expect levels.

in a at commercial build rates to of dynamics let's the businesses. supply support will in widebody by mind, the chain business remain expect aircraft only aero, and flight among our pace In With recovery in which increased each these aviation growth our manufacturers, increased picture robust tempered demand healing. hours, look with particularly we of

and supply defense constraints environment. the the of We macro return serve as and year. supply regardless markets backlog key in of XXXX, throughout fueled year's investment this from the are stimulus also well and next into Process to to improving expect P&C, comps verticals on will we and to year will improvement this fall Solutions, growth off Russia continue supply in Backlog UOP have improved and support in provide headwinds built our secular levels semiconductor carbon continued inflation year. institutional capture chain. to should advanced offerings on enable another have resiliency balance elevated a increased strong and space and as remain supports strong Many also the Solstice growth an LNG expect growth we in energy elevated HBT, Sustainable among for Reduction customers decarbonization, themes In to new as backlog in SaaS we as Solutions demand Act should will as provide growth budget and capacity drive to on capitalize efficiency seen aligned materials divestment In products Technology opportunities. such in XXXX. we growth anticipate expansion

potential in investment recession Solutions, businesses in our will Safety decreased in new and provide For short-cycle capacity impacts warehouse and XXXX. headwinds Productivity

business a revenues decline 'XX, margins have already if macro actions allow solutions differentiated with that mix strong regardless us we begun of that However, we've environment. implementing expand us even shifting Operational the allow will to portfolio will in improvement compete year-over-year. to and

We'll R&D address innovative, and to on remain shift hour we flight cost on investments toughest overall improvement will streamlined continued aero higher-margin recession-proof from margins in pricing world's tailwind, a sustainability transformation recovery CapEx digital in keenly the XXXX uniquely anticipated technology, technologies benefit businesses. Honeywell, as volume So differentiated, the SPS and challenges. continue base, in mix creating and towards focused growth-oriented our process

to lower. spend normalize our begin We to repositioning on expect

overfunded This a be results discount However, next base in benefit EPS pension higher will rate income interest lower by be our than both and incremental environment, a contributions and year. and headwind that which accounting noncash offset significantly more our likely in rate asset lower are item a rising great is will to status shareholders. a noncash for in no which position our current pension ensure needed as is employees, former

in to have balance deployment. deliver expect confidence for to demonstrated strong our our growth, financial Overall, to the call outlook more performance capital into environmental Darius sheet excellence. EPS gives inputs going resiliency growth supports markets capacity flow in to discuss can we back expansion, overall dynamic us to significant under ability annual the that, and 'XX cash despite We circumstances like adjusted environment of including turn that sales I'd operate call With the specific commitment which environment. margin We'll close and 'XX end meaningful our a accelerate dedication the deal year. over to the M&A our a we provide favorable free and once

Greg. you, Thank

reduce to the more targets help aspirational X set protect and Slide X and approach our the are a carbon emissions, be environment. of and ESG X XX% Scope for by neutral ESG X targets to turn to Scope have impact We've than since is the Scope commitments. . emissions together initiatives, our and shape us XXXX. science-based is we have more over just common level, about ties operations company. the we XXXX. set target aggressive businesses Committed our the At pledged an to It reduced a by our future for talk Honeywell. Let's that and thread our to a in facilities initiative we corporate taking

Aerospace business, as retired safety technology, technology next that leaks. process through and Ecofining our ESG broad our emissions gas circular evolution fuel, maintaining help through ETJ renewable both management We're impacts XX identify recycles customers and the indoor technology new of the and manufacturing beyond standard and well-being, this providing traditional the in achieving quality cloud sites can our Honeywell economy our feedstocks, sites for our manufacturing In our We're parts, customers. improving sustainable aviation for XXXXX, ISO sites improving with parts energy reducing improving planes and solutions implementing, quality of go takes of and a now global using environmental energy own energy at which trading with requirements process quickly establishing, innovative to landfill management. offerings. supporting segment, world-class reducing volumes occupant ethanol through feedstocks above certified efficiency their energy worker buildings strict driving lower using Our office and used portfolio imaging air We're well.

