I'm Andrew Obin. I'm BofA's multi-industrial analyst. Welcome to our Industrials in Transportation Conference. I think it's year two in revised format. This year we're going to have over 500 investors in attendance. Last year we had, I think, over 400. We're moving in the right direction. You know, as I said, the goal is to have it large, boring, and good. You know, so that's the goal for the conference, and hopefully we're succeeding. We have fantastic corporate attendance, close to 100 corporates. You know, for those of you visiting, we are going to have takeaway dinner on Thursday. If folks want to go grab a meal with us, we still have a couple of slots left. It's going to be at Midtown. Let me just touch on some big themes. All the noise aside, industrials are the best performing sector in the market year to date. We think that U.S. will, is, and will be the best market in the world for industrials. We think that U.S. is in the midst of the biggest CapEx cycle in two decades. That is our North Star. Despite all the noise, we think fundamentally that is what is going on. We think, look, these stocks are not cheap. You know, the market gets it, but we think that is the underlying fundamentals. So far, this earnings season, I think stocks have demonstrated surprising resiliency. We think a couple of things. A, we think probably below the surface, there is just simply more pricing that these companies have. I think these companies have done a great job learning how to do pricing during COVID. I think they have brought this toolbox to the current environment. I also think on the margin, it is likely that the companies have been more aggressive moving supply chain out of China over the past several years and make the supply chain more resilient than we thought. Insofar as reshoring goes, there is a lot of noise, but, you know, we think there are going to be few large verticals which will drive reshoring activity. We are not sure there is going to be anything else. The ones that will happen, I think, will matter. First, semiconductors. When we talk about semiconductors, there is really TSMC in Arizona, right? It is big. You know, TSMC just announced another $100 billion project in Arizona. We think the second and third order effect of that is going to be to bring more, to continue to bring more supply chain to Arizona. We think this is going to be very, very important. Talking to executives, LNG, we think is another area where the market should be excited. So far, as far as we can see, we think hydrocarbons is the most neglected area of the markets with some of the most attractive multiples. We think LNG is one area that will continue to receive funding under the new administration. We do expect a lot of projects to move forward. One area that is not getting a lot of attention is pharma. I think there has been $150 billion of pharma CapEx announced. That actually, I think, is three times how we are calculating, everybody was excited about EVs. Pharma is going to spend, sounds like, three times more than the EVs. It is going to be real, you know, and finally, you have sort of this whole TND and AI, CapEx, but that's a bit separate. You know, I think we're going to spend a lot of time sort of talking to companies about the evolution of their supply chains, both in terms of supply chain resiliency and possibility of moving supply chains to North America. I would say finally, before I finish, I think another topic that is underappreciated by investors, I would say, is the rise of the Chinese competition. I think, over the past couple of years, China has been ignored by the U.S. investors because it hasn't grown. I also think the dirty little secret is that U.S. Companies are continuously being squeezed out of China, so they're not talking about it. I think the next step is Chinese companies coming to the world stage. I think we're probably going to see it first with European competitors just because they're more global in their nature and more reliant on exports. We think rising Chinese competition and China providing good product at a good price is going to be a big theme for the next three to five years. I was at an ARC forum in Barcelona last week. I think European industrial competitors are keenly aware of this dynamic. Not sure if investors have caught on yet. With that, we're going to kick off right on time. We have Honeywell. We upgraded Honeywell last week. The stock is neglected for a lack of a better term. and we think there's a lot of good news happening below the surface, both in terms of execution and end markets. We view the stock as inexpensive. You know, this morning with us, we have Mike Stepniak, Senior Vice President and Chief Financial Officer of the company. I think we're going to go and just do a fireside chat. Mike, thank you for joining us today. Thank you for having me. Appreciate it. Of course, Sean is sitting in the audience. Thank you, Sean. How are you? Good to see you. Yep. So yeah, maybe, to kick off, thank you for joining us today. There is a lot going on at Honeywell. You know, just to start, can you just give us an update on the business performance and separations? Sure. We obviously were extremely pleased with the first quarter. We delivered on top line commitment, and had a beat across the board, if you will. Orders in the first quarter were strong. They