© Reuters.
Honeywell Worldwide Inc. (NASDAQ:) reported a strong conclusion to the fiscal yr 2023, assembly its monetary commitments and outlining a strategic imaginative and prescient for progress within the coming years. Vimal Kapur, who will take over as Chairman following the retirement of Darius Adamczyk in June, detailed the corporate’s achievements and forward-looking methods throughout the earnings name.
Honeywell noticed an 8% rise in adjusted earnings per share, a $2.6 billion free money circulate, and a record-high backlog of $31.8 billion. The corporate additionally introduced the acquisition of Service’s World Entry Resolution enterprise and secured important new contracts in avionics and vitality storage.
Key Takeaways
- Honeywell met its 2023 monetary commitments, together with natural progress and adjusted earnings per share.
- The corporate plans to ship the higher finish of its long-term natural gross sales progress goal vary of 4% to 7%.
- Honeywell introduced strategic acquisitions, together with Service’s World Entry Resolution enterprise for practically $5 billion.
- The corporate’s backlog reached a report $31.8 billion, indicating robust future revenues.
- Steerage for 2024 contains natural gross sales progress of 4% to six% and adjusted earnings per share progress of seven% to 10%.
Firm Outlook
- Honeywell goals to deploy at the very least $25 billion of capital from 2023 to 2025, specializing in high-value acquisitions.
- The corporate expects Aerospace to guide with low-double-digit natural progress.
- Constructing Automation is projected to have low-single-digit progress, with an emphasis on margin growth.
- Vitality and Sustainability Options phase to have blended outcomes, with some headwinds anticipated.
Bearish Highlights
- Security and productiveness options gross sales noticed a 24% natural decline.
- Constructing expertise gross sales skilled a 1% natural lower.
- The corporate anticipates gross sales declines within the first quarter of 2024 because of difficult comparisons in warehouse automation demand.
Bullish Highlights
- Aerospace gross sales grew 15% organically, with business aviation up by 20%.
- Efficiency materials and expertise gross sales grew 4% organically.
- Notable wins over $1 billion in new avionics and mechanical contracts and vitality storage options deployment.
Misses
- Regardless of general progress, particular segments like security and productiveness options and constructing expertise confronted declines.
Q&A Highlights
- Executives outlined a balanced strategy to capital deployment, with a mixture of M&A and share repurchases.
- The corporate is on observe to exceed its $25 billion capital deployment steerage.
- Honeywell is assured in its progress prospects throughout numerous segments, regardless of market challenges.
In a yr marked by management adjustments and strategic acquisitions, Honeywell has positioned itself for continued progress and shareholder worth creation. The corporate’s diversified portfolio and robust monetary efficiency, coupled with its give attention to innovation and market growth, sign a constructive trajectory for the yr forward. With an emphasis on natural progress and strategic capital deployment, Honeywell is about to navigate the complexities of the worldwide market whereas delivering on its long-term monetary objectives.
InvestingPro Insights
As Honeywell Worldwide Inc. (HON) appears to be like to the long run with strategic acquisitions and a give attention to natural progress, current information from InvestingPro affords extra context to the corporate’s monetary well being and market place. With a market capitalization of $133.34 billion and a P/E ratio of 24.17, Honeywell is buying and selling at a premium relative to near-term earnings progress. Notably, the corporate’s P/E ratio has adjusted barely to 23.57 over the past twelve months as of This autumn 2023.
InvestingPro Suggestions spotlight that Honeywell has raised its dividend for 13 consecutive years and has maintained dividend funds for a formidable 39 consecutive years, showcasing the corporate’s dedication to returning worth to shareholders. That is notably related as the corporate’s dividend yield stands at 2.19%, with a dividend progress of 4.85% over the past twelve months as of This autumn 2023. These figures underscore Honeywell’s secure monetary returns amidst its strategic progress initiatives.
Furthermore, Honeywell is acknowledged as a distinguished participant within the Industrial Conglomerates business and operates with a average degree of debt, which suggests a balanced strategy to leveraging and monetary administration. This aligns with the corporate’s capital deployment technique and its potential to safe new contracts in crucial sectors like avionics and vitality storage.
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Full transcript – Honeywell Intl (HON) This autumn 2023:
Operator: Thanks for standing-by and welcome to the Honeywell Fourth Quarter 2023 Earnings Convention Name. Presently, all members are in a listen-only mode. After the speaker’s presentation there shall be a question-and-answer session. Please be suggested that at this time’s name is being recorded. I’d now like handy the decision over to Sean Meakim, Vice President of Investor Relations. Please go forward.
Sean Meakim: Thanks, Jamila. Good morning, and welcome to Honeywell’s Fourth Quarter 2023 Earnings and 2024 Outlook Convention Name. On the decision with me at this time are Chief Govt Officer, Vimal Kapur; and Senior Vice President and Chief Monetary Officer, Greg Lewis. This webcast and the presentation supplies, together with non-GAAP reconciliations can be found on our Investor Relations web site. From time-to-time we put up new info that could be of curiosity or materials to our traders on this web site. Our dialogue at this time contains forward-looking statements which might be primarily based on our greatest view of the world and of our companies as we see them at this time and are topic to dangers and uncertainties, together with those described in our SEC filings. This morning, we are going to evaluation our monetary outcomes for the fourth quarter and full-year 2023, talk about our outlook for the yr and share our steerage for the first-quarter and full-year 2024. As at all times, we’ll depart time in your questions on the finish. With that, I will flip the decision over to CEO, Vimal Kapur.
Vimal Kapur: Thanks, Sean, and good morning, everybody. To start out, I wish to acknowledge some vital management adjustments introduced this morning. First, Honeywell’s Board of Director has elected me to tackle extra position of Chairman when our present Govt Chairman, Darius Adamczyk retires from the Board in June. Moreover, Invoice Ayer has been elected to succeed Scott Davis as Impartial Lead Director of the Board efficient this Might. First, I need to thank Darius for his innumerable contributions to Honeywell, in addition to his mentorship over the previous two years specifically. I’d additionally wish to thank Scott for his insights over the previous 4 years at Impartial Director and management all through the CEO succession course of. Congratulations to Invoice for his appointment as our new Lead Director, I stay up for partnering with him in attaining Honeywell’s strategic progress initiatives. Lastly, I wish to thank Darius and the Board for his or her help in naming me Chairman. I’m humbled and honored to guide this nice firm and wake-up on a regular basis energized to tackle world’s hardest challenges together with our 100,000 future shapers. Now let’s flip to the principle matter of at this time and dialogue on Slide 3. We had a strong end to a different difficult yr, delivering on our 2023 commitments. Honeywell’s world-class Accelerator working system and differentiated portfolio of expertise, enabled us to attain our preliminary full-year steerage for natural progress, adjusted earnings per share and free-cash circulate and surpass the high-end of our authentic steerage for phase margin growth. Full-year’s natural progress of 4% year-on-year was a powerful demonstration of resiliency by our long-cycle Aerospace and Vitality oriented companies, whereas we await acceleration in a few of our short-cycle companies, as markets proceed to normalize. Earlier than we get right into a extra detailed dialogue on 2023 outcomes and 2024 outlook, expectations, let me take a minute to revisit my priorities for Honeywell. First, our purpose is to ship the upper-end of our long-term natural gross sales progress goal vary of 4% to 7%. So as to obtain that, we’re enhancing our improvements playbook, accelerating our providing in sustainability and software program, monetizing our installed-base and leveraging our management place in high-growth areas. Second, over the past six years, the trouble of the good integration have remodeled Honeywell into an built-in working firm that deploys world-class functionality at-scale and a number of progress enablers that profit the whole enterprise. We’re evolving Honeywell Speed up Model 3.0 of our working system to drive additional worth by way of standardization by enterprise mannequin constructed on our up to date digital spine. Along with making this group less complicated and extra environment friendly to function, Accelerator is a robust supply of worthwhile progress. All of our companies and potential addition to our portfolio. Third, we proceed to judge and undertake actions to optimize our portfolio. We’ll achieve this by executing on strategic bolt-on acquisitions, whereas divesting non-core strains of enterprise to constantly improve the standard of the portfolio and speed up worth creation. It is a highly effective mixture, which delivers worthwhile progress and robust money technology, making a compelling long-term worth proposition for our shareowners. Now let’s flip to slip 4 to debate our progress on portfolio shaping objectives. Within the fourth quarter, we introduced the acquisition of Service’s World Entry Resolution enterprise for practically $5 billion, enabling Honeywell to develop into a frontrunner in safety answer for the digital age. This transaction, which is clearly in step with our strategic bolt-on M&A framework additional enhances our tools agnostic, high-margin product enterprise combine inside constructing automation Honeywell’s general safety portfolio shall be greater than $1 billion in gross sales. When the deal closes this yr rising at accretive fee to help Honeywell long-term progress framework. As well as, earlier in January Quantinuum introduced its first fairness increase because the merger of Honeywell Quantum (NASDAQ:) Options and Cambridge Quantum Computing in late 2021, securing $300 million at a pre-money valuation of $5 billion, demonstrating Quantinuum’s main place on [fault-tolerant] (ph) quantum computing. The spherical was anchored by Quantinuum’s strategic companion JP Morgan Chase (NYSE:) with extra participation from Mitsui & Firm, Amgen (NASDAQ:) and Honeywell. This funding brings the overall capital raised by Quantinuum since inception to roughly $625 million. Quantum computing is the important thing enabler for AI to achieve scale potential and Quantinuum is a pioneering key breakthrough and increasing use instances throughout plenty of industries. Honeywell stays a majority proprietor with over 50% fairness possession and we’re dedicated to demonstrating a path to monetization of our [stake] (ph) throughout the subsequent 18 months. With the current portfolio announcement we’re on a observe to speed up capital deployment and exceed our dedication to deploy at the very least $25 billion of capital in 2023 by way of 2025 with a bias in the direction of excessive worth accretive M&A. Our steadiness sheet then continues to provide us significant capability for each opportunistic share repurchases and M&A and the continued comparatively favorable [demand] (ph) surroundings in 2024 will help the execution of our M&A technique on a constant foundation. Earlier than I hand over to Greg, let me flip to Slide 5 to evaluation a few of our current thrilling wins. Let me briefly spotlight a few of our current business proof factors. These wins reveal innovation throughout our portfolio and help Honeywell’s just lately introduced plan to align its portfolio to a few compelling megatrends: automation, way forward for aviation, and vitality transition, all underpinned by strong digitalization functionality and answer. In aero, we secured over $1 billion in new avionics and mechanical wins immediately with airways carriers in 2023, representing over 2,500 aircrafts. With a powerful begin to 2024, United selected Honeywell to supply a variety of superior avionics for near 350 plane that can enter into service over the following decade. This win is one other encouraging demand sign and demonstrates the power of our providing within the market. In vitality area, our battery vitality storage answer shall be deployed to 6 photo voltaic parks in US, Virgin Islands. When accomplished, our automation answer will enhance the island’s decarbonization effort by fulfilling 30% of the vitality want by way of renewable sources, reducing each emission and client vitality prices. We stay enthusiastic about our sustainable options portfolio and Honeywell’s place on the forefront of world’s ongoing vitality transition. Lastly we’ll be incorporating our hydrogen purification and carbon seize applied sciences right into a multi-billion greenback low carbon ammonia tasks. By means of this, as much as 97% of the plant’s carbon dioxide emission could be sequestered and the mission might take away as much as 7 million tons of CO2 air pollution over per yr. This mission creates yet one more instance of Honeywell’s potential to assist remedy our buyer’s more durable challenges and an indication of what is to return for our vitality and sustainability options enterprise. Now let me flip over to Greg on Slide 6 to debate our fourth quarter and full yr 2023 ends in extra element and likewise present steerage for 2024.
Greg Lewis: Thanks, Vimal. And good morning, everybody. Let me start on Slide 6. As a reminder, we’re reporting fourth quarter and full yr 2023 outcomes below our legacy phase breakdown and offering our 2024 outlook utilizing the brand new phase construction which went into impact in January. With that, let’s flip to the outcomes. We had a powerful end to a different difficult yr delivering on our 2023 commitments. Regardless of a dynamic macro backdrop, Honeywell’s disciplined execution and differentiated options enabled us to ship on our full yr natural gross sales, phase margin, earnings and free money circulate commitments. Full yr natural gross sales have been up 4% year-over-year, attaining the low finish of our long-term monetary progress algorithm and beating the midpoint of our preliminary steerage, regardless of a 5% drag from decrease security and productiveness options gross sales. Section revenue grew 8% year-over-year with phase margin growth of 100 foundation factors to 22.7% above our long-term annual growth goal of 40 foundation factors to 60 foundation factors and 10 foundation factors above the excessive finish of our preliminary steerage. Adjusted earnings per share grew 5% or 11% when excluding the influence of decrease non-cash pension earnings year-over-year. We generated free money circulate of $4.3 billion on the excessive finish of our steerage vary, or $5.3 billion excluding the after-tax influence of one-time settlements. We deployed $8.3 billion of capital, together with $3.7 billion to share repurchases, $1 billion to CapEx, $700 million to M&A, and $2.9 billion to dividend payouts, which we elevated for the 14th time up to now 13 years. Fourth quarter natural gross sales have been up 2%, led by the eleventh consecutive quarter of double digit progress in our business aerospace enterprise. Section margin expanded by 60 foundation factors to 23.5%, pushed