Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Thursday, January 29, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Vimal Kapur
  • Chief Financial Officer — Mike Stepniak
  • Head of Investor Relations — Sean Meakim

TAKEAWAYS

  • Organic Orders Growth -- Orders increased 23% organically during the quarter, resulting in a record backlog exceeding $37 billion.
  • Organic Sales -- Organic sales rose 11% for the quarter (6% excluding the Bombardier agreement), led by double-digit growth in Aerospace and high single-digit growth in Building Automation.
  • Segment Performance -- Aerospace organic sales grew 11% (excluding Bombardier), with commercial aftermarket and defense posting strength; Building Automation grew 8% organically, led by 9% growth in solutions and 8% in products; Industrial Automation delivered 1% organic sales growth; Process Automation Technology remained flat; Energy and Sustainability Solutions saw a 7% organic decline.
  • Book-to-Bill Ratio -- Company-wide book-to-bill stood at 1.2, supporting backlog growth of 15% year over year.
  • Adjusted Segment Profit -- Adjusted segment profit rose 23% (or 2% excluding Bombardier), with segment margin at 22.8%; margin expansion in Building Automation and Aerospace was partially offset by ESS and Industrial Automation.
  • Adjusted EPS -- Adjusted earnings per share for the quarter were $2.90, up 17% (down 3% excluding Bombardier), with a reported 24¢ year-over-year tax headwind.
  • Free Cash Flow -- Free cash flow reached $2.5 billion for the quarter, up 48% (13% excluding Bombardier effect); full-year figure was $5.1 billion, up 20% year over year (7% excluding Bombardier), representing a 14% margin.
  • Capital Deployment -- Quarterly return of $900 million to shareholders via dividends and buybacks; $300 million invested in high-return capital projects; repaid $2.3 billion in debt during the quarter and $3.8 billion for the year.
  • 2026 Guidance: Sales -- 2026 sales are expected in the $38.8-$39.8 billion range, or 3%-6% organic growth, driven by Aerospace and Building Automation, partially offset by headwinds in Process Automation and Industrial Automation.
  • 2026 Guidance: EPS and Margins -- Adjusted EPS forecasted at $10.35-$10.65, up 6%-9%; segment margins projected to expand 20-60 basis points to 22.7%-23.1%, including a 30 basis point headwind from increased investment in Quanti.
  • 2026 Free Cash Flow Outlook -- Free cash flow is anticipated at $5.3-$5.6 billion, up 4%-10%, with cash flow margin around 14% and 83%-90% conversion.
  • Segment Structure Changes -- Beginning in 2026, Honeywell will report four segments: Aerospace Technologies, Building Automation, Process Automation and Technology, and Industrial Automation; three automation segments will structure into six strategic business units.
  • Portfolio Actions -- The Advanced Materials spin-off is complete; the Aerospace spin is scheduled for Q3 2026; the company intends to sell Productivity Solutions and Services and Warehouse and Workflow Solutions in 2026.
  • Quantinuum Progress -- Quantinuum raised $840 million at a $10 billion pre-money valuation; launched Helios, doubling its previous qubit count; announced commercial partnerships with Quanta, NVIDIA, JPMorgan, Amgen, and Mitsui.
  • R&D and Talent Investment -- Company increased R&D in 2025 and added approximately 600 engineers, with primary R&D allocation to new product development.
  • Pricing -- Price contributed roughly four percentage points to consolidated sales growth, with price execution expected above 3% and forecasted to remain in the 3%-4% range for 2026.
  • Capital Expenditures -- For 2026, capital expenditures are expected to rise by approximately $250 million, funded by improved working capital efficiency, with significant aerospace allocation.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Organic sales in Energy and Sustainability Solutions declined 7% due to lower petrochemical catalyst shipments and continued project deferrals, with management noting the business performed "slightly below our expectations."
  • Industrial Automation guidance does not assume a rebound in underlying end-market demand, reflecting ongoing headwinds in products and cyclical exposure in Europe and China, specifically for this segment.
  • Management cited ongoing pressure in petrochemical catalyst demand and acknowledged "excess capacity in the world," resulting in deferred customer purchases in process automation businesses.
  • Seasonally lower aerospace volumes expected to drive a sequential margin decline in the first quarter, combined with a "normal seasonal step down in revenue" from Q4 to Q1.

SUMMARY

Honeywell (HON +4.19%) reported double-digit organic order growth and a new record backlog, underpinned by broad-based demand and price execution across Aerospace and Building Automation. The company is advancing on major portfolio transformation milestones, finalizing the Advanced Materials spin-off and scheduling the Aerospace spin by Q3 2026, with divestitures planned for Productivity Solutions and Services and Warehouse and Workflow Solutions. Notable R&D initiatives, including the commercialization progress at Quantinuum and reinforcement of new product introduction contributions, support ongoing organic growth. Strategic capital deployment emphasized increased shareholder returns, disciplined capital expenditure, and substantial debt reduction. Management provided a detailed 2026 outlook with specific organic growth, margin, and free cash flow targets, alongside clear drivers for each business segment and explicit cost management plans.

  • The 2026 guide does not incorporate the pending acquisition of Johnson and Marty's Catalyst Technologies business, with an update to follow post-close.
  • "Segment margin should expand modestly as volume leverage, better pricing alignment with tariff costs, and tapering acquisition integration costs more than offset mix pressure from stronger growth in defense and space and commercial OE."
  • Industrial Automation is expected to lead margin expansion across all segments in 2026 through meaningful productivity options and fixed cost reduction.
  • Expected elimination of Aerospace spin-related stranded costs within twelve to eighteen months following separation, with prior Solstice stranded costs already neutralized in 2025.
  • Management highlighted that the overwhelming majority of earnings growth in 2026 is expected to come from segment profit growth, adding approximately 64¢ at the midpoint.
  • The new reporting structure will enable more targeted capital allocation strategies within focused and simplified segments.
  • Recurring revenue from digital platforms like Forge in Building Automation is scaling upward but remains at an early stage, with planned expansion into process and industrial businesses.

INDUSTRY GLOSSARY

  • Quantinuum: Honeywell’s consolidated quantum computing business focused on commercializing high-fidelity qubits and quantum programming solutions.
  • Helios: Quantinuum’s latest quantum computer platform, noted in the transcript for its industry-leading qubit count and fidelity.
  • Book-to-Bill Ratio: A performance metric comparing incoming orders to revenue recognized—values above 1.0 indicate order growth and potential for future sales expansion.
  • Stranded Costs: Expenses remaining with a company after a business divests a portion of its operations, often requiring targeted cost-reduction actions.
  • Forge: Honeywell’s industrial IoT and asset optimization platform, enabling higher recurring software and services revenue from installed customer assets.

