Honeywell International, Inc. Morgan Stanley's 14th Annual Laguna Conference

Thank you very much, and good to be back in Laguna. I would say we are 75 days as a new company. It looks like a 100-year-old company, but we have definitely reinvented ourselves with the changes of completed spin of aerospace and advanced materials. I'm not going to belabor that. I think everybody's aware of the story. I think where we are focused on is, as a new company, how we execute on the commitment we made on our Investor Day. Our very simple investment thesis, we are pure-play automation, coming out of the gate playing into three end markets: building, process, and industrial. Building and mining installed base is our business model. We live with that every day.

We are accelerating growth of our installed base by moving towards verticals which are growing at a higher rate, and mining installed base using much more AI-based tools so that we can get more value out of it. The good news is our strategy execution is pacing at a rate better than we had expected. The Q3 start for the first two months have been good or very good, depending on how you want to say it. We have good momentum. We expect to start the first quarter at the upper end of 4-6, which is a great place to start, and have similar momentum for Q4, which will make a good setup for 2027. Where we sit today, we are executing the strategy, the momentum is good, and we think we have a good setup for imminent two quarters ahead.

We want to have a good start and then give a good setup for 2027 ahead for us. Look forward to the discussion and drill into any direction you want to go into.

It is fair to say that, first of all, we are a newer company. Portfolio change has been substantial. We separated three businesses apart from the spin, and we acquired six businesses. I think just appreciating our portfolio, it requires work. I am not saying it is good or bad, it just being a newness. But fundamentally, we, as a company, needs to prove we can grow at a high rate, which organic growth rate was not a feature of Honeywell. We did a great job of earnings growth through margin expansion, which we have not forgotten. We still know how to do that. But adding to that feature organic growth and delivering that near term is the best way to prove it. And we feel confident that next few quarters continue to be upper end of 4%-6%, more towards 6%.

We establish credibility that we can grow organically through the strategy we have put in place. That fundamentally is different for us, too, but also market will appreciate that as we have couple of quarters under our belt in which we prove those numbers.

Two things have changed. I would say the first is the portfolio itself. If you have the right portfolio, that helps you to grow at a higher rate, as we have seen in some of the businesses. So changes in the portfolio we made was intentional to a certain degree. That certainly is different. Second is making growth as our first priority. That is our goal number one. It means how we think about growth enablers, which to me is fundamentally more and more pivot towards in our mix of our business towards higher growth verticals. To mine our install base, how we are structurally doing more and more penetration, that becomes our priority. That we are thinking every day that are we mixing up our business towards high growth verticals? Are we penetrating more towards services and software? To do both these, we need new products.

That becoming our primary focus area is different from what it in the past. So portfolio is different, strategy execution focus is different, which gives us the confidence that we are going to deliver what we committed, $12 earning by 2029. I should have said it earlier, where we sit today, Mike said it during Investor Day, that to us is more of a floor. We are here to beat that floor and perform at a better rate over a period of time.

Today, let us kind of for benefit of everybody, we defined in each of our segments higher growth markets. In buildings, it is data centers, it is hospitals, and it is hospitality. In case of Process, it is LNG and life sciences, and so on. So we identified eight markets. They constitute 20% of our mix today, but these markets in 2026 are growing at a rate of net 15%. Some of these markets are well known, like LNG market is growing at a high rate in Process. Data center is growing at a high rate. Semiconductor is one of the identified high growth vertical in Industrial. So the answer to your question is, our rubric is today it is 80/20. 80% of the business come from more mature markets, which are growing at a GDP rate.

They should grow at 3%-4% rate, depending upon the geography and the market. The 20% grows at a 15% rate, and that's the math. If 80% grows at 3% and 20% grow at 15%, we are going to hit that 6% mark. We are conscious of the fact that it's better if that 20% becomes 25% or even higher. That's one of the commitment we made during Investor Day. We want the high growth verticals to be 25% of our mix. We expect to finish this year from 20%-21%, so we are heading in the right direction. Hopefully next year we go from 21%-20%. We're just mixing it up. The more mixing up we do, lesser growth now we need from this higher growth even, versus 15%. I think we are headed in a right direction.

We don't want to forget the fact that the base business also has to grow, for us to deliver. It's not and, Kush. It's not or, it's and. So base business has to grow well. We have to do good customer service. We have to innovate new products. That's how the base business grows. High growth verticals, you basically build offering in which we can compete and then differentiate against your competition.