are strong again in April and what we are seeing in May. We are quite confident about our guide and what we said during earnings. I think the only, I would say, just hesitation or pause is the demand piece in the second half of the year, specifically in the businesses that have more exposure to China and how that is going to play out. From a tariff standpoint, tariffs are, we said, I think there are $500 million of gross impact for us. We are offsetting with price escalations and other actions as far as our supply chain. Just yesterday, they came down for us another $100 million. It would become less, I would say, impactful, relevant. We are watching demand, and we build a little bit of contingency in the second half, just monitoring the demand, but largely feel good about all of our segments. Mike, you sort of highlighted, you brought up that, you're seeing strength in April and May. Any verticals that you want to call out, having the strength, particular, you know, it is May 13th. Anything, what are you seeing in May? Building, building automation for us is performing well, specifically products. FAIRR, Europe is, is doing well. We can see green shoots in, in Europe as far as short cycle demand. China's has been good for us too. Even China is not a big revenue driver for us. It's about 5%, but China demand is, is there. We're seeing that, from a project standpoint, Middle East, Australia, APAC. We'll see, I would say, broad, broad strength as far as demand. Terrific. So, you know, maybe we can talk a little bit about, you know, one thing that we've noted, the company has changed, I think, its planning philosophy. So, you've been in the CFO seat for about four months now. Honeywell seems to be guiding more conservatively and, you know, also consistently, in the past couple of earnings seasons. What changes have you made in your approach to guide and what changes have you made in managing the different business segments? Sure. As far as the guide, and I've been, even though I started in February, I've been essentially building the guide and the plan for the year since about September. What my philosophy is that we need to drive the business for short-term performance, but also for long-term performance. What I'm focusing on is really looking at leading indicators and focusing on leading indicators as far as how we guide and what I want to guide and how I want to set the plan is having, I want to have a high degree of confidence in what we can deliver. That's what we're guiding. As far as what I focus the teams on is really a couple of things. First one is, is really focus on making sure that we hit our milestones on NPI, product introductions, offering management refreshments in the offering. That's because that drives really a midterm strength growth for us and hitting those milestones. The commercial, I would say, commercial intensity as far as how we go into our markets, how we pivot to higher growth verticals and how the team shows up as far as the commercial intensity. Just to go back to the initial guide, you know, as long as we sort of, and we're going to go talk about other things. You have sort of talked about slowdown. Doesn't sound like, have you seen any slowdown so far in April, May? Anything slowing? Not a broad, broad slowdown. I would say in our ESS business, we see some of the customers just, I would say, hesitating on some of the investments, but that's not broad-based. This is more, I would say, anecdotal versus a big trend. I think with tariffs stabilize and the macroeconomic backdrop stabilizes here in the second half, we'll see those investments continue. Excellent. Thank you. Maybe we can talk about the spin. The company is breaking up in three. I was interested if you do just some of the parts, you know, I think it does suggest that you're trading relatively in line and, you know, there are a lot of puts and takes here. How do you think about the benefits of breaking up the company just beyond the sum of the parts math? Yeah. First, I would say the board and Vimal, that was a major consideration. What we really looked at, if you follow Honeywell for a while, is we went through the period of accelerator and optimization for, I would say, cost efficiencies, et cetera. As you look forward and you look at our three large segments, their needs are diverging in terms of the couple investment needs as far as innovation, the themes in each industry. We are a big believer that these businesses being by themselves, they can be more focused, they can allocate capital more efficiently, they can manage their growth CapEx better. That is really the reason why we are separating. Excellent. Thank you. So maybe we can dive into aerospace first. Can you just explain the dynamic that drove Honeywell aerospace organic growth of 9%? At the same time, you have commercial OE organic growth of negative 7% in the first quarter 2025. What gives you conviction that commercial OE growth turns positive from here? Sure. I would say, first of all, we're super excited about what our defense and spaces business is doing and really, really happy with the aftermarket demand. On the commercial OE side, we still have positive backlog of about $2 billion. If you look at our OEM customers, they're not linear in terms of how they take product from us. What I can tell you is our supply chain output