Full Conference Call Transcript

Vimal Kapur: Thank you, Sean, and good morning, everyone. Honeywell delivered a strong fourth quarter to close 2025, exceeding our expectations for both adjusted sales and adjusted EPS, with orders up 23%, driving our backlog to over $37 billion. This performance reinforces the strength of our end market positions and execution. We exited the year with a sales growth of 6% excluding the impact of the 2024 Bombardier agreement, which demonstrates the outcome of our portfolio actions and our emerging focus on innovation stemming from continued investment in R&D. This gives us conviction in another year of meaningful top and bottom line growth in 2026.

Looking ahead, we expect to once again drive strong organic growth fueled by conversion of our record backlog, disciplined price execution, and momentum in new product introductions. The strong organic growth coupled with productivity and an aggressive reduction in stranded costs related to the spins will enable us to deliver 6% to 9% earnings growth in 2026, along with accelerating cash generation. It was about a year ago that we announced our intention to spin off aerospace, which will result in the creation of three leading pure-play independent public companies. We have made tremendous progress throughout the year with the advanced materials spin complete, and we now expect to complete the aerospace spin in 2026.

Both aerospace and automation will host investor day in June, and I hope many of you can join us then. Our teams are working around the clock to ensure this gets done as quickly and judiciously as possible. I want to thank all our employees for their commitment and dedication to this process. We also remain very excited about the progress at QuantiNUM on key technological and commercial milestones that position the business to lead the way in quantum computing. I will talk more about QuantiNUM and its progress in a few minutes. 2026 will be an exciting year as we move forward with the final stages of our portfolio simplification.

This positions each business with the right strategic focus, organizational agility, and tailored capital allocation strategies needed to grow faster and drive incremental value for all our stakeholders. Let's now turn to Slide three to discuss the latest update on our portfolio transformation. As I mentioned, we are progressing faster than originally anticipated on our separation milestones. On October 30, Solstice began trading as an independent public company, and we now expect the aerospace spin to occur in quarter three. To that end, we announced the aerospace leadership team last week, comprised of tenured aerospace veterans, and made key board appointments to bring extensive operating experience to our teams.

Tim Courier, who will serve as president and CEO of Honeywell Aerospace at the time of separation, will be joined by Josh Jepsen, who will serve as chief financial officer. Additionally, we announced that Craig Arnold, the former chairman and CEO of Eaton Corporation, will serve as nonexecutive chair of Honeywell Aerospace Board of Directors. Greg brings more than two decades of experience in leadership roles at the and tech businesses where he delivered transformational results through operational excellence and disciplined capital allocation. Together, Craig, Jim, and Josh bring the right mix of industry company, and capital market experience to maximize the value for our customers, partners, employees, and our shareowners.

We're also excited to welcome Indra Noohi, former chair and CEO of PepsiCo, to Honeywell's board of directors, further strengthening our team with her proven track record of leading diverse global businesses and accelerating long-term growth. Beginning in 2026, we reorganized Honeywell's segment into a more simplified structure focused on a cohesive, synergetic business model. Moving forward, we'll be reporting four segments: Aerospace Technologies, Building Automation, Process Automation and Technology, and Industrial Automation. The three automation reporting segments will be organized into six strategic business units, enabling us to better solve customer challenges and deliver in-house outcomes with the Honeywell Forge platform.

Finally, we concluded the strategic review of productivity solutions and services and warehouse and workflow solutions and have announced that we intend to pursue a sale of both businesses in 2026. All of these actions position both aerospace and automation for a strong beginning as new industry-leading public companies in 2026. Let's start to slide four to discuss the recent advancements of QuantiNu. Following the recent fundraising in which QuantiNUM raised $840 million at a $10 billion pre-money valuation, the pace of both technological and commercial progress at Continuum is rapidly increasing.

Close collaborative share owners as Quanta, NVIDIA, JPMorgan, Amgen, and Mitsui have led to new commercial partnerships that are supporting the development of critical applications for improving drug discovery, cybersecurity, and encryption for large financial institutions. In November, QuantiNUM announced the launch of Helios, the world's most accurate commercial quantum computer, which nearly doubles the qubit count of its predecessor, H2, and we believe sets a new standard for quantum computing performance with the highest fidelity for quantum computing qubits ever released in the market. Helios' groundbreaking design and advanced software stack brings quantum programming closer to the ease and flexibility of classical computing, which we believe positions the company to accelerate Quantum's commercial adoption.

Quantum also announced a partnership to integrate Helios with NVIDIA's AI supercomputing technology to create powerful new architecture that can solve the world's most pressing challenges. This collaboration between QuantiNUM and NVIDIA is creating a future where AI becomes more expansive through quantum computing, and quantum computing becomes more powerful through AI. As Continuum achieved these important technological and commercial milestones, I'm confident of the company's future and the best is yet to come. And before Mike talks about 4Q results, let's move to slide five to discuss our recent growth acceleration. This chart demonstrates the recent acceleration in organic growth stemming from a combination of strong end market demand, our portfolio simplification, and innovation.

This drove a 300 to 400 basis point improvement in LTM average organic growth since the beginning of 2024. As I noted earlier, we see favorable end market dynamics across aerospace and defense, process and building automation. We are enabling this further with an intentional shift to higher growth verticals. Our performance simplification efforts are positioning the company toward less cyclical and less capital-intensive markets, where we can build our installed base and leverage this to drive software and services growth. This is being compounded by recent acquisitions in excess LNG process technology, compressor control, and defense technology.

On innovation, we delivered 4% organic growth from our new product introduction in 2025, with the majority coming from innovation in new markets and offerings as opposed to upgrades on existing core products. This is a direct result of our meaningful step up in R&D in 2025, which continues at these levels in 2026, as well as management's focus on growth through new products. On the people side, we have made a concerted effort to enhance our talent pool to drive growth. We added approximately 600 engineers to our workforce in 2025, which has greatly bolstered our R&D capacity and have also allocated the overwhelming majority of R&D to new product development.

Additionally, our sales team incentives are now better aligned to our objective of prioritizing the commercialization of new products, further reinforcing our plan to drive growth through innovation while building stronger customer intimacy. With that, I will now turn the call over to Mike to go through our fourth quarter results, starting on Slide six.

Mike Stepniak: Thank you, Vimal, and good morning. We ended the year with robust fourth quarter results. Sales grew 11% organically or 6% excluding the impact of the 2024 Bombardier agreement, led by double-digit growth in aerospace and high single-digit growth in building automation. We also continue to drive price across the portfolio, as Vimal noted, which contributed roughly four percentage points to the top line. On a segment basis, aerospace sales grew 11% organically, excluding Bombardier, led by continued strength in both commercial aftermarket and defense and space. Commercial OE growth accelerated as expected from the third quarter as shipments continue to recouple with customers' bill rates.