our website. to in ESG Investor published which recently impact reduction innovations is find Relations can on Honeywell information our Honeywell's more You about XXXX technologies and environmental out report, ESG available

into midpoint closing our the higher-than-previously and let's value share to rigor that, ongoing we creation you We expect including difficulties, move to for by metrics Honeywell organic margin or this differentiated you I as quarter with deliver Q&A. raised With Slide sales we and range, We're XXXX Honeywell. Thank for external impacts, full third can from guidance the for let's our the adjusted earnings our to met cycle. well results some Q&A. per through in absorbing I turn we environment. of unwavering Now encouraged thoughts segment executing areas in challenging of series strength remain drive before and Sean, ability regarding in many anticipated on our XX our steadfast a fully of seeing colleagues are this your portfolio, am to exceeded FX. framework all year deliver move our my increased and as despite negative guidance to

Vimal Greg line and Darius. Darius, answer open Instructions]. for questions. Q&A. please are to [Operator your the Liz, available you, now Thank

Instructions]. [Operator

line of Tusa JPMorgan. from Steve question first comes at the Our

result What the turned OE Pretty the fourth Aerospace. for defense then hasn't maybe and into really strong outlook second, on margins picking year? despite Just up the is yet. in next quarter and in

maybe from aerospace a So next that color you more into perspective. just year as on margins little head

Yes.

is our margins I consistent. pretty view on think

Could year, chain. quarter we going to in to bit the unlock we're seeing or in be OE. a or early we'll but to I guidance the next think the fourth up would continue basis we're expect managing through be supply will continue points, growth I XX quarter that for that like providing It's XX be look down XX similar. -- as be basis something XX to Could points.

We have an portfolio. investment

talk we pretty we're grower business. lot I know, you investments we've talked too. the biggest the As of to into a about Aero as is think that's not about. remain margin going And year, R&D consistent next the expansion, our in making

Steve. just add of maybe And Yes. couple things, to a

of great job margins in they environment very of a done the toughest always expanding a out it's have our frankly, And difficult think I any businesses. environment. pricing

great done they've So a job.

forward and look mix there's to have a I takes. some of credits that to mean, tougher, we will we get issue. year, As lot the next puts

a is mix OE favorable growth scenario. obviously the So not

air next the in to travel miles we miles expect robust Now that, do year the aftermarket as don't business, offset we year. as this

that the wide-body wide-bodies miles of year. However, expect And it's you by to next X:X. fact roughly more we know, as aftermarket do offset are the opportunity narrowbodies

solid So we a expect all all, in at records continues to year. The all-time backlog grow.

I 'XX. think aero is positioned year for in great a

kind long-term year, context in put on that expansion, of margin mentioned do of the substantial the then And but target? Great. next you you SPS how

too I into will target. changing mean long-term I certainly think We're to next target. anything, our If year helpful be early. our not long-term Yes. it's get

think the we've in the do expansion it's difficult at is business that changing from think some will [indiscernible]. we're and what warehouse but 'XX and -- be to Exactly I not grow good forward softness point, going going I and automation certainly be the will show 'XX. in margin bottom, signaled to of the this

Jeffrey with Sprague Our next Research. question comes Vertical from

Maybe two wrap just into I'll for questions one. me.

some environment First, sort this kind in of just maybe active on secondly, bid-ask see dial or of you to whole that XXXX you pension more of on pipeline? maybe just maybe normalizing actually noncash, do offset I with? sort the that the headwind dynamic. something of deal that we given improving. comment should Is you're about but that in restructuring comment, get it expect just a And EPS dealing tape? general spreads Or back it's

second for me to I'll Greg maybe with the start first kind and the turn So let one over of one.