has been growing double digits for the last, I think, 11 quarters in a row, including the past quarter. We see this demand to continue, and there is, I would say, nothing that would tell us that demand is slowing down on OE. Now, as far as how it translates to revenue, I would say it, especially last quarter and this quarter, it'll be a little bit choppy as I would say some of our OEM customers normalize their productions, because they haven't been very linear as far as how they took product from us. Sometimes they get to inventory, sometimes they pass it to their end customers. Sometimes they slow down because they see that they have enough, I would say, safety stock. It is not linear, but the demand, we can see it, we can see it one by new demand coming in and to the backlog that we have and plus the backlog. Excellent. Maybe we can talk about Biz Jets a little bit. We would've thought that Biz Jets would be the most economically cyclical part of the business. You know, we sort of estimate roughly 20% of commercial aviation. Is that the correct way to think about the portfolio? You know, talking about concerns about slowdown, are you seeing anything slow there? We're not. We saw ours normalize early coming out of COVID, but they stayed at that 4-5% growth year over year. We see strong OE demand as far as the fleets. Like I said earlier, part of our positive backlog and the backlog growth is driven by business OE equipment. I don't see a slowdown in the short term, at least not in this year. Maybe we can talk a little bit about defense and space. What are the key trends, programs, and noteworthy things in the latest President budget as far as Honeywell is concerned? Looking at defense budget and looking at DOGE, we do not see a lot of impact there for us, actually none so far. A lot of these programs they're working on, they're multi-year, they're committed, critical to national security. We have not seen the slowdown. We, on the other hand, see a lot of demand, both domestically and internationally, about 25% of our defense and space business is international. We made investments specifically in Europe in engineering capacity and production capacity. Europe is our biggest international market as we just see a strong demand there. I think as we progress over the next couple of years, that demand will continue to grow as national security becomes much more important to Europe and to some of the Asian countries. What are the milestones we should watch for? Sort of the evolution of international sales, just, I guess the world is not getting safer anytime soon, but any big competitions, you know, any specific programs you would highlight? Obviously Europe is thinking through how to source more local, locally, et cetera. We have, we bought this company, Civitanavi. Yeah. That's based in Europe that actually plays into that. We're trying to stand up more capacity both from an innovation standpoint and production in Europe. We think that just given the needs of European markets and everything that's going on with trade, I don't think it's quite a plausible strategy, if you will, to. Right. Because there's plenty of U.S. content in all this. Exactly. I think it would just take too long. And, you know, how should we think about, just DOD versus international business? Which one should we expect to outgrow? International business in the short term is going to outgrow, just much more pent-up demand. I think U.S. defense and space is stable, but it's not growing at the same level. The impact of DOGE? I don't, we don't see any impact of DOGE for us. Like I said, the majority of our programs are committed. They've been there for years and critical to national defense. All right. Maybe we can go to building automation. Building products, and you've highlighted it has been performing better than expected in, you know, the past couple of quarters for Q2 2024, first quarter 2025. What has been driving the upside relative to expectations? And maybe what is building products just for folks just. If you think about it, it's building products, it's products that go into building infrastructure, fire detection, security, building management systems, et cetera, and then projects. We use projects and services predominantly to pull our content and continue to advance our NPI. I think the most exciting thing about a building automation business is the fact that this is a business that truly exemplifies what we're trying to do with the rest of the portfolio, meaning creating install base and then minded install base with value-add services, connected offerings, et cetera, and that's been working very well for us. I would say the leader in terms of the growth for us right now in building automations is fire. Okay. Fire is performing very well. High growth verticals for us are data centers, hospitals, hospitality, clean science, if you will, as well. We'll play in that. Those are the verticals that are taking off. We are seeing a lot of progress in Europe, where we are partnering with our channel partners, having new offerings, and that strategy is paying off quite well. And just on fire, maybe it's, like it's actually a serious question. It seems that incidents of fires in the U.S. are actually going up because of the lithium batteries. Is it related to that or is it just related to just structural business model changes at Honeywell? I would say the battery fires are quite difficult. Right. On the lithium battery, they're very hard to contain. Yeah. I would say regular fire suppressants do not address those fires or do not contain those fires. That is why you do not see a lot of lithium batteries in the buildings. Yeah. 