Honeywell International (HON) President and CEO Darius Adamczyk sees some roadblocks ahead for the US in 2023 but generally believes the economy won’t turn into a “catastrophe”. It’s a prospect that balances areas of strength in Honeywell’s business with weaker points — a nuance we appreciate from the Club’s top boss holding. “I’m not too pessimistic about 2023,” Adamczyk said Tuesday morning on CNBC. “I think the economy will be tougher than it was in 2022, but I don’t think it will be a disaster.” For Honeywell in particular, this means that some parts of its business are better positioned than others. Adamczyk, who has led the industry group since 2017, said: “We see the big picture. Some of our segments are bracing for a storm. Other segments are growing very, very quickly. fast and we’re trying to continue as many people as possible,” he added. Aerospace has a favorable position Honeywell’s aerospace division — which supplies parts to aircraft manufacturers Boeing (BA) and European rival Airbus — falls on the positive side of the economic spectrum. economic. “In the aerospace sector, we have more demand than the supply chain can really keep up with,” said Adamczyk. “I think the supply chain challenges are real, and they’re still there. They’re getting a little better, but they’re still there.” Aerospace is a big piece of Honeywell’s pie, so the continuing power there is especially noticeable. The segment is on track to account for about a third of Honeywell’s 2022 revenue and about 40% of the company’s operating income, according to recent Bank of America estimates. Honeywell’s description of the aerospace market mirrors what we heard earlier on Tuesday from the CEO of Raytheon Technologies (RTX). In a CNBC interview, Raytheon’s Greg Hayes said demand from commercial aerospace customers was “incredible.” Raytheon owns aircraft engine manufacturer Pratt & Whitney and system software supplier Collins Aerospace. Weaker Warehouse Automation Although Honeywell’s warehouse automation business saw growth during the first two years of the Covid pandemic, it has been impacted by the change in consumer spending on services, rather than goods. The shift in how dollars are spent has led to challenges for retailers and, more broadly, reduced demand for Honeywell’s warehouse automation services. “We looked at another aspect like warehouse automation, which is really tied to retail, product and distribution growth. It’s a tougher market for us,” says Adamczyk. “Then we have pretty much everything in between.” Two important things to note for the warehouse automation unit: First, management expects the unit to increase margins next year despite pressure on revenue. This means that revenue growth may decline year over year, but every dollar of warehouse automation sales could be more profitable in 2023 than in 2022. The second is the overall size of the business. industry compared to stronger sectors such as aerospace. Warehouse automation is part of Honeywell’s safety and productivity solutions segment, which BofA estimates will account for around 20% of the company’s 2022 revenue and 12% of the company’s operating income. The Club’s View From an investment perspective, we appreciate the economic outlook offered by Adamczyk, which contrasts with some of the doom and gloom predictions made elsewhere. Some believe the Federal Reserve’s rate hike cycle will inevitably push the country into recession in the coming months. We understand that there are challenges related to containing the hottest inflation in the United States in nearly 40 years. But what sets the Club apart from the most negative predictors is that we think there are still attractive parts of the market — and in general, this time will benefit the opportunists — those who are not. companies like Honeywell. It’s about finding the right places to stay, not heading for the hills outright. “Darius [Adamczyk] reshuffled its portfolio,” said Jim Cramer in his “Morning Meeting” Tuesday, referring to Honeywell’s decision five years ago to spin off its umbrella-focused business units. home heating and heating into separate companies, resulting in a better-focused and more efficient Honeywell.” He now has the right products at the right time. Darius is too conservative to say, ‘Listen, we’re going to have a great year,’ but what he has is opportunity,” Jim said.[ JPMorgan Chase CEO] On the other hand, Jamie Dimon made me feel like I had to freeze in place because it was too dangerous out there. Jim continued: “It’s been dangerous out there all my life. There are times in your life when you have to say, ‘This is good.’ And what the Fed is doing is good. It’s going to help in the end. for all of us”. The club is currently rated 2 on Honeywell stock, which means we’ll wait for a drop before buying; the stock is up more than 14% in the past three months and it’s important not to chase it. However, our outlook for the company is generally positive. Outside of the aerospace sector, we also see favorable conditions in the company’s UOP division, which manufactures products used in refineries. (Jim Cramer’s Charitable Trust has long been a HON. See here for a full list of stocks.) As a CNBC Investment Club subscriber with Jim Cramer, you’ll receive trading alerts before Jim Cramer. conduct transaction. Jim waits 45 minutes after sending a trading alert before buying or selling shares in his charity portfolio. If Jim was talking about a stock on CNBC television, he would wait 72 hours after issuing a trading warning before taking a trade. 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Darius Adamczyk, CEO of Honeywell speaking at the World Economic Forum in Davos, Switzerland on January 23, 2020.
Adam Galecia | CNBC
International Honeywell (HON) Chairman and CEO Darius Adamczyk sees some roadblocks ahead for the US in 2023 but generally believes the economy won’t turn into a “catastrophe”. It’s a prospect that balances areas of strength in Honeywell’s business with weaker weaknesses — a nuance we appreciate from the Club’s top boss holding.