Robust demand across all end markets led to the third consecutive quarter of strong double-digit order growth and a book-to-bill of 1.2. Building automation grew 8% organically, supported by growth of 9% in solutions and 8% in products. Regionally, North America and the Middle East led the overperformance, with Europe up strong mid-single digits as well. Orders increased both year over year and sequentially, driven by ongoing momentum across both building solutions and products and highlighted by strength in the projects and fire businesses. Industrial automation grew for a second consecutive quarter with organic sales up 1%, led by warehouse and workflow solutions and sensing, as well as a return to growth in productivity solutions and services.

Process solution sales were flat, as strength in aftermarket services was offset by lower volumes in measurement and controls products. Finally, organic sales in energy and sustainability solutions declined 7%, stemming from lower petrochemical catalyst shipments, coming in slightly below our expectations due to continued project deferrals. However, orders momentum in EOB continued, with over 40% orders growth in refining and petrochemicals projects, which supports our confidence in a gradual 2026 recovery. In total, Honeywell orders grew 23% organically after 22% growth in the third quarter. Wins in long-cycle aerospace, energy, and broad-based demand in building automation led the way, resulting in a total book-to-bill above one and pushing backlog up 15% to a new record.

On profitability, adjusted segment profit increased 23% or 2% excluding Bombardier, with segment margin of 22.8%, led by ongoing margin expansion in building automation, partially offset by the timing of high-margin power shipments in ESS and a headwind from a step-up in R&D. In aerospace, adjusted segment margin expanded 40 basis points sequentially to 26.5% as we again delivered stronger volumes enabled by supply chain improvements. While in BA, margins expanded 20 basis points year over year to 27%, driven by commercial excellence and volume leverage. This was partially offset by declines in IA and ESS, driven principally by unfavorable mix from lower catalyst volumes and cost inflation.

As a reminder, ESS fourth quarter and full year 2025 results include only the UOP business unit following the fourth quarter of advanced materials to discontinued operations, and this will be the last quarter we present results for ESS. Adjusted earnings per share of $2.90 was up 17% and down 3% excluding the impact of the Bombardier agreement, driven primarily by higher segment profit and a lower share count, overcoming a 24¢ year-over-year headwind from the timing of taxes. You can find additional information on the fourth quarter adjusted EPS bridge in the appendix of our presentation. Finally, free cash flow of $2.5 billion was up 48% or up 13%, excluding the impact of the prior year Bombardier agreement.

Growth in free cash flow was driven by higher operational income and collections, offset by higher cash taxes and interest payments. On capital deployment, we returned $900 million to shareholders in the quarter through dividends and share repurchases while funding $300 million in high-return capital projects. We also repaid $2.3 billion of debt in the fourth quarter. For the full year, sales increased 7% organically or 6% excluding the impact of the Bombardier agreement, exceeding the high end of original full-year guidance by two points. Adjusted segment profit grew 11% or 6% excluding Bombardier, with adjusted segment margin expansion of 40 basis points or contraction of 40 basis points excluding Bombardier to 22.5%.

Adjusted earnings per share was $9.78, up 12% year over year, or up 7% excluding Bombardier. Finally, free cash flow was $5.1 billion, up 20% or up 7% excluding the impact of the Bombardier agreement, representing a 14% margin. We deployed $10 billion to capital in 2025, including $3.8 billion to repurchase 18 million shares, $2.2 billion to acquisitions, $1 billion to capital expenditures, and $3 billion to dividends. We also repaid $3.8 billion of debt to lower interest expense. All in all, a very strong performance to end the year with plenty of momentum heading into 2026. With that, let's turn to slide eight to discuss our 2026 segment outlook.

In aerospace, we expect top-line growth in the high single-digit range organically. We anticipate continued end market strength supported by a resilient supply chain that continues to grow its output. Commercial OE growth should accelerate in 2026 as we move past customer destocking and ramp our shipments alongside increasing production rates, particularly in commercial air transport. Defense and space should maintain its momentum as higher global spending drives substantial orders growth and record backlog. Steady increases in flight hours in air transport and business jet underpin ongoing commercial aftermarket strength, though we expect modest normalization in growth rates from the prior year.

Segment margin should expand modestly as volume leverage, better pricing alignment with tariff costs, and tapering acquisition integration costs more than offset mix pressure from stronger growth in defense and space and commercial OE. For building automation, we expect full-year sales growth above mid-single digits, highlighted by strength in growing data center and healthcare end markets. We expect growth to be led by North America and acceleration in Europe on increased investments in healthcare and the decarbonization infrastructure buildup. For the year, both products and solutions will grow at similar rates. We anticipate BA margin to expand over 50 basis points, driven by volume leverage, pricing, and productivity actions.

Process automation technology sales are expected to be roughly flat organically year over year. Slower first-half growth in petrochemicals and refining should be offset by robust demand in global projects, particularly in life sciences and cybersecurity solutions. We expect margin to be roughly flat, with pricing and productivity offsetting material cost inflation. And finally, in industrial automation, we expect sales to be down low single digits to roughly flat, with stable growth in industrial solutions offset by headwinds from a challenging prior year comparison in products. Within this framework, we're not assuming any rebound in underlying end market demand. We expect IA to lead margin expansion across all segments in 2026 through meaningful productivity options and fixed cost reduction.

Let's now turn to slide nine to double click on process automation and technology dynamics in 2026. During 2025, we saw 17% organic orders growth in the new P&T segment, which led to a corresponding 16% rise in the opening backlog. This continues to be a significant part of our long-cycle order strength, particularly in LNG and refining, both in the US and internationally. The backlog growth gives us confidence in an expected second-half ramp, especially when measured against our historical backlog conversion rates. Wins in LNG, a number of large module equipment deals are expected to convert to sales in the back half of the year.

In addition, we're encouraged by our pipeline in P&T, which grew high single digits year over year, signaling that the strength of long-cycle orders is expected to persist contingent on the pace of final investment decisions from our customers. We're diligently tracking the slower-than-expected aftermarket order rates for catalysts, particularly within petrochemicals, which has been influenced by overcapacity in the market. Alloy shipments can be temporarily delayed in the short term but are ultimately necessary for our customers to maintain yields. Those can only be deferred for a period of time.

So while we acknowledge the challenges this business faced in 2025, we're encouraged by orders growth and backlog as well as pent-up catalyst demand that should eventually fuel strong growth as we progress through 2026 and into 2027. Let's move to Slide 10 to talk further about our expected segment margin expansion for 2026. In 2026, we anticipate the demand for our differentiated high-value solutions and continued pricing that is outpacing inflation will drive further margin expansion.

On a segment basis, we expect improved volume leverage principally in our building automation and aerospace technology businesses, which will drive solid incremental margins, while P&T margins will be roughly flat in 2026 due to the impact of stronger projects growth in the second half. Our focus on productivity action and rigorous fixed cost management will continue in 2026. We're working diligently to rightsize our cost structure ahead of the planned aerospace spin and expect to eliminate stranded costs in twelve to eighteen months after the spin. We have already neutralized the impact of Solstice stranded costs in 2025 through productivity and fixed cost reduction in the rest of the business.

Finally, continuing investments in R&D and technology will be a modest headwind in 2026. As Vimal noted, our team is making significant commercial R&D investment to maintain its leadership position in quantum computing. With that as the backdrop, let's move to slide 11 to go through the details of our full-year 2026 guidance. Before we get into the specifics, I want to point out that our 2026 guidance includes a full-year outlook for aerospace, productivity solutions and services, and warehouse and workflow solutions. And does not incorporate the pending acquisition of Johnson and Marty's Catalyst Technologies business. We intend to update our outlook when these transactions are complete.

For the full year 2026, we anticipate sales of $38.8 to $39.8 billion, up 3% to 6% organically. We expect growth to be led by Aerospace on higher commercial demand and increased defense budgets, and building automation driven by new product innovations. This will be partially offset by a slower start to the year in process automation technology, which turns to growth in the second half driven by order visibility and significantly easier comps, and mixed regional and end market dynamics in industrial automation.

Segment margins are expected to be up 20 to 60 basis points to 22.7% to 23.1% as the benefits from price execution and productivity actions more than offset cost inflation and a roughly 30 basis points headwind from increased investments in Quanti. Industrial automation will lead for the year driven by targeted fixed cost takeout followed by building automation as higher volumes continue to drive margin expansion. Aerospace margin should expand modestly as volume leverage is partially dampened by mix pressures. Finally, we expect P&T segment margins to be roughly flat year over year, with pricing and productivity offsetting material cost inflation.

Expect a combination of strong top-line growth coupled with fixed cost reduction will drive adjusted earnings per share of $10.35 to $10.65, up 6% to 9%. Our guidance assumes a 1% reduction in share count stemming from share repurchases. As we have signaled, we intend to focus our cash deployment in 2026 on reducing debt ahead of the separation. Moving to cash, we expect free cash flow of $5.3 to $5.6 billion, up 4% to 10%, which represents an approximately 14% cash flow margin and 83% conversion at the high end, or 90% excluding noncash pension income. Capital expenditures are anticipated to increase by roughly $250 million to support growth investment attached to orders we already have in build backlog.

This increase in spending will be funded by improvements in working capital efficiency, with a continued focus on aerospace inventory. Let's move to slide 12 to briefly review our full-year 2026 EPS bridge. The main takeaway on this slide is that the overwhelming majority of our earnings growth in 2026 is expected to come from segment profit growth, adding approximately 64¢ at the midpoint. We expect to benefit from higher volumes, enhanced productivity, and favorable price cost offset by higher investment in Quantinuum, as I noted. As you can hopefully see, we have a fairly clean, high-quality, and straightforward path to our 2026 outlook. A few other points to note.

Below the line, expenses should be roughly flat year over year as higher pension income of approximately $660 million is offset by increased repositioning expenses as we prepare for separation, while net interest expense remains in line with 2025 levels. We expect the tax rate to remain roughly 19% and average shares outstanding to decline approximately 1%, adding $0.08 to earnings per share. Additional below-the-line details are available in the appendix of the presentation. Now let's turn to slide 14 to talk briefly about 1Q guidance. We anticipate first-quarter organic sales growth of 3% to 5% organically.

By segment, we anticipate organic sales growth in building automation and industrial automation to look very similar to our full-year outlook for these businesses, while process automation technology will be more in line with 4Q 2025 levels given the slow start as mentioned earlier. In addition, we expect to see a normal seasonal step down in revenue from 4Q to 1Q, similar to past years. We expect segment margin to be in the range of 22.4% to 22.6%, flat to up 20 basis points, led by productivity actions in our automation businesses. We anticipate aerospace margins to be down slightly from the prior quarter on seasonally lower volumes.

This will drive adjusted earnings share growth in the first quarter of 2% to 6%. We expect a roughly $70 million increase in below-the-line driven by higher interest expense from recent acquisition and increased reposition expense ahead of the separation. Additionally, as we announced last week, following a settlement of all Flexjet-related litigation matters, we made a one-time cash payment of $177 million in the first quarter, which is excluded from our full-year free cash flow guidance. I'll now hand the call back over to Vimal to wrap up before Q&A.

Vimal Kapur: Thank you, Mike. We are pleased with our strong finish to 2025, with sales and adjusted earnings per share exceeding the high end of our guidance range. This performance underscores the resilience of our business model approach and highlights the growing demand for our innovative solutions. Looking ahead, our guidance for 2026 is underpinned by continued strength in our orders growth, price execution, and record beginning backlog. As always, our guidance serves as a prudent baseline for performance that we have a strong conviction we can achieve. Moreover, we continue to progress our separation milestones, which we are tracking ahead of plan, paving a clear path for both aerospace and automation to emerge as leading companies in 2026.

We look forward to sharing more about our strategy and long-term growth at the upcoming Honeywell Aerospace Investor Day in June in Phoenix, followed by Honeywell Automation Investor Day on June 11 in New York City. These events will provide an excellent opportunity for us to engage with our investors and showcase the strength of our portfolio. And before turning to Q&A, I want to take a moment to acknowledge our head of investor relations, Sean Meakim, for all his contributions over the past four years. As you know, Sean will be moving to aerospace with the spin-off to establish another world-class investor relations function as he did in Honeywell.

He will be an incredible asset to Craig, Jim, and Josh as they begin their journey as a standalone entity. Sean effectively communicated the vision and value of Honeywell's strategy with credibility and conviction, linking the framework with investors for our emergence post-separation. On behalf of the leadership team and shareholders, I want to thank Sean for your dedication and commitment and say that I could not be happier to have you lead the IR function at Honeywell Aerospace. Congratulations. And with that, Sean, let's take the questions.

Sean Meakim: Thanks for the kind words, Vimal. Very grateful for the opportunity to lead IR and be part of this team. It's been a great learning experience, and I'm really excited about what's ahead for both aerospace and Honeywell. Vimal and Mike are now available to answer your questions. I ask that you please be mindful of others in the queue by only asking one question and one related follow-up. Operator, please open the line for Q&A.

Operator: Thank you. Our first question comes from the line of Julian Mitchell with Barclays. Please proceed with your question.

Julian Mitchell: I want to say thank you, Sean, for all the help. If we think about the margin progression, just to try and understand that a little bit more for the total, so it's sort of flattish year on year in the first quarter, picks up steam over the balance of the year. Maybe help us understand how second-half weighted that margin acceleration is? And are there any specific items on a segment level driving that, please?

Mike Stepniak: Sure, Julian. Thank you for the question. So on the headline numbers, we're expanding 20 to 60. Operationally, we really are expanding margins about 50 to 90 basis points. And we have a little bit of a headwind about 30 basis points this year from Continuum. That headwind is a little bit higher in the first quarter. In the first quarter, we also have our taxes at the highest, and we're paying our interest expense for the year at the highest. So that's easing. So I think what you'll see from us is 20 to 20 bps in the first quarter, and then sequentially improving. The second half looks much better than the first half.

Vimal Kapur: Yeah. And, Julian, what I'll add is that the fundamental playbook, which Honeywell always executed on margin expansion, which is price, volume, productivity, that will be in full play this year. We do expect, as Mike mentioned, our operational margins to expand, you know, to 90 basis points and invest some money back in Continuum. But we are very well programmed to deliver margin expansion as we did in the past, like, 2023, we were 100 basis point margin expansion. So we are very confident in delivering our margin expansion rubric for 2026.

Mike Stepniak: And I would just also maybe add that last year, we talked about it. We stepped up on engineering from an R&D standpoint. That's now normalized going into 2026. It's not a headwind for us. And last year, it was about, I think, 50 bps of headwind if you take 2025 as a whole.

Julian Mitchell: That's helpful. And then just a quick follow-up on the aerospace margins. Specifically, I think they're starting out the year maybe down a touch year on year and then up a few tens of basis points for the year in aggregate. Maybe clarify kind of how you see those mix impacts playing out through the year? And there's been some discussion on commercial OE contract renewal timings and so forth. Is that a factor this year affecting the aero margins at all?

Mike Stepniak: Sure. So maybe I'll just start with the 2025 progression, but I think it's important as you think about 2026. So we entered 2025, and we said we'll finish about 26% for the year. That's exactly what we did, and the team executed well. Despite the Liberation Day having to contend with the tariffs. Largely, tariffs are behind us. Going into 2026, price will be better. For aerospace, acquisition integration costs are abating. That's also a tailwind. And the supply chain is continuing to improve. So for 2026, really, to me, it's a margin expansion question.

It's really just a question of how much, and that's a factor of mix and how is mix going to play out in the business, as well as how we continue to unlock and scale the supply chain and how the trajectory progresses. But 2026, I fully expect margin expansion in aerospace. And, Julian, to your question on the OE contracts, yeah, we are indeed negotiating our contracts with multiple OEs as we speak. On the commercial side and business jet side. You know, those are under progress right now.

Vimal Kapur: And what I can share with you is that longer term, it will play bolt on quite well for aerospace margin expansion. Because the nature of these are long term. So remain very confident that this is gonna have a positive impact on our margin expansion story for the business in the time spent.

Sean Meakim: And, Julian, one last piece I would just add on. Just think about the first quarter reminder that Liberation Day was in April, so there's a little bit of a lapping where we have that little bit of lag on the pricing impact relative to the tariffs in aerospace in the first quarter for the OE business.

Julian Mitchell: Great. Thank you.

Mike Stepniak: Thank you.

Operator: Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.

Nigel Coe: Thanks. Good morning. So a lot going on here, guys. Continuum, you announced you filed a confidential S-one earlier this month. Are you fully committed to an IPO at this point? So is there an option to bring in a strategic investor? And then I want to make sure we get the right numbers on the investment spending. It looks like it's picking up by about $100 million year over year. So that would be what $250 million of total spend within corporate? Just want to make sure that's the number. And does the free cash flow or rather the cash burn kind of equate to that number as well?

Mike Stepniak: So I'll start and I'll let Vimal comment on the just on the commercial progress, etcetera. But exactly right. It's about $100 million year over year. Increase. We fully consolidate Quantinuum right now. As you know, our raise was quite successful, so Continuum has plenty of cash. But it flows through for Honeywell's financials. But it's about $100 million year over year increase in terms of maturation and commercial efforts that the team is progressing.

Vimal Kapur: And, Nigel, you put it well. A lot going on in Honeywell. So we are absolutely working on the continuum lag. What I can share with you is obviously in the legal restrictions on what we can share. But as a practical matter, the progression on platform continues to be very promising. Which is the reason we are investing more on the need dollars to continue to progress to launch the next version of our quantum machine, which is committed in the 2027 time frame. So that's a driver. And I actually spend a lot of time with the customers now to talk about leveraging for commercial applications. So think about banks, about pharmaceutical companies, and think about large governments.

They're all very interested given we are coming closer to time to value. And we are also building the leadership team of Continuum businesses, expanding its capability so that it could stand alone as an independent company at the right time. So that's what I can share. I think a lot of wheels in motion. And we continue to work very hard to make it a successful business.

Nigel Coe: That's very helpful. Thanks. And then my follow on is, is really just wanted to dig into the extraordinary strength in the process orders. Last time we checked in with you guys, you were talking about softness in large productivity. That seems to have changed one and eighty. So just wondering what's changed and perhaps a bit more detail on where you've seen the strength by geography or end market?

Vimal Kapur: So Nigel, there are two dynamics going on in the market. On the positive side, people are spending capital to build more capacity in LNG and refining. That defined that's showing our orders up. It's so substantially and backlog up by 15%. So that's positive. Those are long cycle. And we therefore, will show more revenue accretion from them in 2026 because the cycle time is twelve to eighteen months. So we started lapping up our bookings from quarter three of last year and built the backlog, which will convert now Q3 and 2026. Also on the positive side, the LNG business continues to do quite well. Sundyne business we acquired is gonna become based baseline.

You know, and organic growth, so that's gonna help. In the second half of the year. On the other side of the ledger, we continue to see pressure on the catalyst demand on petrochem side. Petrochemical has excess capacity in the world, so our customers are shy to buy more Catalyst. And, also, I would say, in automation side, some of our migration offerings there's a certainly a slowness there. Our guide doesn't factor any change in that in 2026. Now I'm not suggesting it won't change, but we are cautious on how we are guiding at this point. And that remains the, the low point in the business.

So strength in long cycle, in LNG and refining, and weakness in short cycles, specifically in the petrochemical side.

Nigel Coe: Okay. That's great. Thanks, Noah. Thank you.

Operator: Our next question comes from the line of Scott Davis with Melius Research. Please proceed with your question.

Scott Davis: Good morning, guys. Good morning. Glad to see the final spin off moving up here. But look, I wanted to talk a little bit about price because forever Honeywell was kind of a 1% to 2% price company, and now the last couple years, you've been able to capture meaningfully more, 4% now, which is still meaningfully more than the peer group average. But what can you guys walk through you know, there's kinda two angles here. I mean, one is kinda passing through tariff impacts. You know, and that's not a structural price increase, that's more of a pass through.