'Cause building code doesn't allow for it. Right. But we're working on technologies to maintain it and contain it. Right. So for commercial buildings, lithium fires are just not an issue. no. Okay. So it's more, it is your business model working. That's right. Right. Because we've definitely seen it on the residential side, but. Yeah. Okay. In building code, I don't think you have lithium batteries. Yeah. I don't think we're allowed to have like these scooters in the building for that very reason. Maybe we can talk about it just to build on that. How is cross-sell and putting access solution Honeywell International channel going? Is it contributing to growth? And when do you expect this to contribute to accelerating growth? It is contributing right now, and you can see it in building automation reported sales. You will see it starting in the third and fourth quarter; the business will become organic for us as far as growth. I would say we are really pleased with the access solution business, and it is a great addition to our product portfolio and project cross-sell, but it also is accretive as far as growth and margins. Per our pro forma, this business is outperforming right now. Really excited about this acquisition. Excellent. So maybe, shift to industrial automation and, why don't we start, with Honeywell Process Solution? Yep. because you have some capabilities in LNG, we addressed it, but what's the competitive landscape right now for Honeywell process solutions? Who do you consider your key competitors? Process solutions, I mean, we compete with several players, but really we're just looking at, you know, what we can do in process solutions. For us, it's really about how process solutions can partner with UOP and great, great cross synergies there and focus on new technologies that we developed. The business has been growing at mid-single digits for us. We're really pleased with it. We're focusing on life sciences there right now, and that's a new growth vertical for us. If we go sort of, to legacy, you know, so we think sort of, downstream, you know, we sort of were thinking about sort of this three-way competition between Emerson, Honeywell, and maybe Yokogawa. This is B of A's view. I think other players have very nice install-based business, but I think for Greenfield and Brownfield, it's really been a three-horse race, in our view. You know, clearly, you know, your competitors are not asleep. Right. And, you know, when we at, when we were at Hanover, you know, clearly there are Chinese competitors. Yep. coming out. How is the competitive landscape evolving, I think, over the next three to five years? Yeah. The landscape is competitive. Like you said in your opening remarks, Chinese competition is, you can see, coming up, especially in China and Middle East. That is why in a lot of cases we have no localizing China because of the technology concerns, et cetera. We feel very, very good about our offering, both from a UOP standpoint and from HPS. I think that is a big differentiator for us. We are just investing monies and our engineering efforts just to continue to create new technologies, more efficient technologies, et cetera. Generally, I think I feel good about the space because the world will need more energy. Where it comes from really depends on a lot of things and geopolitical landscape and how governments think about their own energy security. Generally we play across the spectrum and we know that demand for energy will continue to increase. We feel well positioned. Does the spec in China for automation, does it look differently for, you know, because historically what happened, right? People have taken high-end Western technology. Mm-hmm. Brought it to China. You know, now the Chinese are evolving their own standards. As that evolves, do Chinese standards sort of decouple from the rest of the world? Do they start dictating their own terms, right? Because they're doing some projects in the Middle East. Or does it remain fairly the same? You have these global standards and everybody performs to the global standards. What is the evol, you know, evolution of Chinese competition mean for what sort of the product looks like? Yeah. I think it really depends on technologies. We obviously like to play and we compete in high-end technologies. Yeah. That's where we take pride in. And, from a core and values standpoint, we're at heart an engineering company. Yeah. We compete, whether you take, we take our ESS business, industrial automation, and building automation. We try to compete in the high-end markets, which technological, I would say, entry barriers are high. Okay. where you need to be specced in, or it's always essentially that technology is demanded by the code. With Chinese right now, what we see in our markets, it's co-competition in lower end. Right. So like these T-Podd refineries. Yeah. You know, how the world's gonna develop will. Right. No, thanks so much. And maybe just before we go, Intelligrated, signs of life. I think some of your competition sort