bit one, which activity. the sort an of is more driving the answer both driving I a which improved do valuation think is more the is On appealing as of becoming pipeline, little is short first mean, much we

what months set business everybody does was it because Now what have value XX today. reality it to to I with in think not ago, is wants their obviously, sellers

of I of dramatically don't to terms to some headwinds. in X months sort So change going valuation. kind next and environment X of tailwinds we're fighting the in think the is

one. to you the very pipeline. at could are be uncertain. particularly properties I And can improving So we value our to still also right tell but 'XX we we We're a and today's that's why trying appealing environment. given have a think environment that Greg. not I substantially up And TBD point, I'll they this But than it higher headwinds year. turn over to the emphasize I do something. are pension yes, just tee just mean, to item, we want the be Whether second will more we're is or acquire there, out restructuring frankly. I'll

contributions kind overfunded pension a don't nothing We of anticipate item. cash happens. bit an And plan. have a no what any of this is matter We

right just of content. in I put -- to want So sort the that's

right. put during that. done know enough and Yes. the has course year. pension bit noncash it's, the be Darius it's mean, the And to until the headwind get know, magnitude year, but rates, of the is as approaching we again, out will repo, probably and little you pension in large. overall pension rates a and I meaningful, but that's No, of not point That, to the we'll down come doesn't asset we'll snap we'll of think noncash, finalized mentioned, and interest that income on $X.XX. But going be the as could at that Yes. order offset it probably nearly end discount line what the

Jeff. here, comment last one And

sort positioned year, of at SPS. to means really talked number [Technical okay, that businesses, QX little in repo some HBT and outline Difficulty] we in our we got the sort about provided challenges preparing and going noticed of that end the rougher which in you for we're a them and of for bit upper business we're the be because all our of environment for some of our guidance, will we've well do not As of

of and time, pulling doing meant be all to in and for the a will position work lot a So activity we're basically of of we're that 'XX. QX that's of to XXXX. business quarter, strong restructuring ahead lot kind our a robust

comes Barclays. from Julian with Mitchell question next Our

just maybe and Sorry, two-part as well. question a

just on part, First orders.

I up in low they digit were think said QX. single you

So like X, that? this call regional be headwind second there's And on as preliminary XXXX. year, whole. then a just from sorry, are decent look a XXX like XX, business in up the the Quantinuum -- your slowdown Any margins Doesn't XXXX year thoughts, for piece on to QX. ex-Quantinuum out big Slide driving bps Slide a would

line chains could performance supply easing you with and be top growth, sort repeated some a of So margin year? think do next similar

Yes.

I first, I answer we earlier I'll to -- think through really -- it's that. is tell going think work second to your to which Julian, we're one

On have end That, issue we February, things. whenever expand you're until point for all wait the of former QX like out just to much? question, think tell you is to I would your January on. you I can I or early How can and margins. count to results 'XX. we're going to couple of Unfortunately, going our guidance probably a

of year, single-digit the Intelligrated, exclude you a impact last big very growth bookings If for quarter was it's bookings. high and

So just keep that in mind.

the single with strong actually and low I'm So of inclusive That's pretty outcome a still happy outcome. it's digits, Intelligrated. up

that's think outcome. a good I So

in I so in As QX. the some were regions bit softer, soft a HBT, little was a particularly were in of Those Europe There shock. couple on, have you spots. softer were that look China at and expected, would bookings sort as spots not of on big a

of was and mix, strong. balanced There was takes. On Middle America East North strong. a puts some side, the flip kind was

to down. So . we automation, really expectations nothing It was. dramatically Warehouse expect different than be our it

was. strong. expect the It We to America North be

some soft We Europe. were. There expected spots in

all with revenue generally but in outcome, orders not pleased just all, outcome well. the So the really as

from from comes Melius question Scott next Our Research. Davis

I of price. are to get your of anything price side accounts Q. bit project little maybe think some of twice just average. up skewing that? would there like said your on businesses, think would I the be It's higher was hard literally just type a the group for kind thinking saw the a to that that and It trying XX%. Is portfolio that in I'm

little maybe puts where the of and on you some color a and price or So maybe have least the there? just the bit of price pulls most

Yes.

most repricing spot Aerospace would done -- the than us businesses As you for has I expect the seen better difficult been probably in Darius And backlog going we've actually inflation think in the we highlighted, have there. and long-cycle because we sure. for

as of going So driver you are success price. we all in back projects good The that, the would definitely getting of imagine. bigger had some have products and our businesses businesses