But can you talk about really how much of this price is kind of a change in pricing strategy how you guys approach projects, contracts, know, obviously, products help, I would imagine. And how much of that 4% is kind of just the run of the mill passing on? Tariffs? Thanks.

Vimal Kapur: Yep. So that's a great question, and I think a lot about it, you know, on the dynamic. I think, fundamentally, the inflation drivers have become more persistent in the markets we serve. And I drive the insistent the inflation drivers into three buckets, labor cost, is increasing, typically, three to 4%. In a typical year, there are labor shortages. There's enough talk to you know, messaging around that. We also see cost increase in electronics prices. Memory is the new driver now. Of course, it a small portion of what we buy, but it all starts compounding. And then commodity prices keep going up.

I mean, there's a lot of news on gold, but then there's a also other commodities which keep ramping up. So when you put it all together, fundamentally, the inflationary trend in industrial segment and segments per Honeywell Surf they remain quite persistent. And our pricing strategy, therefore, has become more mature, really, to look at as a long term trend, work with our customers, customers, and align with them that what's coming ahead. And minimize the impact on their businesses to the extent we can and deploy pricing, which is also different by regions. It could be one in US, different in Europe, different in other parts of world, Also, different for new products.

Because we need to see where we have some leverage there. Based upon feature function, which are differentiated So a lot going on in the pricing front, and I would say 2026 is gonna look very similar to 2025 in the same ZIP code. And we spend a lot of time to make sure that the price cost doesn't become a headwind for us. And we do maximum to preserve our volume while we are preserving our margins.

Scott Davis: That's Yeah. Very helpful. Yeah. I would just maybe just add that too. You look at our portfolio, we've been migrating to high growth verticals where we can afford better pricing and we have a bigger step up in terms of revenue that is generated by NPI. And these products tend to be accretive and give us better pricing as well.

Scott Davis: Yeah. No. And then just a natural follow-up would just be, is there you know, you could when you talk about NPI, you talked about product launches, but is there do you guys use a vitality index or anything internally and any kind of way to kinda compare the acceleration of NVI versus the past?

Vimal Kapur: You saw one of the mention of that in our growth acceleration chart in the our prepared remarks. One thing, with certainly started measuring is how much of revenue in a given year is coming from new products. Net new growth coming from new products. And last year, it was approximately 4%. It means our R&D dollars are creating a differentiated demand into our offerings. And we are able to either keep share or gain share or able to move to new verticals. So we are measuring two key, KPIs One is vitality, We used to measure that, Scott, for many years. What I learned is some of our segments high vitality is just, you know, right to play.

Because the turnaround of the product is so fast. And if your vitality is not you know, forties and fifties, you basically may start losing share. So, incrementally, while we continue to measure vitality and RemainCo Honeywell will have vitality in high 40s, Think about 45% or so. We also now measure every quarter new product revenue coming from new products. And our internal target is like, we did 4% last year, like to maintain that rate. That requires a lot of, you know, ideation, working with the customers, having the right ideas, and so on.

But that's gonna be the new playbook for Honeywell that we wanna grow to new products, and then whatever my market allows us to pick up on price. So, yeah, that's that's that's how I will summarize that, that comment.

Scott Davis: Very helpful. Thanks. I'll pass it on, and best of luck this year, guys.

Vimal Kapur: Thank you.

Mike Stepniak: Appreciate it.

Operator: Thank you. Our next question comes from the line of Steve Tusa with JPMorgan. Please proceed with your question.

Steve Tusa: Hey, good morning.

Mike Stepniak: Good morning, Steve. Good morning. Just to clarify that answer, so you're expecting roughly 3% price this year?

Mike Stepniak: Price will be above 3%. I would say most likely three and a half depending on geography and the vertical we're deploying 3% to 4%. On average, it should be should be three and a half. And quarterly, also, I think there'll be a little bit of movement, but that's kind of the framework we're using for the year with the teams.

Steve Tusa: So at the low end of the range, you have volume down 50 bits.

Mike Stepniak: No. No. It really just depends on the it deploy price at SKU level essentially. So it's depending on how fast if the product is growing at 1% and market doesn't allow us to deploy more price, we won't do that.

Vimal Kapur: Think low end, would say, Steve, volume growth in the low end of the guide three to six to zero. High end, it is about three. So that's kinda how you wanna look at the guide. Three to six, price being somewhere around three to three and a half, and the balance is volume.

Steve Tusa: Yeah. It's it's it seems pretty conservative with your order growth rate, but I won't belabor that point. Just on the stranded costs, it seems like I would have maybe expected the advance material stranded cost to come out a little bit quicker. Can you maybe just level set us on where those stranded costs lie today, especially on the aero side, what to and how those should, you know, layer out of the numbers, because that seems to be a relatively heavy burden that, you know, you're leaving in there. But should, you know, be a tailwind at some point in the next, eighteen months or so.

Vimal Kapur: No. You're right, Steve. So we have already neutralized the advanced materials stranded cost in 2026. So that's one of the walk we are showing in our margin expansion that it is net neutral So the headwind of that is gone, which shows that we are looking ahead and executing it as simultaneously as we're working to spin Now specifically coming to the aerospace question, right now, will Admit that we are so heavily focused to make spin happen in Q3. We'll share the specifics of stranded cost, etcetera, during our Investor Day coming up in June. But we are absolutely confident and committed that we will eliminate stranded costs in twelve to eighteen months' time. Earlier, the better.

We get it. But that's the range we expect to take it out.

Steve Tusa: Okay. And then just one last one on Aero. Can you give us any kind of magnitude of margin improvement embedded in the guidance for aero this year? Is it 25, 50 bps, like just a little bit of color on directionally? Magnitude?

Mike Stepniak: Yeah. I would say modest. Do you think, like, low thirties incrementals?

Steve Tusa: Got it. Okay. Thanks, guys.

Mike Stepniak: Thank you, Steve. Thank you.

Operator: Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Deane Dray: Thank you. Good morning, everyone, and congrats to the team on hitting the transformation milestones earlier. And also best to Sean and welcome back to Mark. Just for the first question, just you've been now more specific about the portfolio cleanups for PSS and warehouse. What can you tell us about the sales process?

Vimal Kapur: So I would say at this point, we have a lot of interest in both the businesses. And we expect to do sign of the deals in quarter two. None of specific within the quarter. It's it's hard to pinpoint a month here at this point, but we do expect the quarter two, we'll be able to sign it, and the close will be customary you know, regulatory approvals So that you can then estimate that the total time this business may not be part of Honeywell. You know, what it does is, Dean, interestingly, when we complete the transaction of warehouse automation business and telegraded, and productivity solution business it simplifies us into three end markets.