of also is talking about that it's looking better. Yep. How sustainable it is, how hopeful should we be? I know your guide is actually quite conservative. Thank you. I appreciate that. What are we seeing in Intelligrated? I would say the guide is pragmatic. On Intelligrated, we're happy with the first quarter performance. Revenue, I think, was up 5%, orders coming in. The business over the last couple of years has been, we resized the business, which we now think we have a really good mix of aftermarket and new projects. The pipeline of orders looks good. I would say with tariffs, though, it's a little bit lumpy and choppy. I think that's where you also see a little bit of hesitation in customers as far as most recent tariffs and how they want to invest and which facilities they want to invest. Generally, I would say yes, the backdrop is improving. So, maybe we can talk about sort of energy and sustainability solutions. So, you targeted mid to high single digit served addressable market growth through the cycle for UOP. But UOP grew 8% in 2023 and zero in 2024. And the framework suggests low to single digits in 2025. So how do sort of these internal expectations fit within the framework for UOP? UOP will, for this year, continue to lead growth for us. If I look at our catalyst business demand, that's been pretty stable. I would say this is almost like an annuity. Every year there are catalyst sales and customers reload. That business has been stable. Where we see, I would say, some lumpiness right now is in the projects businesses. Mm-hmm. 'Cause they're more dependent on the capital investment cycle and decisions. In UOP, you know, any given project could be a couple billion dollars of someone's money to invest. These tend to be more lumpy. I would say, what you've seen more recently in terms of our acquisitions, the one that we just announced, Sundyne, and the prior ones, we were looking at essentially more stable business models in it where the product is specified, has a higher aftermarket, Yeah. Portion of revenue, which will help smooth out those peaks and valleys, if you will. Could we talk maybe about, maybe we can talk about sort of UOP's exposure to, you know, UOP has these dominant market shares. Yep. In a lot of key markets just due to its history. I know you guys have invested to increase your presence in the LNG, Sundyne acquisition. Maybe you can talk, you know, how are you pivoting UOP, which is clearly one of the company's crown jewels, for sort of where the world is going under the new administration and globally. Yeah. This is really just us trying to diversify. Yep. and like I said, our thought is that the world will need more, more energy. Yeah. Where energy is going to come from will depend on a lot of different factors, geopolitical and others. We want to play across the spectrum. Yeah. Right now our LNG business gas processing is doing very well. We also have a pretty rich portfolio in ESG, which the demand is softened for it, but we know it's going to come back. Mm-hmm. Can you talk about the Sundyne? Like, why did you buy it? It's a very interesting deal. Can you just talk a little bit more? What did you buy? Why did you buy it? Right. Because clearly this is where the company is putting capital. Yeah. Sundyne is, it's a great technology first. We know this company very well because their product is a lot of times specced in the process of when you design plants in UOP. Mm-hmm. We're quite familiar with this company. The reason we also like it is because it has a large install base. Mm-hmm. It has a lot of aftermarket. We know just understanding our UOP business, we know these pumps are high technology pumps. Mm-hmm. They're quite complex. They're very difficult to, reverse engineer if you will and replace. Right. Actually derivative of aerospace technology, those pumps. That's why we invested in it because it helps support our UOP business and is less cyclical. We really well understand the end markets where those pumps play in and understand the technology. Once again, we're on ESS. Can we talk about advanced materials? I know it's gonna get spun out, but what are the latest trends? I mean, I think folks who cover HVAC space are obsessed with what's happening with the availability of the refrigerant. Can you just talk about what's happening? Just explain to us, because I think people, and I think I had this conversation with Sean, that, you know, refrigerant for HVAC is like the biggest part of the business. Just maybe explain to us what's inside the business and what are the key drivers for the business. Yeah. I mean, refrigerants, predominantly, you know, HVAC, cars, et cetera. That's the biggest, that's the biggest part of the business. What I would say in this business, when we talked about our 2025 and going into 2026, what we like about this business is, we see a cycle coming up again. We're actually investing in growth CapEx in this business this year, and we're quite confident this business will continue to grow, grow quite well. The reason we are separating advanced materials, but then the name is Solstice Advanced Materials now. It's going to be spun out at the year end. We see a lot of growth potential in the business, but the business, just in terms of its capital investment requirements around the growth CapEx, needs a little bit different