HBT, would very having are so strong in products say, in all SPS the And power that's, businesses I pricing PMT, particular.

algorithm bit in little relatively on going not coming QX. be look kind much we leverage as of get probably add, next we're very, gain I to modest and is enjoy going just changes this expect from would a will we QX QX much and from bit I probably what probably be But we're to more price 'XX. we'll going volume very And a algorithm of probably some to the that's change forward still different. probably 'XX, a less the into strong. year, I leverage, mean, mean, price. volume

That's to PMT, QX. mean, -- And QX has 'XX how the of year we output in in QX, make problem. about for is going it is was expansion But the pass-through of a I'm I if kind actually granted aero lower you aero frustrating, and last HBT, up it how take to in if -- dropped our grow SPS, outlook we of even X% if been different. you margin bit at we a X the our the be and slowly you improving. is but So kind years, backlog tougher in supply QX. over slightly a look at versus averages look at X% look normally, chain

And So we incremental benefit continue. that coming there expect the chain. supply is in some to through

So for will value be algorithm different year. next creation our

I guys. luck, Good color. appreciate. great That's

Andrew next Our America. of of question Bank from Obin comes

on Just my defense space. and question

And think to peers, how I to for specific Is correlation just up? cash because it seems end talk think the the some that there the weaker. what's just it what's for is, been platform back. business? model with tax two -- was part you question my to could how just that a And budget be relative get this Just program, should I R&D versus then lagging did it credit? we happening best has Where peers.

Yes.

there's we unpack you both kind Unfortunately, of no rubric that simple of me and because those. So can I give space have... for defense let

yes. tried, We

Yes, those are because look programs. all for like the if helicopter think hypersonics, TXX, obviously we at of Those are have I such programs good a scenario. And some broad engine you us.

wasn't think obviously space. But to there's this quarter do and in the -- best remember, got bottom. defense is this our You've we terms of

went up it Our backlog substantially. went up and

were in if space. that. digits growth some in 'XX, single for expect early the color defense And and actually and want we on up and Our think orders that you we this is space trough, defense high

we've kind -- a corner the So seen in turn seen we've bit of of of in terms defense a and space.

digits long-cycle this up back quarter. double backlog -- was Our

year-to-date, we're in optimistic obviously terms So been going of what's of in the going a this kind but to I've space forward. year, happen disappointment this is really and defense we believe bottom.

tax to until it. call them, the R&D we're see we On going not credits,

companies We've initial As consensus know, that, at to few January. least and very so tune $XXX cash you hurt proven the be of one back stuck outlook far. that been right we've our we've that probably of at of with the took the to only, out the us that or I million. in mean

think going in that know. duck happen November that's, through, frankly, going that anybody what's it's in Now thinks guess. I the and don't And to I anybody's now December, to lane get session

for go is It think better. -- if a does. to I outlook I either We could way. lot certainly 'XX coin But it a cash does, our personally look it flip. hope going it's think

we So where are. of that's kind

Our next Nigel from question comes Coe Wolfe Research. with

that. But next very I'll being I of very, strong. Just on so the Just word clarify, all year, we that? the it Materials But question. keep dynamics. maybe understand pricing one Advanced SPS to just disproportionate think driver curious a on

bit 'XX in versus into do You go How portion is of the demand PS of we probably the called sort as environment supply weak a spending portfolio? 'XX weak about pent-up fourth think weaker quarter. for chain we into warehouse, Project Solutions out

has differentiated So new segments, pricing line. strong in And a other PMT, been Absolutely, in we proves let across board position. pricing me we Advanced Materials. on got strong our have because in too. start with and that differentiated also the our focus the pricing product products But

segment across also. Process growth Darius, So UOP Materials It the let only pricing SPS question, Advanced you... is spreads I'll and PMT Solutions story. not

Yes.