by growth in efficiency supplies and applied sciences and aerospace. Earnings per share for the fourth quarter was $1.91, up 26% year-over-year, and adjusted earnings per share was $2.60, up 3% year-over-year. An adjustment to our estimated future Bendix legal responsibility on the finish of the yr and our annual pension mark to market adjustment drove the distinction between earnings per share and adjusted earnings per share. Excluding a $0.13 non-cash pension earnings headwind, adjusted earnings per share was up 8%. Bridges for adjusted EPS from each 4Q 2022 to 4Q 2023 and FY 2022 to FY 2023 could be discovered within the appendix of this presentation. Free money circulate was $2.6 billion with free money circulate margin of 27.4% versus 23.1% in 4Q, as working capital was a larger supply of money in comparison with the prior yr. We deployed $2.6 billion of money circulate to share repurchases, dividends, high-return CapEx and M&A. The fourth quarter was one other robust one for our backlog, which grew to a brand new report of $31.8 billion, up 8% year-over-year and 1% sequentially, because of power in Aero, PMT, and HBT. Orders have been up 1% within the quarter led by progress in business Aero, PMT, and HPT, together with orders progress in constructing merchandise. This setup offers us confidence in our 2024 outlook which I’ll talk about in a couple of minutes. As at all times we proceed to execute on our confirmed worth creation framework which is underpinned by our Accelerator working system. I am assured within the power of our backlog, the tailwinds we’re seeing throughout our lengthy cycle finish markets, and our potential to navigate a dynamic working surroundings, which we now have demonstrated yr after yr. Now, let’s spend a couple of minutes on the fourth quarter efficiency by enterprise. Aerospace for the fourth quarter was up 15% organically year-over-year, with 20% progress in business aviation. Our business authentic tools enterprise grew over 20% on elevated deliveries to each air transport and enterprise and basic aviation prospects. Business aftermarket had one other double-digit progress quarter led by the power in air transport market as elevated flight hours continued to drive demand. Protection and area gross sales grew once more within the fourth quarter as the continued world give attention to nationwide safety continues to drive strong demand, whereas we proceed to work by way of provide chain challenges which govern that progress. Aerospace book-to-bill of round 1 within the fourth quarter is extra proof that demand continues to outpace provide, an encouraging signal that as the availability chain unlocks we’re properly located to capitalize on our advantageous place available in the market. Section margin expanded 20 foundation factors to twenty-eight% on account of business excellence and quantity leverage, which have been partially offset by value inflation and blended stress in our authentic tools enterprise. Efficiency materials and expertise gross sales grew 4% organically within the fourth quarter, superior materials was up 6%, returning to progress within the quarter, pushed primarily by a double digit enhance in fluorine merchandise. In HPS, gross sales have been up 4% organically as we noticed continued power in life cycle options and companies and sensible vitality. UOP gross sales grew 1% organically on account of strong seasonal demand in petrochemical catalyst shipments, partially offset by decrease volumes in gasoline processing. Our sustainable expertise options enterprise completed the yr with over 30% gross sales and orders progress within the fourth quarter. Orders for PMT grew throughout all three companies. Section margin expanded 200 foundation factors to 24% on account of productiveness actions, favorable enterprise combine, and business excellence internet of inflation. Security and productiveness options gross sales decreased 24% organically within the quarter, primarily on account of decrease volumes and warehouse and workflow options and productiveness options and companies. The tasks portion of our Intelligrated enterprise stays round trough ranges as investments in warehouse automation proceed to be subdued. Nevertheless, our pipeline of recent tasks is strong and we’re dedicated to delivering modern options to a widening array of consumers on this market, positioning Honeywell to win in an eventual restoration. In our productiveness options and repair enterprise, we proceed to work by way of the results of distributor de-stocking, however over 30% orders progress within the quarter supplies some confidence that we’re close to the tip of that cycle. Sensing and Security Options stays comparatively resilient regardless of quick cycle challenges in a number of finish markets. Section margin in SPS contracted 290 foundation factors to 17.3%, pushed by decrease quantity leverage and value inflation, partially offset by productiveness actions and business excellence. Constructing expertise gross sales have been down 1% organically as progress in our long-cycle constructing options enterprise was offset by modest declines in short-cycle constructing merchandise. Options grew 6% within the quarter, led by excessive single-digit progress in constructing companies, pushed by robust execution and overdue backlog burndowns. Orders have been robust throughout the board within the fourth quarter, as each enterprise grew year-over-year. Section margin contracted 90 foundation factors year-over-year to 23.9% because of value inflation and blended headwinds, partially offset by productiveness actions and business excellence. Development throughout our portfolio was supported by one other quarter of double-digit gross sales progress in Honeywell Linked Enterprise, which stays accretive to general Honeywell. Our choices in related industrial, cyber, related buildings, life sciences and related plane, all grew by greater than 20% year-over-year within the quarter. For the full-year, HCE gross sales and revenue [fall] (ph) by way of by double-digits, which is an indicator of the ability of our robust software program franchise. With 2023 now within the rear-view, we’re enthusiastic about Honeywell’s favorable setup to speed up progress in 2024. Let’s flip to Slide 7 to speak about our outlook for the yr. We count on the surroundings to stay dynamic, however the energy of our Accelerator working system allows us to maneuver shortly and decisively to drive progress, defend margins, guarantee liquidity and place ourselves properly to ship on our commitments and I am assured we’ll do this once more in 2024. Our end-market exposures throughout aerospace, automation and vitality stay favorable with continued business aviation fleet progress, greater protection funding, heightened give attention to automation, because of labor shortage, intensifying vitality demand and decarbonization objectives and elevated infrastructure spending. These compelling vertical tailwinds are underpinned by the continued demand for digitalization and our report degree backlogs, which can help strong natural progress for the enterprise. This outlook is considerably tempered by the unsure timing of an eventual restoration within the short-cycle as markets return to normalcy, which we see because the swing issue to our gross sales consequence for the yr. However we’re excited by the prospects of this re-acceleration within the coming quarters. Total, we now have a powerful setup that can drive progress inside our long-term monetary framework for gross sales, margin, earnings and money in 2024. Our strong steadiness sheet and robust money technology will help accretive capital deployment. And whereas we’re proud of our recently-announced transaction, we are going to proceed to build-on our accretive M&A pipeline as we optimize the portfolio. Now let’s flip to Slide 8 to debate how these dynamics come collectively for our 2024 steerage. Given the backdrop, in whole for 2024, we count on gross sales of $38.1 billion to $38.9 billion, which represents an general natural gross sales progress vary of 4% to six% for the yr with a larger steadiness between quantity and value. Our information anticipates some short-cycle restoration to start within the second-half of the yr, albeit possible at completely different charges for our numerous end-markets, making a considerably back-half weighted outlook. Moreover, we stay keenly centered on new product innovation, sustaining our management place in high-growth areas, monetizing our huge installed-base and strengthening our software program franchise, which we count on to supply resiliency by way of the yr. We additionally count on the Aero supply-chain to proceed to enhance steadily sequentially all year long because it did in 2023. For the first-quarter, we anticipate gross sales within the vary of $8.9 billion to $9.2 billion, flat-to-up 3% organically. We count on our general phase margin to broaden 30 foundation factors to 60 foundation factors subsequent yr, supported by enhancing enterprise combine, continued price-cost self-discipline and productiveness actions, together with our precision give attention to lowering raw-material prices. Just like final yr, we count on constructing automation margins to broaden probably the most as we profit from productiveness actions and build-on continued business excellence, adopted by industrial automation and vitality and sustainability options. For aerospace, quantity leverage will cowl continued funding in our innovation platforms and within the supply-chain