Making Markets Ep 20: Quick Take on The Market’s Reaction to Honeywell’s Transition
by Daniel Newman | January 12, 2022

In this Making Markets quick take, host Daniel Newman sits down with Honeywell CEO Darius Adamczyk to discuss how the market is reacting to Honeywell’s innovation and growth.

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Daniel Newman: So, when we met at Six Five, we had this story about Honeywell’s transition. Now, another six months later, we’ve identified, it’s been an interesting year. We still have a lot of macro-economic issues, but your moves forward, whether that’s been a series of acquisitions like Sparta Healthcare Technologies, Sine, you’re continuing to make investments. Forge, I’m seeing more commercials on CNBC, than ever before. The stories transition. Do you think the market is starting to fully appreciate? Because, I still look at your stock and I’ll end it here. I say, sometimes I feel like it’s pure value, the way people assess it and value it. It’s all margin-driven and dividend-driven. And then, I look at it and I’m like, “But, there’s so much innovation-”

Darius Adamczyk: Right.

Daniel Newman: “Going on.” Are people appreciating that?

Darius Adamczyk: Yeah, no, I think, that’s a very astute point on your part, right? Because, we are continuously investing in future technologies, but we also want to provide a compelling return for the today’s shareholders. And we’ve done that. I think we’ve got a very demonstrated track record of growth and margin expanse. We’ve done that for decades and if anything, we’ve accelerated our growth. But, we also want to future-proof the business. So, whether it’s things like our sustainable technologies portfolio, which really will enable the world to have a much greener planet. Whether it’s our forger offerings, our software offerings, whether it’s quantum computing, whether it’s our play in UAVs and UAMS, which is really the future of aviation. I think what’s underappreciated, people want instant gratification. “Well, how much is it going to get me this year?” Well, it’s actually going to get you a negative R&D into estimate. But, the point is that, if you don’t seed and if you don’t plant these future technologies, then the person who runs this business a decade from now, won’t have a viable enterprise.

And when you are a Honeywell shareholder, you get two, maybe three primary things. You get a company that competes and innovates and is a leader in just about every industry that we play in. And we do very, very well in those industries. Number two, is we have a responsibility to future-proof the business as well. And I just gave you some examples about how we’re thinking about the future and how we’re also investing in playing these technologies. And three is, and I think we’re very careful about how we deploy capital. I mean, we think that we’re good stewards of our investor’s capital and I think, the US digital design acquisition, which we just completed a couple weeks ago, is a great example. It’s a highly ESG-oriented acquisition. Basically, it allows first responders to actually, arrive at a building in order of magnitude, faster than through current technologies.

It’s a high-growth business. It fits our building technologies portfolio. And we bought it at a price point, which was fair. It was, “We’re going to get an ROI of 25%, year five.” And so, it is still possible to buy good businesses at a value point, which is attractive. And that’s the overall investment thesis for Honeywell, is you get all three of these elements. Careful deployers of capital and do it in a way that our investors look at it, future-proofing with new innovation technologies that may not generate much today, but they will in the future. And then, we play and win and we innovate in the markets we play in today, to give you a compelling return.

Daniel Newman: Yeah. And the diversification has been significant.

About the Author

Daniel Newman is the Chief Analyst of Futurum Research and the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio