Honeywell International (NASDAQ:HON) CFO Mike Stepniak said the company is not currently seeing a material financial impact from the ongoing conflict involving Iran, while noting the situation remains fluid. In a fireside chat that also included investor relations head Mark Macaluso, Stepniak said the Middle East represents a “high single digit” percentage of Honeywell’s annual revenue on average.
He added that shipment delays are currently “minimal,” amounting to roughly $20 million to $30 million of top-line revenue pressure for the quarter, and said the company expects to offset the impact through contingencies. “Right now we don’t see any impact from Iran conflict and what’s going on in the Middle East,” he said, referring to the quarter and full year.
Key variables Honeywell is watching
On aerospace demand indicators, Stepniak said the company does not currently see a slowdown in “traffic and hours” tied to the Middle East situation. He added that supply chain conditions can still be “choppy,” making quarter-to-quarter execution more difficult even when full-year expectations remain intact.
2025 framework and second-half expectations
Stepniak reiterated Honeywell’s full-year financial framework, saying he is “extremely confident” in achieving the company’s guidance of:
- 3% to 6% revenue growth
- 20 to 60 basis points of margin expansion
- 6% to 9% EPS growth
He said Building Automation is expected to continue performing strongly, while Industrial Automation is expected to begin growing in the second half as focus increases and execution improves. In Performance Technologies, he pointed to backlog that the company expects to start converting in the second half, including what he described as about $100 million of incremental revenue stemming from orders booked in the fourth quarter and early this year.
Building Automation growth drivers: verticals, Forge, and connectivity
Stepniak described Building Automation as performing “extremely well,” with orders “strong across the board” and growth last year in every geography, including China. He said quarter-to-date orders in the automation business were up about 5%, and he expects mid-single-digit order growth as March tends to be a strong period.
He attributed Building Automation growth to a pivot toward higher-growth verticals—such as data centers, hospitality, and healthcare—which he said represent about 20% of Building Automation revenue and are growing “2.5x, 3x” faster than the rest of the business. He said the company’s goal is to increase these verticals to 25% to 30% over time.
Stepniak also emphasized new product introductions (NPI) and the Honeywell Forge platform, citing more than 30 NPIs in the fire business last year, “most of them based on Forge.” He said the company is seeing annual recurring revenue and software services become a larger portion of the segment.
On data centers specifically, Stepniak said Honeywell’s data center exposure in Building Automation has expanded from “about 0%” of revenue three years ago to about 5% today, supported by work with hyperscalers across security, safety, energy storage, and fire protection.
He said the Forge strategy is currently centered on connecting the installed base, noting that Honeywell connected more buildings last year than in the prior five years combined, but that only about 10% of the base is connected so far. He described a shift from pricing “by connection” toward value-sharing models tied to productivity gains, with AI-enabled applications built on the Forge platform to help buildings become more “self-learning” and ultimately more autonomous.
Performance Technologies: LNG backlog, catalysts outlook, and software
In Performance Technologies, Stepniak highlighted LNG as a major source of demand. He said Honeywell booked about $700 million of LNG orders last year, including $500 million in the fourth quarter alone, and described the LNG business as “essentially sold out for the next two and a half years.” He said LNG could become “well over $1 billion” annually, depending on capacity expansion decisions and avoiding overbuilding.
He said UOP backlog is “extremely strong,” with improving visibility for project revenue conversion beginning in the second half of the year. On catalysts, he described ongoing overcapacity on the end-user side—particularly in petrochemicals—but said improving spreads could help that overcapacity “burn off.” He also said an oil price above $70 would likely support investment decisions for customers.
Stepniak said Honeywell’s HPS software business is “about $900 million, approaching $1 billion,” is predominantly annual recurring revenue, and is growing at a “high single to double-digit” rate. He added that Honeywell is transitioning away from traditional energy exposure toward markets such as MMM, life sciences, and utilities.
On the Johnson Matthey transaction, Stepniak said Honeywell is targeting an August close pending regulatory approvals. He said the previously disclosed price adjustment reflected the state of the catalyst industry and the target’s performance, characterizing the deal as a long-term strategic fit rather than one expected to deliver immediate returns.
Industrial Automation focus and balance sheet priorities
Stepniak said Industrial Automation will become more focused after the separation of “TLW,” leaving what he described as mission-critical measurement and sensing applications in a fragmented market with high costs of failure and customers willing to pay for performance. He said the company is pursuing a “self-help” playbook emphasizing improved pricing discipline, supply chain execution, stronger NPI investment, and a shift toward growth verticals. While he expects low-single-digit performance near term and “flattish” first-half dynamics, he said the business should inflect in the second half and that he would be “quite disappointed” if it is not a mid-single-digit grower in the second half of next year.
He also said Honeywell expects to be selective with M&A in Industrial Automation, favoring bolt-ons and tuck-ins that are accretive and aligned with an installed-base and aftermarket strategy.
Separately, Stepniak said his near-term financial priority is deleveraging, targeting a leverage ratio below 3x by the end of this year and 2.5x longer term.
Corporate costs, stranded costs, and pension considerations
Stepniak provided detail on expected corporate cost structure on “day one,” saying corporate costs total about $650 million, including approximately $400 million of net corporate costs and $250 million related to Quantinuum. He also said Honeywell expects $350 million to $400 million of stranded costs tied to Aerospace that will shift back and then be taken out over roughly 12 months, with the company receiving an Aerospace trademark payment of about $150 million per year that would reduce corporate costs.
He added that restructuring costs could run around $50 million to $250 million annually going forward, while noting that some restructuring has already been addressed through one-time separation-related costs.
On pensions, Stepniak said Honeywell’s pension is overfunded by more than 40% and that pension assets and overfunding will be split between Aerospace and “RemainCo” based on employee service. He said Honeywell is evaluating whether to keep pension impacts in reported financials, emphasizing a desire to keep reporting “very simple” and clearly connected to free cash flow generation.
About Honeywell International (NASDAQ:HON)
Honeywell International Inc is a diversified, publicly traded multinational conglomerate (NASDAQ: HON) that designs and manufactures a wide range of commercial and consumer products, engineering services and aerospace systems. The company operates through major business platforms that historically include Aerospace; Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. Its portfolio spans avionics and propulsion systems, building controls and HVAC equipment, process technologies and advanced materials, industrial automation software, and personal protective equipment and scanning solutions.
Honeywell’s aerospace business supplies aircraft manufacturers and operators with engines and auxiliary power units, avionics, flight safety systems and aftermarket services.