to unlock quantity. Maintaining our margin fee inside a good band of our current ranges, whereas enabling us to ship strong year-over-year revenue progress. For the first-quarter, we count on general phase margin within the vary of 21.9% to 22.2%, down 10 foundation factors to up 20 foundation factors year-over-year. Importantly, our steerage for each the primary quarter and the full-year for 2024 doesn’t take into account the deliberate acquisition of Service’s World Entry Options enterprise. We anticipate the closing of the deal by the end-of-the third quarter, and we’ll replace our steerage accordingly at the moment. Now let’s spend a couple of minutes on our outlook by enterprise. In Aerospace Applied sciences, we count on that strong demand will stay all through 2024 as our report degree backlog supplies a catalyst for progress. In business authentic tools construct charges proceed to pattern upwards, driving enhance in chipset deliveries, primarily in air transport. On the business aftermarket aspect, we count on to see quantity power as flight hours proceed to enhance, notably in wide-body as worldwide journey normalizes additional. In protection and area, provides — supply-chain constraints not demand would be the limiting issue on quantity progress. Nevertheless, our output progress of 18% in 2023 throughout Aero offers us confidence in our potential to execute and we anticipate modest sequential enchancment all year long. For general Aerospace, we count on natural progress within the low-double-digit vary in 2024. Whereas we once more count on Aero to be our quickest top-line grower, margins will possible stay at comparable ranges to 2022 and 2023, as greater gross sales of lower-margin merchandise are largely offset by elevated quantity leverage. Within the first quarter, we count on to see low-teens natural progress year-over-year because the progress we have made on supply-chain all through 2023, coupled with our report backlog will drive continued significant year-over-year output progress. For Industrial Automation, the timing of short-cycle restoration will play a key think about 2024 outcomes and are — and can possible result in a back-half weighted yr. In Course of Options, we count on to additional construct on the success we skilled in 2003 with one other robust yr of progress, notably in our tasks and aftermarket companies enterprise. Our sensing and security applied sciences and Productiveness Options and Service companies will profit as the results of distributor destocking fade all year long. In warehouse and workflow options, we count on to maneuver by way of the trough of the warehouse automation spending cycle, capitalizing on our strong pipeline and simpler year-over-year comps because the yr goes on. Because of these dynamics, we count on IA gross sales to be flattish in 2024. Section margins ought to broaden, notably within the second-half as short-cycle restoration results in quantity leverage advantages. Within the first quarter IA will stays sequentially secure, whereas difficult comparisons in warehouse automation demand that’s nonetheless close to trough ranges will weigh on year-over-year progress, resulting in excessive single-digit to low-double-digit gross sales declines year-over-year. Turning to Constructing Automation, we see a — we count on to see our long-cycle companies once more outpace our short-cycle portfolio, notably early in 2024. Total, the timing of the short-cycle restoration shall be one of many key drivers of efficiency within the yr and sure result in stronger ends in the second-half. Each tasks and companies will develop on the power of current backlog and tailwinds from aftermarket companies. We’re seeing encouraging indicators in our core verticals, each within the US and internationally as institutional funding in creating areas shall be an engine for progress in BA. We anticipate our short-cycle merchandise companies will profit as stock ranges normalize. For Constructing Automation, we forecast full-year gross sales progress to be low-single digit year-on yr. Regardless of this, we anticipate BA would be the phase with the most important margin growth, primarily pushed by productiveness actions and business excellence internet of inflation. Within the first-quarter we count on gross sales progress to be just like the fourth quarter as destocking reaches its late levels. In Vitality and Sustainability Options, the macro-environment will present places and takes in 2024. UOP progress shall be led by power in our Catalysts and Companies companies, whereas our Course of Applied sciences enterprise, modular tools progress will possible be offset by quantity headwinds from difficult comps in LNG tools. In Sustainable Know-how Options strong demand will result in one other report yr of progress. In Superior Supplies, power within the broader fluorine merchandise enterprise, notably in our [indiscernible] portfolio shall be offset by anticipated quantity decline in our legacy stationery merchandise, because of well-telegraphed quota reductions from the US. Inside the remainder of Superior Supplies, enhancing short-cycle demand over the course of 2024, notably from semiconductor fabs will help the top-line. Total, we count on [VSS] (ph) gross sales to be flat-to-up low-single digits for the yr in comparison with 2023. Margin ought to enhance in 2024, although not as a lot as in our different segments, due to each business excellence and productiveness actions. Within the first-quarter, we count on gross sales to be down mid to-high single-digits year-over-year as we work-through difficult comps, notably in our gasoline processing enterprise and put together for greater exercise ranges because the yr progresses. Transferring on to different key steerage metrics. Pension earnings shall be roughly flat to 2023 at roughly $550 million, which is modestly extra constructive than in comparison with our outlook feedback from the third quarter earnings name, because the interest-rate surroundings turned barely extra favorable in the direction of the yr finish. As a reminder, pension earnings is a non-cash merchandise, given our overfunded pension standing will guarantee no incremental contributions are wanted. It is a nice place to be in for our workers, each former and present and our shareholders. We anticipate internet below-the-line influence to be between adverse $550 million and adverse $700 million for the full-year and between adverse $140 million and adverse $190 million within the first-quarter. This steerage features a slight enchancment in year-over-year repositioning spend, which shall be between $200 million and $300 million for the full-year and between $60 million and $100 million within the first-quarter, as we proceed to spend money on high-return tasks to help our future progress and productiveness. We count on the adjusted efficient tax-rate to be round 21% for the full-year and round 22% for the first-quarter because of timing of discrete funds. We anticipate common share depend to be round 656 million shares for the full-year as we execute on our dedication to cut back share depend by at the very least 1% per yr by way of opportunistic buybacks. Because of these inputs, we anticipate full-year adjusted earnings per share to be between $9.80 and $10.10, up 7% to 10% year-on yr. We count on first-quarter earnings per share to be between $2.12 and $2.22, up 2% to 7% year-over-year. Included within the appendix is a bridge that walks the weather of 2024 adjusted earnings per share from 2023. You will see the first year-over-year drivers are greater volumes and elevated productiveness, with decrease share depend offsetting below-the-line adjustments, that are primarily from greater internet curiosity expense. On free-cash circulate, we count on to develop in-line with earnings, excluding the after tax influence of final yr’s one-time settlement from derisking our steadiness sheet. We’ll start the multi-year unwind of working capital, the place our digitalization capabilities by way of Accelerator are enhancing demand planning and optimizing manufacturing and supplies administration. As well as, we see a number of compelling growth-oriented capital funding alternatives and broaden — count on to fund high-return tasks centered on creating uniquely modern, differentiated applied sciences. Consequently, we count on free-cash circulate to be within the $5.6 billion to $6 billion vary, up 6% to 13% excluding the influence of prior yr settlements. Our 2024 free-cash circulate bridge is within the appendix and summarizes the drivers of year-over-year progress with internet earnings progress being the most important issue, adopted by working capital enhancements, partially offset by modestly higher-growth CapEx spend. Relating to capital deployment, whereas we’re centered on executing our strong M&A pipeline, opportunistic share repurchase at highly-attractive valuations, which you noticed within the second-half of 2003 as we accelerated our buyback in 3Q and once more in 4Q stays an vital a part of our framework, a vote of confidence in Honeywell’s efficiency and that can proceed to be true in 2024. So in abstract, whereas we’re cautious on the macroeconomic backdrop, our leverage to the important thing macro traits of Aerospace, automation and the vitality transition, underpinned by digitalization, which shall be complemented by our report backlog and accelerated working system, give us confidence in delivering one other robust yr in 2024. So with that, let me flip it again to Vimal on Slide 9.