profile. I think it'll be better standalone. Excellent. So, maybe we can talk a little bit about Quantinuum. Sure. So, back in October of 2023, Honeywell announced that it would monetize Quantinuum in the next 18 months. It sounds like IPO is going to be the method to monetize it. Just any update on how you're thinking about monetizing this business and whether an IPO is still the right method. We're working through it as you know, the markets are quite volatile right now. Yeah. As far as valuations and investment base, the business that works means progressing very well for us. What I would say, what's probably more exciting about this business is the technology investment. Okay. In Quantinuum, w e have a couple great pursuits, in terms of the equipment. We feel very close to 100 logical qubits capability, which essentially, in our view, validates a commercially viable product. Mm-hmm. From a technology standpoint, this technology has matured quite well for us. Mm-hmm. You should see some, I would say over the next 12-18 months, you should see some really interesting and nice announcements from us in the area of Quantinuum. The key here is you wanna see some stability in the markets. Yeah. I mean, the valuations are crazy and just trying to pinpoint right now, it's quite difficult. We're working through it, but month to month is, I would say, it's quite volatile right now. Is IPO still the right framework of thinking about it? We thinking through several different options at this stage. Okay. Interesting. We do have a couple of questions that the management has asked this. Sure. To ask every company on stage. I'll ask those. I have, first one, do you expect to shift incrementally more production to the U.S. or to source more from the U.S. because of tariff policy? Do you expect your customers to source more from the U.S. because of these trade policies? It will really depend how the tariff landscape settles. Mm-hmm. We've made some tweaks in our manufacturing footprint over the last three months, but that's probably in, you know, low single% basis as far as our manufacturing footprint. Nothing, nothing ordinary. It's more just surgical. The other question, the tax bill yet to pass is expected by many to include bonus appreciation incentives for domestic manufacturing as well as some individual tax relief. Do you expect this to have a significant impact on your company? And And which are the potential tax changes that could have the most impact? Like everybody else, we would like the, I would say that the tax regime that is in place right now to remain. I think that would be most beneficial for us, with exception maybe of the R&D expensing. Mm-hmm. Obviously that would be, I would say, beneficial to most company if that was allowed. Excellent. You've been very efficient at answering the question. So a couple more from me then. Yeah. Structurally, how do you think about your pricing strategy across the different business units? Where do you get the most pricing power and, what sort of, an area of caution for you? With tariffs, obviously pricing got quite more complicated. I would say going into the year and what are we trying to accomplish via pricing is get pricing where we can, but not destroy demand. Yep. We're very careful about, as far as learning from last time, in terms of managing our overall price cost equation. Mm-hmm. We have, this time around, I would say much more opportunities in terms of supply chain efficiencies and how we manage that. That allows us to be more choosy as far as how we drive prices and where we drive prices to, to be able to stimulate demand and manage our share of the market. Are you guys doing more pricing or so far? Have you done more pricing or surcharges? We have regular way pricing. Yeah. Which we issued during the year. And that's, you know, 2-2.5% for us, with the inflation maybe now that'll be north of 3%. The tariffs we manage more for surcharges. We want to be very transparent to our customers where the surcharges are and what's driving there. We found that that's a better way to drive the type of cost recovery. Gotcha. If the tariffs go back, you'll pull back. That's right. Okay. Excellent. Maybe the last question, how you, you bought back more stock this quarter? Yes. How have the company's view on buybacks evolved over the past maybe 12 to 18 months? I would say going into, going through the first quarter, and into the second quarter, we just felt that the stock was very attractive from a pricing standpoint. Mm-hmm. We wanted to front load that and take advantage of that. Mm-hmm. If you will. As we go through the year, we'll see how our capital allocation evolves, priorities, whether it's M&A, stock, dividend. Dividend obviously will stay the way that it is. Of course. We're not going to be impacted, but we'll be opportunistic, I would say. Okay. Would you say you're more open to buybacks than in the past or any change or? We're, we'll continue to maintain our capital allocation discipline and then allocate capital appropriately. I would say in this year, we felt that going to the year in the first half, the stock was attractively priced for us to do more buybacks. Ultimately we agree the stock is attractively priced. Mike, thanks so much. Right on time. Everybody, thanks so much for attending. Thank you very much. Appreciate it. Of course.