Process, buildings, and industrial. Because this allows us to make a choice not to be in a transport transportation, logistics, and warehouse market Not that these are bad markets, It's more a question of where we want to participate as a company. So it's a choices to be made. The second thing it does is it makes industrial automation as a sensing and measurement business. We had one of the challenge of industrial automation being a complex business to understand with lot of segments, and lot of drivers, So with this decision, we are able to narrow down the business to sensing and measurement.

Which gives us a platform on which we will build upon you know, through organic growth and you know, hopefully, we'll look at more inorganic actions in the future. So it plays out extremely well in our overarching strategy.

Deane Dray: That's real helpful. And, second question, there was a reference about pockets of weakness in Europe and China. Maybe just give us a sense of, from the geographies, what you're seeing at the margin.

Vimal Kapur: I would say that know, those comments are specifically for industrial automation business. Industrial automation business is seeing strength in North America and US in particular. The segments are performing extremely well. But the segments of IA business in China and in Europe the exposures we have in end markets we serve, we see pressure there. And that's a weakness in short cycle Europe. Now that's not true for other parts of Honeywell. If you see building automation, they don't see pressure in Europe and China because they serve different markets. And they have different product lines. So it's very specific to industrial automation at this point. And we'll observe how the year progresses.

What we are doing is we are focused on launching more much more new products. So that we are able to generate more demand organically to offer some of these, you know, drivers And we'll observe how the year progresses with our to counter some of these, market conditions.

Deane Dray: Thank you. Thank you, Dave.

Operator: Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed with your question.

Sheila Kahyaoglu: Good morning, guys, and thank you. I'll focus on Aerospace, that's okay. All three end markets grew double digits in 2025. Maybe if you could tell us the rank order of how you're thinking about 2026 end markets and any changes around the medium-term growth trajectories as we for Investor Day in June?

Sean Meakim: Thanks, Sheila. Yes, I would say that we were really pleased with the progress the team made on supply chain, really great performance on volume, especially to end the year. So great momentum particularly with the order rates. Going into '26. Looking at the growth rates by end market, we'd say defense and space is likely to lead, so high single digits maybe creeping in a low double depending on supply chain progress. We then expect OE to be high single digit growth and then still strong performance in aftermarket but continue on that path towards normalization.

So call it mid to high single digit growth is the range and all that should blend to high single digit performance for 2026.

Sheila Kahyaoglu: Got it. Thank you. And then one on, I know a lot has been asked on margins already, but just specifically around incremental investments as we see from the defense contractors. How are you thinking about incremental investments surrounding your portfolio within aerospace and R&D focus areas?

Vimal Kapur: Peter, we have been investing if you look at the broader of, you know, investments, we have been investing in supply chain. We have telegraphed earlier. More than a billion dollar investment. Then we have delivered volume growth over 14 quarters now. Digit volume growth, which results into our organic growth. Now in 2025, 2026, overall Honeywell CapEx increases about $250 million. Aero is a large part of it. And it's a good news in my view because Aero needs more volumes. It needs to supply chain capacity. There are other parts of investment and other parts of, automation business, but Aero has a large share of it.

So fundamentally speaking, we are able to deliver to Department of War needs for more volume. And in fact, we are close to Peony, hardly with any past due, which shows that we have ability to meet their needs of the volume they are looking for. So we are very well positioned there. I think our volume capacity our investments are always in order. And we'll continue to make more if it is necessary to grow the business.

Mike Stepniak: Pillar four, it's about a $150 million. In CapEx increase next year. Majority of it is gonna be funded through working capital. Improvement. And it's So not no impact. Should

Sheila Kahyaoglu: Okay. Got it. Thank you.

Operator: Our next question comes from the line of Amit Mehrotra with UBS. Please proceed with your question.

Amit Mehrotra: Vimal, the building automation growth has been good the last few quarters, and I think some of that is applicable to kind of the success you've had in plugging the assets into Forge. And I guess the question I have is, what is the how can you can you replicate that in the process and industrial businesses whereby maybe that those cyclical parts of the business, you can generate more recurring revenue by upselling some of the services by plugging into your platform Can you just talk about that? Or are those just two different things?

Vimal Kapur: Yep. No. They, excellent question, Ahmed. You know, we have been working very hard to change our business model to more recurring revenue and the basis of that is stronger linkage to our IoT platform, Forge. Building started that first. Started that later. I would say the gap between that is about nine to twelve months. And you can clearly see results in the buildings what we have been able to do is really build I'm gonna use word ontology based models. It means that we are able to when we connect a building, we are able to identify all its assets. And really build a reference data model for a for our customer.

Which allows us to then build different applications on top of it. And, hopefully, when we are in Investor Day, we'll be able to show you agents on top of four which are managing different operations, maintenance, energy management, So we have moved now to agentic way of working on our on our customer base. And absolutely right. That kind of innovation is driving the growth pull through of our products. Because it's a one solution. It's not separated from other. Now you're on the same journey in the process. We're just about nine months, twelve months behind. A connected plant is our key offering.

Which takes our customer install base both on process technology and process automation and, again, a ability to build this ontology based model and then give a much more capability to optimize their operations. So that's coming. That's coming soon. And we do expect that to become an enabler for recurring revenue growth in the process segment in the near future. And then finally, we'll in industrial side, our business is far more becoming sensing and measurement. It's less about our controls. But we have to evolve that strategy there. But I remain very confident we are gonna see the same pattern in process in the very near future.

Amit Mehrotra: And just sort of very much related to that, you know, you're building automation revenue forecast. It's kind of mid single digit plus this year. It feels like that journey in connecting those 11, 12,000, you know, assets in the field is kind of a third of the way through. And I think you guys have a goal of kind of accelerating that this year. So I'm just wondering is it just conservatism? Because it seems like as you as you get to that journey of fully connecting assets, you can actually drive sustainability in that kind of high single digit organic growth.

Vimal Kapur: Yeah. I mean, our penetration, Amit, actually is much lower, which gives us sort of runway and upside. You know, we'll share those details during day, how much of install base it's penetrated from connected assets perspective. But, also, bear in mind that recurring revenue takes time to scale So if I you know, as our recurring revenue bank is building, it just compounds every year at a bigger scale. So we are at a low base at this point. But we do believe that we also will continue to ramp it up at a much higher rate in the times ahead. As our ARR is growing there.

And we expect to expect to share two things during the Investor Day. Our offerings on Ford, both for buildings and process and industrial some initial ideas. And then our ARR strategy, how much it is and how much we expect it to compound in the times ahead.

Amit Mehrotra: Okay. Yeah. That'll be helpful. Thank you very much. Appreciate it.

Vimal Kapur: Thanks. Thank you.

Operator: Thank you. Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please proceed with your question.