Vimal Kapur: Thanks, Greg. Let’s take a minute to zoom out from the near-term dynamics and speak about how our monetary algorithm interprets into worth by way of EPS progress. Final Might, we unveiled our up to date long-term monetary progress algorithm. One of many strengths of that framework is that we now have demonstrated that we will steadiness between the levers we now have to ship what issues, constant, compelling EPS progress. Let me unpack this for a second. Our annual 4% to 7% natural gross sales progress and 40 foundation level to 60 foundation level of margin growth alone will ship 6% to 10% of natural EPS progress. Some years, one or different of those parts transfer. However as you have got seen, 6% to 10% supply has been constant hallmark of Honeywell. When coupled with 1% to 2% of EPS accretion from each share buyback and constant M&A execution, we’re assured we’ll ship double-digit adjusted EPS progress on the midpoint on a [true] (ph) cycle foundation. The power of our dividend at present yielding about 2% additionally provides additional worth to our shareholder returns. Though there was some noise within the outcomes, largely associated to beneath the road, we now have delivered 8% phase revenue progress and a pair of% adjusted EPS accretion from the share repurchases on a median throughout the previous few years, in step with the long-term monetary framework. Now, we’re ramping our M&A lever, which ought to drive incremental advantages. With that, let’s go to the following web page to debate our current progress on this long-term progress algorithm. As you’ll be able to see on Slide 10, our 2023 outcomes symbolize one other yr of robust monetary efficiency in keeping with our framework, following significant progress since 2016, inorganic progress, gross margin, phase margin growth, and free money circulate reacceleration. Equally, our 2024 expectation for natural progress, gross margin, phase margin, and free money circulate margins are solidly in step with our long-term dedication as we proceed to make regular, constant enchancment in high quality of Honeywell’s monetary profile. We’re reorienting the group to prioritize natural progress, deploying the operational energy of Accelerator 3.0, and executing on a strong portfolio optimization technique, which can allow us to attain our long-term targets. I stay up for the following section of transformation and stay optimistic concerning the super alternatives we’re uncovering to seize worth, drive incremental gross sales progress, broaden margins, and generate additional cash. We’ll proceed to trace our development carefully and replace you as these efforts more and more switch into our enhanced monetary efficiency. Now, let’s flip to Slide 11 for closing ideas earlier than we transfer to Q&A session. We delivered on all of our 2023 commitments. We’re assured in our potential to climate the dynamic macroeconomic and geopolitical backdrop with working rigor you have got come to count on of Honeywell. Latest report backlog ranges, ongoing power in our greatest finish markets, aerospace and vitality, in addition to impending restoration in our short-cycle enterprise will help robust end result as we progress by way of 2024. I stay optimistic about the way forward for Honeywell and consider the corporate is well-positioned to drive the innovation wanted to resolve among the world’s most difficult issues. The long run is actually what we make it. With that, Sean, let’s transfer to Q&A.
Sean Meakim: Thanks, Vimal. Vimal and Greg are actually obtainable to reply your questions. We ask you please be aware of others within the queue by solely asking one query and one associated follow-up. Camilla, please open the road for Q&A.
Operator: Thanks. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first query comes from the road of Steve Tusa with JP Morgan. Please proceed together with your query.
Steve Tusa: Hello, good morning.
Vimal Kapur: Hey, Steve.
Greg Lewis: Good morning Steve.
Steve Tusa: Are you able to simply speak concerning the sequential development in EPS as we transfer by way of the yr off of the primary quarter base right here?
Greg Lewis: You are speaking about for the total yr?
Steve Tusa: Sure. I imply the primary quarter is a bit of bit gentle as a proportion of the yr, so simply attempting to grasp how issues construct for the following three quarters to get to the midpoint of information?
Greg Lewis: Positive. I imply, in case you have a look at the information we’re giving for Q1, it is truly not that completely different from 2023. So, as we progress by way of the yr, we’ll count on to see the quick cycle income inflection extra possible between 2Q and 3Q than 1Q and 2Q by way of the extent of — that acceleration. And so, I feel the EPS will observe together with that. I imply, the final two years, our EPS has been extra back-end weighted in third and fourth quarter than our prior historical past. I feel it’ll look pretty comparable this yr.
Steve Tusa: Okay, after which only one on the constructing’s enterprise. What are you guys seeing there, and what are you assuming for the merchandise enterprise within the subsequent few quarters? There’s clearly quite a lot of noise within the channel there, and likewise simply from an finish market demand perspective, possibly contact on regionally as properly within the constructing enterprise?
Vimal Kapur: Sure, Steve. So we had 1 / 4 4 end by which our buildings orders have been grew throughout all segments, each in constructing merchandise and in constructing options. In order that places us in an excellent setup for 2024. To your particular query, the setup we now have permits us to see sequential progress within the quick cycle because the yr progresses, and the entrance finish of the yr will see extra power in our answer aspect of the enterprise. Europe stays challenged, because it was, over the past a number of quarters. And in US, we’re within the late innings of destocking of the distributor inventories. In order that’s the general setting. What excites me concerning the enterprise is the work we now have completed on new merchandise, that is going to place us properly, our power in excessive progress areas, which is performing exceedingly properly. So net-net, we stay fairly assured on progress in constructing options, constructing automation enterprise in 2024, particularly margin growth and are assured of delivering robust outcomes there.
Operator: Thanks. Our subsequent query comes from the road of Julian Mitchell with Barclays. Your line is now open.
Julian Mitchell: Hello, good morning. Possibly simply wished to attempt to take into consideration the progress by way of the yr from a phase margin standpoint. I suppose you have had seven quarters in a row of fine year-on-year growth. Q1 is form of flat after which the yr is up near that form of 50-bips mark. So that you’re exiting the yr in This autumn possibly with margins up 100-bips plus. So simply attempting to grasp beginning Q1 at zero, This autumn up 100, the place does type of the sharpest enchancment come on a phase foundation as you undergo the yr? And can we take into consideration that margin year-on-year enchancment agency vast as simply being fairly regular as we undergo 2024?
Greg Lewis: Thanks, Julian. Once more, I’d inform you quite a lot of the steerage fundamentals are tied fairly carefully to the quick cycle restoration. And what I imply by that’s, we do not count on an enormous inflection within the first half, and so subsequently our phase revenue enchancment within the first half versus the second half goes to be a bit decrease. And as these quick cycle companies get better, keep in mind, these are among the highest margin companies within the portfolio. In order that quantity leverage goes to be fairly highly effective as we undergo the yr. And that’ll be true in every of these non-Aero associated companies.
Vimal Kapur: What I will add, Julian is, if I have a look at the total yr image for the margin growth, what we now have dedicated 30 foundation factors to 60 foundation factors, there are three broad drivers. The pricing will stay of the order of three%. Our value value won’t be a headwind. We stay very assured on our pricing execution. Second, we are going to see good productiveness in 2024. Materials productiveness stays robust in This autumn and we count on that to roll up on a full yr foundation in 2024. We even have made good progress in executing AI in our operation, and that shall be additionally a supply of productiveness in 2024. And eventually, the quick cycle restoration level, which Greg made, as that unpacks itself, the margin accretion we now have on that’s fairly substantial. So while you put all of it collectively, we stay extraordinarily assured on our margin growth algorithm.