portion, think comps. we're some difficult SPS, very, been for the I very it's mean, So on lapping PS' I softer. -- That's

bit It's into still forward. that market. in than elevated And of but last We our position. sort that, some I unexpected. QX and backlog is sort our record the is granted volumes dialed will probably What a little orders have nothing been of algorithm an better year, is backlog at strong. tell going you of relatively we've I liberated mean, it our still

actually North I QX, was good thing days would that a America is supply a sign dropped always in other which inventory channel of of sign. which good also The sort the tell, is in

quarter it not there, all, in all most but So robust our expectations. different the than wasn't

Ritchie Joe from with comes question Sachs. Goldman next Our

or an kind potential about of has the size guys billion And seen then to the offload be looking deployment opportunities. at I'm talk thinking strategy that did could environment, the that billion, that changed I'd you action? you're stock potential of through piece given of with as as just to capital billion volatility $XX Darius, $XX talked for you're secondly, deals have over about your M&A hear, be sometime things you like of the XX-month Quantinuum a period. at all curious just we've business $XX at portfolio? whether curious of looking environment to kind

Yes.

that the maybe now. the answer one the market because particularly I with me Let that question -- is right like second short plays start receptive not is yes, to mean Quantinuum

stay all not having condition something is stock market. way going I forever. stock the do that But will the great look, when to mean, a that. depends really market So the -- not of that's year. We we know it's on there But

know kind -- we something do with So I where don't I might frame Quantinuum. some an back time different would off of necessarily XX-month that with

-- we're the is believe tough X for the because months going mean market to the do expect hasn't think and we market of better if is to market get plan do the the Quantinuum going in a I I So get better. environment, We economy. forward ahead changed.

So short from an of now. still And business. that doable story. terms think that's XX-month in much I that think we've time with I I different frame been guess doing very something

So answers I that was fully your other What that question? hope that question.

Yes.

point? on the you're size that Just the deals other this working on just at of question

that sort us and the something We're the for that prior to of $X moves call -- mentioned takes say very, price. to $X deals purchase that stay tiny continues I that of of needle. spot billion just not sweet would billion is not unless a things very, energy, would the lot I it to of earnings it on Yes, it. I probably in very mean, from is the probably I strategic wedded be one and I'm this sure sort because up away the

are I impossible, be So but mega think we're probably in of going they're I never to size inching the likely. probably up terms say not deal. that the of deals

Our with Deutsche comes Nicole from next Bank. question DeBlase

on and then my ask other I'll one question. Just pricing, follow-up

in will Just there risk categories Scott's environment, on And your obviously. how time probably take that it's secondly, going some pricing moderation pricing decline cash kind to conversion have taken some to or path of I continues? has point plus? it's continues build. to of in this guess, been. been unprecedented the free if would is inventory commodity deflation for XXX% strong prices then to And back a an that back because some I suspect what's time

Yes.

keep there'll we may be of that where is declines, I portfolio demand. demand make to pricing mean we're elasticity massive in risk looking that across have, spots So like terms that a sure at what true I'm our be the sure and not destroying we

we do expect pricing speaking, So broadly next year. positive -- but

at inflation some degree. said, to off it's kind down, elevated moderating. level. is of not an I leveled It's just As It's going still

say, I'm be I pricing risk be true. but So that's declines sure would pockets may a what that not there'll broadly speaking, where that

free mid-teen back we've a kind XXX%, we as to is to we're ratio, helpful of to flow margin, flow about frankly, a be confident it our of more a range, think terms about that In about talked and not that around free cash able and going one. We cash very deliver talked we're that.

flow, the us I objective. We're some to free really for XXX% be at barometer not it's mean, probably a before company. cash mid-teens as a but margin get as right cash we healthy that's flow looking really free going the time there, our So

Yes.

see next year. in our you I think for outlook it

expect pension, impact grow line -- be which in cash free a next of going of roughly to excluding EPS, roughly with to year, We headwind. the major is flow sort

is if the because think the that year, free about got point substantial only on we and substantial retaining I to cash a at revenue of headwinds flow $X our you are important out number I the we down original we year. this like actually cash mean since point impact taken a I year. for flow really outlook I one headwinds. look some think So and headwinds. would you free since few, -- there that on And about our despite in faced X this consensus hasn't call Russia in about -- EPS this our But And of just -- think year-over-year the think between emphasize just about not performance we're still our that January, billion of if company FX basis, $X.XX EPS. if I

