Honeywell International (HON) Deutsche Bank’s Chicago Industrials Summit summary

Strategic direction and growth targets

• Set 4%-6% top-line growth and doubled EPS growth targets, aiming for $12 EPS by 2029, with strong margin expansion and 90%+ free cash flow conversion over the next three years.

• Orders pipeline is robust, with broad-based growth across all regions, especially North America and the Middle East.

• Portfolio transformation largely complete, but ongoing refinement and bolt-on M&A remain priorities, especially in Industrial Automation.

• Capital allocation focuses on debt reduction, maintaining a 35% dividend payout, and CapEx-light operations.

• M&A targets are $2–$4 billion bolt-ons, with a focus on accretive, core sensing and measurement businesses.

Innovation, technology, and AI integration

• Forge platform is central to software and services growth, targeting 45% of revenue from these streams, with asset connections expected to nearly double in 2.5 years.

• AI is being deployed both in customer solutions and internally, driving productivity in engineering, finance, and audit functions.

• Customer adoption of AI-enabled solutions is strong, supported by improved cybersecurity and data sharing.

• Consistent R&D investment (4%-4.5% of revenue) is key to sustaining the new product introduction (NPI) engine.

• NPI is a major lever for pricing power and margin expansion, especially in Building Automation and Industrial Automation.

Segment performance and outlook

• Building Automation is diversified, growing at mid-single digits globally, with data centers expected to double as a share of sales.

• Margins in Building Automation are projected to reach 29% by 2029, driven by NPI, Forge, and employee leverage.

• Process Automation benefits from strong demand in oil, gas, LNG, and new verticals like life sciences and semiconductors.

• LNG project pipeline extends into 2028–2029, with robust demand and capacity build-out.

• Process Automation margins are temporarily diluted by acquisitions but expected to reach 25% by 2029.

• Industrial Automation is positioned for significant margin expansion, targeting 25% in three years, with confidence in achieving this through operational improvements and NPI.