Julian Mitchell: That is useful. Thanks. And simply my fast observe up, if we have a look at, say, Slide 15, attempting to grasp form of the form of that gross sales restoration, you have bought these two items on the backside, productiveness options and repair and warehouse and workflow. If we take into consideration these two companies, one exited the yr simply completed down 25 and the opposite exited down 50, what is the exit fee for 2024 for these two that is embedded within the gross sales information, please.
Greg Lewis: Yeah, properly, once more, we do not information that particularly, however it is best to count on that this exit fee diminishes because the yr progresses, and as we get into the again half of the yr, that turns to be one thing that’s possible constructive on productiveness options and companies and shall be flattish on warehouse and workflow options. And maybe up, we’ll see how the yr progresses on the mission aspect. An vital factor to bear in mind is inside the warehouse enterprise, specifically, we have got truly a really wealthy combine now on the aftermarket companies enterprise. So whereas the tasks orders will actually be the factor that can govern the highest line development general, we see double digit progress persevering with within the aftermarket bit, which after all is the place we seize the worth from the set up base. So we really feel superb concerning the development of that as we undergo the yr.
Vimal Kapur: Possibly so as to add to Greg’s level on warehouse options enterprise, the highest line has been difficult, however I see that this as not a headwind for EPS in 2024. We’ve got taken motion that Greg spoke about aftermarket. The aftermarket continues to be robust and shall be an element of progress in 2024. We’ve got taken significant motion on our value base, particularly on provide chain. And after we put these actions collectively, which is in our management, we see margin growth on this enterprise. And despite high line stress, it won’t be a supply of EPS answer. It is going to be a supply of EPS accretion.
Greg Lewis: And Julian, if I might add only one final thing there. From a modeling perspective, be mindful it isn’t only a dynamic embedded in our mannequin for 2024, second half possible stronger than the primary half. It is also that second half 2023 was weaker than first half 2023. So each of these will affect the year-over-year progress fee as you are speaking about exiting 2023 versus exiting 2024.
Julian Mitchell: That is nice. Thanks.
Operator: Thanks. Our subsequent query comes from the road of Scott Davis with Melius Analysis. Your line is now open.
Scott Davis: Hey, good morning, Vimal and Greg and Sean.
Vimal Kapur: Good morning.
Greg Lewis: Good morning.
Scott Davis: Good morning. Guys, can we take a step backwards at the very least and simply stroll world wide a bit of bit on what you are assuming? I assume, Vimal, you in all probability have fairly good learn on what is going on on in China. It has been a troublesome area for lots of your friends, however you needn’t actually give attention to Aerospace as a result of it is a completely different dynamic. However for the opposite companies, maybe just a bit little bit of shade on what you are anticipating, any variations in 2024 geographically versus 2023. That’d be useful. Thanks.
Vimal Kapur: Sure, thanks, Scott. So, particularly speaking about — let me begin with China. We grew about 7% in 2023. I do not count on a fabric shift between 2024 to 2023. We’ve got weathered a troublesome yr in 2023, China’s financial cycle. And I count on 2024 to be a shade higher, however it’s no extra going to be a supply of excessive progress, what it was 5 or seven years again. Talking extra broadly of excessive progress areas, which represents nearly 25% of the Honeywell income now. We had superb efficiency in Center East and India specifically, and we count on these traits to proceed in 2024. India grew for us excessive double digits. In 2023, we had very significant income there, comparable good efficiency within the Center East, so we count on these areas to carry out properly. All in all, I count on high-growth areas to develop double-digit, which shall be a supply of natural progress, a few p.c, and general Honeywell algorithm of natural progress. Europe stays difficult. We’ve got seen headwinds in some parts of our companies and tailwinds in another parts. So net-net, it is extra impartial to adverse. And US, after all, we’re like all people else, ready for rate of interest surroundings to settle. And that can decide the efficiency of our enterprise, particularly on the quick cycle. In order that’s type of my broad overview of how we see completely different geographies.
Scott Davis: Okay, that is useful. After which a bit of little bit of a nuance right here. Would you classify the Service deal as a bolt-on? It looks like a bit of bigger than a bolt-on by my definition, however type of curious how you consider it, as a result of clearly in your slides you talked about bolt-on offers being the main focus and if we have been to count on different type of like billionish…
Vimal Kapur: I’d name it bolt-on, as a result of my argument is that, bolt-on to me is which is including to our core portfolio and propels the expansion of natural progress of the enterprise itself. So that is what this enterprise is. In case you see our Buildings Merchandise enterprise, our technique is to have merchandise that are specified, that are crucial for the constructing. We had a average place in safety with the addition of this portfolio makes us a significant participant. And subsequently I name it a bolt-on, as a result of it is a continuum of our technique. We’re not discovering a brand new adjacency. We’re not exploring some new thought. It is one thing we perceive extraordinarily properly. And subsequently, our confidence so as to add shareholder worth right here is extraordinarily robust.
Greg Lewis: And be mindful, at $5 billion, it is one thing like 4% of our market cap. So moderately, it isn’t an enormous guess because it pertains to that as properly. Clearly, very completely different world than when our market cap was half that 10 years in the past.
Scott Davis: Positive. Understood. Thanks, guys. I will cross it on. Good luck this yr.
Greg Lewis: Thanks.
Operator: Thanks. Our subsequent query comes from the road of Andrew Obin with Financial institution of America. Your line is now open.
Andrew Obin: Sure, good morning.
Greg Lewis: Good morning, Andrew.
Andrew Obin: Hey, simply taking a look at UOP, I used to be a bit of bit shocked by the expansion within the quarter. I’d have thought with STS being robust, and I do know you form of gave us, I feel it was a gasoline product, however are you able to simply inform us what sort of visibility do you have got on this enterprise accelerating into 2024? As a result of it’s form of, I suppose, that is what you are guiding to, however just a bit bit extra granularity there. Thanks. Positive.
Vimal Kapur: Positive, Andrew. So 2023 income is 1% progress. It is primarily pushed by tools income we had within the prior yr. We had giant equipment-based tasks in our quantity, LNG tasks. So on a year-on-year comp foundation, do not repeat itself. However in case you see the core UOP enterprise on catalysts, it stays fairly robust. Your particular query on sustainability applied sciences, as we talked about throughout our earnings earlier, stay very assured on its efficiency. We crossed the benchmark of fifty licenses of sustainable aviation gas just some weeks again. Now we’re seeing exercise in carbon seize tasks, early innings on hydrogen tasks. So our plans to have sustainable expertise enterprise of $1 billion in subsequent few years have not modified. And my confidence of that completely has solely grown greater over the previous few months.
Greg Lewis: Sure, and I’d additionally simply zoom out. I imply, we speak about among the variability on this enterprise, and PMT has at all times bought among the highest variability with UOP being an enormous a part of that. Be mindful, we grew gross sales in UOP for the yr, one thing like 8%. Very, very wholesome. And we have additionally grown orders someplace in that very same neighborhood, I feel 2% for the yr, however with 13% within the catalyst enterprise. So we have come off some massive comps with the massive LNG tasks. Total, this can be a very wholesome enterprise with a really wholesome backlog. So — and as you mentioned, the STS enterprise supplies a very nice catalyst on that new side of it, however we really feel superb about the place UOP is at this stage.