EPS between $X.XX. to -- impact is basis, a year-over-year FX on and and closer So Russia

much And actually maintaining. that's talking understood. what differentiated. to for we're I how think So widely we're about need I that think it we year know raising really be is that our And is don't I outlook the

comes from Jefferies. Our next question Sheila Kahyaoglu with

in about maybe We've ask wanted in well. battery production you to seen Can Russian LNG, I the OPEC reactions volatility business as prices PMT Darius, for with price the around caps in to what oil in think oil order and major Vimal technology some the as news prices near-term and cuts. you oil and potential across portfolio? about activity sustainability about is longer-term the PMT and talk you doing

Yes.

much we business, events that our as other during upstream. So mentioned and Day to are we less linked Investor

much to in segment downstream linked more We PMT. are

they in better. sustainability get. the portfolio. getting that how to decision is have capital side returns What investments price slowly in based oil clearly the So volatility getting the are of We will customer see they seen investments on determine on we spend the want better there does

more more We that and segment. in continue to offerings roll

see I how price. the will that's oil So linkage on

convert of That Solutions. in to but going of remain to sustainability portfolio, a growth more degree, also look for in long-cycle a PMT investment, by XXXX. the we supported carry the will stronger ahead, business, growth good And we're broadly confident Speaking PMT is year as Process capital a it's that backlog certain XXXX. for

the So we quite optimistic the next remain for overall, PMT on performance year.

Pokrzywinski comes question Morgan from next Our with Stanley. Josh

was here, you does go to they free just what lead I'm sort air to downtick. helpful. in comment past pocket if are any further? on of on of on like touched this look tiny versus folks look some kind I up it backlog a due there maybe question you need Slide backlog. sequential it past working of X, But that few a Just out would stuff core needing times realigning And And seeing Darius, be where down much a are on versus of times any as terms wondering supply due. this of chains

we in Yes. to HBT I seeing I there three we rates and -- when in issues SPS substantially. offset chain. our mean those a aero the combine downwards right. went you're tick PMT, up robust aero. and was substantial And tiny up, in mean in was Aero segments. there's supply chain in up but went path order But improvement it in are went unfortunately, some backlog. supply in went aero, It you down some

suppliers. industry aerospace have of not Tier for X, is 'XX, from some I in the in because actually the frankly, unlock terms labor And the if for So be better, think big 'XX And may They're for that we SPS HBT. that times labor. actually in as actually are a is lead labor. there getting still Honeywell to especially recessionary Tier look labor, And but helpful long. aero of and X we environment

that helps. that's So hopefully, --

question. more one have time Liz, for we

Our Capital Deane last question with will come Markets. from RBC Dray

on first want sounds for be And to congratulate just on your like it initial focus And you role. going the is to Vimal, new Intelligrated.

Just share firm could areas be with focusing on? other us and you that you'll your what of approach is the

Yes.

So I we in think are specifically we that volumes in mentioned Intelligrated, seeing a as reduction there.

robust to So how business the in really focused more we this cycle. make processes on are

growth process the a taking expansion in our working Connector across come we that your organic in better commitments times long-term I'm business actions run can the our On to on make how So yes, we digitization and expansion our stronger all looking are broader in and rate and committed with and come. commitments Honeywell lot Honeywell, margin out colleagues on margin maturity so drive can to long-term so Enterprises, XXXX operations my opportunities our SPG we're that our we we of in deliver question, on . earnings. at

for closing Adamczyk remarks. Darius

navigate agility to healthy. safe you've come of stay returns. delivered want shareholders effectively drive results for superior Honeywell, I you a listening, quarter operational ongoing We Thank the to and enabling you. for and expect all to level of Thank support. please and thank rigor and typical our third through from shareholder strong multiple continue your us uncertainties to

This conference for call. Thank concludes today's participating. you

now may You disconnect.