Nicole DeBlase: Just wanted to start on some of the order trends that you saw during the quarter. Can we talk a little more about how short cycle order trends generally trended? And not just relative to 3Q, but also throughout the cadence of each month of the quarter.

Mike Stepniak: Sure. So I would tell you that, generally, if you have to look at it regionally. So US, META, India, short cycle orders performed well throughout the year and in the fourth quarter as well. On the other hand, Europe and China at least for where we participate, specifically in industrial automation, or just or just okay, not great. Going into the first quarter, we see that orders generally will be high single digits. On the short cycle side, probably mid single digits, for BA and, and aerospace. And then on a IA and P and T, we will we'll continue to monitor. But as Vimal mentioned earlier, the catalyst and convergence are a little bit a little bit slow.

Nicole DeBlase: Okay. Got it. Thanks, Mike. That's helpful. And then maybe just a question on Industrial Automation margins. I think you mentioned in the prepared remarks that this is where you guys expect the greatest year on year margin expansion in 2026. Can you maybe elaborate a little bit on that with respect to the magnitude of potential margin expansion? Thank you.

Mike Stepniak: Yeah. So vis a vis our guide of 20 to 60 and what are we driving operationally, we have industrial automation at close to a 100 bps. And the reason for it, if you look at the margin, trajectory and progression, feel like Industrial Commission has the most opportunity both from productivity operationally as well as pricing leverage volume and demand. And so that's that's how we instrumented the year, and I have a high confidence the team will execute on that.

Nicole DeBlase: Thank you. I'll pass it on.

Mike Stepniak: Thank you.

Operator: Our next question comes from the line of Chris Snyder with Morgan Stanley. Please proceed with your question. Thank you. I wanted to follow-up on some of the commercial OE contracting discussion. Just given the very long nature of these contracts, I imagine these negotiations are a lot more comprehensive than just pricing for some of the tariff pressure that's come through over the last year. So I don't know, maybe you don't want to kind of frame the magnitude of these conversations, but any color there would be helpful. Or if you could just maybe talk about, like, when was the last time the company did a big comprehensive commercial OE price reset.

Vimal Kapur: So Chris, these contract negotiations don't span one particular OE or all. I mean, this is more than one. Few are large. We are small. That's just a matter of fact. And know, some of these are due for long time. Think about five years plus in some cases. So the impact of that you're absolutely right. Because when you're renegotiating a contract after five, seven, eight years, not only you're looking at the pricing changes, but other aspects of the contract. And that's why it takes very long time to renegotiate a long term contract there. And as I said before, these renegotiated contracts will be a very well for aerospace margin expansion in the future.

So it will be a great setup. Because we lap all the previous long term inflation we have been absorbing in some of these contracts, that won't be a headwind anymore.

Chris Snyder: No. Thank you. Really appreciate that. Yes. Certainly, a lot of cost inflation over the last five, seven, eight years. Maybe just a quick one. I think you guys mentioned that R&D was kind of at the full run rate, obviously, an increase in twenty five. So is that right? Is R&D kind of at full run rate level now? And I know Arrow takes a long time to convert into sales. But I would imagine the industrial side of the business converts quicker. So can you just maybe talk about how you think some of the R&D spend converts to sales on industrial? And could there be any tailwinds from that over the next twelve months? Thank you.

Mike Stepniak: Yes. So I said earlier, I think the R&D right now is at the level that we wanted it. It's about 4.40.8% of sales. That's we feel it's a sweet spot for us. Quarterly going from into the first quarter. That's will continue to abate. And will be more normalized. And we're obviously getting revenue growth, which will be a tailwind from margin standpoint.

Vimal Kapur: And the cycle time, Chris, you know, varies from I would say, you know, eighteen months fifteen to eighteen months for the short cycle and for the long business, like aerospace and some of our process technology. Would be three to five years. So these are long bets in some cases, and it's our job as leadership to put those bets so that we could not deliver even short term growth but also position the companies well for the long term growth.

Mike Stepniak: And I and I believe answered the if you look at our corporate calls, I mean, it's really, for us, the 30 bps drag on Continuum no impact from R&D, stranded calls. We addressed in the in the throughout last year, so we don't have a lot of stranded calls as far as Solstice. So we feel really good about the progression we're making on our structural cost.

Operator: Our final question comes from the line of Andrew Obin with Bank of America. Please proceed with your question.

Andrew Obin: Yes, good morning. Thank you for fitting me in. A question on The question on building automation, just a follow-up. Can we just talk about how much growth is coming from Access cross sell? And also how much exposure do you have there to data centers just because are the market leader on building automation, I would imagine. That's a nice tailwind as well. Yep.

Vimal Kapur: So, Andrew, the Access Solution acquisition is playing well, and overall, the revenue in that segment is growing high single digits. In line with building automation, which is growing high single digits. So our thesis has played out quite well. The second part of your question that sales synergies have been a big feature of it. That was one of the main drivers we thought this business will create our value, and that's been, a additive to the overall growth again, it's reflected in building automation numbers. Because that growth is not only coming in excess solutions business, We're able to pull through a lot of excess solution in our projects business in our solutions side of the house there.

So that's certainly is becoming import you know, an important play. And finally, data center overall position of Honeywell in building automation is becoming slowly material. We are inching towards that becoming you know, greater than 5% of our revenue. Think about it. That number was zero. Couple of years back, so we are inching our way through across all the three solution we provide in data center, the safety for fire, the environmental controls to building management system, and security. So we continue to work our way through, and as that market is performing, that will continue to help the growth of building automation.

Andrew Obin: Thank you. And another question, follow-up question. After selling productivity solutions and warehouse and workflow solutions, anticipate further portfolio actions on industrial automation side or beyond that?

Vimal Kapur: No. I mean, we are we are very pleased with the end state. And as I mentioned, Andrew, that we have built now a business in industrial automation, which is heavily focused on sensing and measurement. So we have a common blast sensing in sensors for aerospace, sensor for medical devices, you know, measurement system for gas detection in industrial and semiconductor, measurement of, you know, gas, and others. So we have a common theme which allows us to build a business around it. So we'll scale from here. So stay tuned. And as we, you know, share our strategy for industrial automation during our Investor Day.

Andrew Obin: Look forward to that. Thanks so much.

Vimal Kapur: Thank you.

Operator: Thank you. Ladies and gentlemen, I'm sorry. Go ahead, sir.

Andrew Obin: No.

Operator: This concludes our question and answer session. I'll turn the floor to Mr. Kapoor for any final comments.

Vimal Kapur: Thank you. So as always, I would like to thank our shareholders, our customers and all the Honeywell future shapers across the world for a strong finish to 2025. We remain confident in our path ahead, and we look forward to sharing more with everyone in the quarters to come. So thank you for all listening, and please stay safe and healthy.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.