Andrew Obin: Wonderful, and simply to observe up on superior supplies. I suppose similar query, the enterprise has returned to progress, simply what are you seeing, possibly in a bit of bit extra element, driving constructive outlook for 2024. I feel [indiscernible] is constructive there as properly. And possibly you’ll be able to throw in quite a lot of questions on semis. I suppose that is a part of it as properly, simply in case you broaden on that. Thanks.
Vimal Kapur: Sure. Thanks, Andrew. Sure, we do see restoration in semis modestly growing. Each month is turning into modestly higher. In order that’s a part of our forecast for 2024. We additionally noticed in This autumn restoration in some segments of chemical substances briefly cycle. And we count on that to roll over in 2024. So the quick cycle restoration on a broader Honeywell portfolio shouldn’t be a one occasion. So it’ll occur in numerous parts. So chemical substances occurred late This autumn and we count on that to proceed. So all-in-all, superior materials ought to have a greater yr in 2024 in comparison with what we had in 2023.
Andrew Obin: Thanks a lot.
Vimal Kapur: Thanks.
Operator: Thanks. Our subsequent query comes from the road of Nigel Coe with Wolfe Analysis. Your line is now open.
Nigel Coe: Thanks. Good morning. Thanks for the query. And Vimal, congrats on the Chairman position. There’s numerous trendy questions, so this is a number of extra. Nicely, a pair extra. Pricing, I am undecided in case you’ve caught up value, however possibly in case you simply speak about what you have [indiscernible] pricing in your income invoice. However it appears that evidently we’re coming into the yr with two of the segments down fairly closely. Possibly simply speak about the way you see that break again to progress for IA and ESS. Is that within the second quarter, is it extra second half loaded? And maybe possibly speak about what you have seeing within the order charges to possibly help the view that we’re on the backside in a few of these markets?
Vimal Kapur: Sure. So for IA and ESS, I’d say, IA broadly, as we mentioned, shall be flatish on a year-on-year foundation. The power we see there’s in Course of Options, specifically, that — it had a powerful 2023, we count on one other robust 2024 from Course of Options. Remainder of IA is a short-cycle restoration. We noticed pockets of that taking place in This autumn in our scanning and mobility enterprise. Now different parts must additionally get better throughout course of the yr. I talked about our warehouse automation enterprise and the way we count on that to carry out throughout course of the yr, particularly on the margin aspect. In order that’s undoubtedly is a part of our forecast. On ESS, we briefly talked an earlier query. UOP is carrying a fairly robust reserving and backlog. So we count on an excellent yr from UOP in 2024. After which I talked about superior supplies a bit earlier there. On orders fee, the This autumn orders have been up 1%, which helped us to additional bolster our backlog now to report excessive degree. Particularly on orders, there have been highlights on quick cycles, early inexperienced shoots in constructing merchandise, in scanning and mobility enterprise, in components of chemical substances enterprise, which is an efficient signal, as a result of if couple have proven, I stay assured this may develop extra broadly throughout our portfolio. Lengthy cycle robust bookings in business aerospace, in UOP, in course of options. There have been some lumpy lessened orders in warehouse automation and protection and area, which I talked earlier. So net-net, our lengthy cycle orders carried out extraordinarily properly on an annualized foundation in 2023. And quick cycle is displaying early cycle of restoration, which supplies me confidence for 2024.
Greg Lewis: Sure, possibly simply within the final level on pricing, we talked about 4% for 2023. That is precisely the place it got here in. And the extra balanced view of value versus quantity in our mannequin for 2024 is actually 3% pricing. And that is going to be, to Vimal’s level, I feel value value impartial to possibly barely constructive for the yr. So we really feel superb about our potential to ship on that. We have talked about that at size up to now. I feel our capabilities in that space have been very robust and we proceed to be assured going into subsequent yr.
Nigel Coe: Okay, that is useful, Greg. And fast observe up on the money circulate. Good to see the pick-up year-to-year. I am guessing the tax advantages, potential tax advantages from R&D type of rollback. I am assuming that is not in your information, however simply curious, if that does cross the Senate, what sort of profit you may see for 2024 for money circulate?
Greg Lewis: Sure. Nicely, to begin with, it isn’t practically house, as I am positive you’ll be able to admire. So we’re not sitting right here counting any chickens. To be trustworthy, Nigel, I feel we have to wait and see precisely how all the principles, first whether or not it occurs and the way they set the principles. As you’ll be able to admire, all of the specifics matter loads on this space. So no, we’re not guiding something particular about that. We’ll wait and see precisely what occurs after which interpret that and combine it into our view when it turns into an actual factor.
Nigel Coe: Okay. That is nice, thanks.
Operator: Thanks. Our subsequent query comes from the road of Sheila Kahyaoglu with Jefferies. Your line is now open.
Sheila Kahyaoglu: Good morning, guys, and thanks.
Vimal Kapur: Hey, Sheila.
Sheila Kahyaoglu: Possibly I will begin off with aerospace, if that is okay. You talked about it rising low double digits. How can we take into consideration the OE progress there? What construct charges are you embedding into that on the business aerospace aspect and any shade you might give on aftermarket and protection progress?
Vimal Kapur: Sure. So Sheila, we count on the general low double-digit information contains the continued excessive progress fee of OE, as we noticed in 2023. That may repeat itself in 2024. Additionally count on double-digit progress in aftermarket. Protection, we carry out at low single to mid-single digit in 2023, the availability chain constraint stays the largest deal with there. And as we make progress, we count on it to carry out in that vary in 2024 additionally. However the greatest unlock for us is provide chain. We’ve got demonstrated a powerful efficiency in 2023. We count on an excellent begin of the yr and we’ll unpack the yr because the issues progress.
Greg Lewis: Sure, so to be clear, I imply, no new indicators from the OEs. They’re persevering with to position the identical degree of demand on us that they’ve been. And so, that is what we’re dedicated to attempt to ship.
Sheila Kahyaoglu: Okay, nice. After which if I might ask 1 extra. You’ve got been requested each angle by way of income progress acceleration. Outdoors of [indiscernible], what do you’ll want to see within the different three segments to hit the excessive finish of steerage? Is it simply all primarily based on quick cycle restoration and the timing of that, or is it some extra value seize? In case you might possibly speak about that.
Vimal Kapur: Sure. The largest variable is the quick cycle restoration and the tempo of it, which stays variable. I imply, you have a look at 2024 setup for Honeywell in three buckets. Our backlog is up 8% and we convert backlog at a fairly predictable fee. In order that’s one thing which is very deterministic. Quantity two, the self-help actions we’re driving to drive progress. The self-help motion contains value, that features new merchandise. I talked about high-growth areas, aftermarket companies. All that’s going to assist us to drive progress whatever the market. After which the third variable is brief cycle. If it returns faster, we’ll have an higher finish of the expansion or we will beat it if it surprises all people and vice versa. In the event that they would not carry out properly throughout the course of the yr, then we’re on the decrease finish of the information.
Sheila Kahyaoglu: Nice. Thanks.
Operator: Thanks. Our subsequent query comes from the road of Andy Kaplowitz with Citi. Your line is now open.
Andy Kaplowitz: Good morning, everybody.
Vimal Kapur: Good morning, Andy.
Andy Kaplowitz: Vilma, I simply wished to observe up on a commentary that you just’re on observe to exceed the $25 billion of capital deployment steerage from 2023-2025. Clearly, you introduced the Service deal, however does that commentary recommend continued extra aggressive capital deployment? Does your M&A pipeline help that? After which might you replace us on the progress in divesting the ten% of the gross sales you talked about beforehand?
Vimal Kapur: Yep. So I’d say that our capital deployment technique can be balanced, which maximizes shareholder return. That is what we’re actually focusing on for. It is going to be the steadiness, as Greg talked about earlier, we count on each M&A and share repurchases to be a part of that factor for 2024 and years to return. The pipeline is ample at this level of time and exercise stays robust. So we’re always trying on the offers which work in our algorithm. It needs to be bolt-on. It has to assist to drive our general natural progress and customarily meet our monetary algorithm which we now have earlier talked about. On the a part of the portfolio, which does not slot in properly, we’re going to drive motion beginning 2024. In fact, we aren’t going to hurry by way of that, as a result of we have to seize shareholder worth, however you’ll be able to anticipate some preliminary actions on that in 2024.
Greg Lewis: Sure, possibly simply to place numbers on Andy. As we confirmed in that slide, we have been doing $8-ish billion per yr. The easy math for 2024 says simply with Service, that quantity is 10 getting into with simply sufficient share repurchase to purchase again the creep. So we’ll be sitting at 18 by way of two years in the direction of the 25 plus quantity. So the excessive confidence that we’ll be above that degree simply with the maths.
Andy Kaplowitz: After which only a fast observe up. You managed to develop Aero margin by 20 base factors in This autumn, even with [OE mix] (ph) being towards you. And also you talked about provide chain enhancing in 2024. I do know you are saying it’s going to marginally keep in a good vary, but when the availability chain does proceed to enhance, is there a chance there with your whole productiveness tasks in that phase?
Vimal Kapur: Look, I imply, there are — there’s a quantity progress there, which can proceed and the amount leverage will get offset by the OE combine, which I talked earlier, the OE combine stays robust. However we’re additionally ending investing into aerospace. The amount progress shouldn’t be coming by chance. We’ve got invested into our provide chain operations, provider restoration, which is demonstrating the continual quantity progress occurred in 2023 and 2024. So while you put these info collectively, that actually drives the margin forecast for Aero at this level.
Andy Kaplowitz: Useful, guys.
Vimal Kapur: Thanks.
Operator: Thanks. And our subsequent query will come from the road of Peter Arment with Baird. Your line is now open.
Peter Arment: Thanks. Good morning, Vimal and Greg. Greg, only a fast one. You talked about in simply type of the legacy phase SPS, you have been speaking about warehouse, the pipeline of type of within the tasks enterprise, that there was some indicators and there was some — at the very least some enchancment there. Possibly in case you simply give us a bit of shade there simply because it is — clearly it has been a — that that individual space has had an enormous downturn right here.
Vimal Kapur: Sure, I can begin there and Greg can be part of. Look the pipeline, if I examine easy info, our pipeline in Jan of 2024 in comparison with Jan of 2023 for warehouse automation tasks, it is up practically 30%. So what it tells us is that, the essential worth proposition and the long-term pattern of warehouse automation are intact. However prospects willingness to take a position on this very tight market or unsure market is what’s holding them again for making capital choices. So we stay completely convicted on this enterprise and the foundational actions we now have taken on proceed to develop our aftermarket, they’re actually paying off. I imply, our aftermarket companies crossed $0.5 billion mark in 2023. We count on double digit progress in aftermarket in 2024. And you’ll count on the enterprise nearly cupping a half mission and half aftermarket on this yr. In order the market confidence returns, we’ll see the expansion again, and that is supported by the pipeline we now have and exercise available in the market.
Peter Arment: Very useful shade. Thanks. I will depart it at one.
Vimal Kapur: Thanks.
Operator: Thanks. And our subsequent query will come from the road of Joe Ritchie with Goldman Sachs. Your line is now open.
Joe Ritchie: Thanks. Good morning, guys.
Vimal Kapur: Good morning, Joe.
Joe Ritchie: Possibly circling again to Nigel’s query on pricing, the three factors that is embedded into your expectations, is that disproportionately coming from Aero? Or how do I simply type of take into consideration pricing throughout the segments?
Greg Lewis: Sure. So, Aero might be on the mid to decrease finish of that, simply given all of the contract nature of their enterprise and the opposite companies, the opposite three segments are going to be a bit greater than that general. In order that’s actually, with out being too particular, that is form of directionally or notionally, I simply give it some thought.
Joe Ritchie: Okay. Nice. Thanks, Greg. After which the short observe as much as circling, I am attempting to sq. the commentary on HBT and the destocking that you just’re seeing within the merchandise enterprise. With — clearly, you are excited concerning the safety acquisition and the expansion profile of that enterprise seems to be completely different. I am simply attempting to sq. these feedback and possibly you’ll be able to type of assist me with what you are seeing inside your personal safety enterprise at this time.
Vimal Kapur: No, as I discussed earlier than, we count on the entrance finish of the yr progress to be extra pushed by options aspect of the enterprise. We’re carrying ahead significant backlog, each in tasks and companies. And because the yr progresses, we count on quick cycle restoration to be the important thing issue for progress because the yr passes alongside. And net-net, we count on low single digit progress in constructing applied sciences, however robust margin growth. Our business excellence actions are in place and we stay assured that we’ll have a significant progress within the yr, each on progress and margin growth.
Greg Lewis: Sure. I imply, I’d simply say, Joe, zoom out for a minute. And we’re coming in the direction of the tip of a 3 yr interval the place, once more, COVID, then adopted by massive provide chain constraints, adopted by large inflation. And that is why you hear everybody speaking about what is going on on in stock shares throughout. And sure, as that factor normalizes, that is going to make issues clear throughout lots of our merchandise companies, together with HBT. However extra broadly, once more, zooming out, we love the — we love the place this enterprise goes, and likewise creating that sizable place in safety with a really enticing asset that we’re bringing on from Service. Sure, we’re very enthusiastic about that chance as a result of we expect that is going to be accretive progress throughout the portfolio for us. So it is only a matter of, I’d say, differentiating between the right here and now and the medium to long run with these feedback.
Joe Ritchie: Useful. Thanks guys.
Operator: Thanks. I’d now like to show the decision again over to CEO, Vimal Kapur, for closing remarks.
Vimal Kapur: Thanks. I need to thank all our shareholders in your ongoing help and our Honeywell colleagues who proceed to allow us to outperform in any surroundings. Our future is shiny and we stay up for updating you on our progress as we execute on our commitments. Thanks very a lot for listening and please keep secure and wholesome.
Operator: This concludes at this time’s convention name. Thanks for taking part. You might now disconnect.
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