The past year’s performance of Honeywell International stock and the speed of affecting change at the Charlotte-based technology company has disappointed CEO Vimal Kapur.
“I’m typically a restless person, so speed of execution could be better,” Kapur told a Morgan Stanley conference last week in Dana Point, California. “But I recognize that it’s a company with 95,000 people and operations in like 20 major countries, so things are not going to move at my pace. We have to take the organization along with us, change the mindset of the culture.”
Noting that Honeywell shares have been “flat, $200 give and take,” Kapur said he’s “personally disappointed on how the stock has performed over one year.”
Honeywell shares traded for about $204 Tuesday morning. The shares have mostly ranged between $175 and $225 over the past four years.
He added, “obviously, we fully understand we need more work to demonstrate growth across all four segments. But I feel confident on the progress we are making and the direction we are headed for.”
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Since taking charge as CEO in June 2023, Kapur has realigned Honeywell’s business segments with a focus on automation, the future of aviation and energy transition. The updated reporting structure covers four segments: aerospace technologies, industrial automation, building automation and energy and sustainability solutions.
Effective earlier this year, the changes aim to spur organic sales and deploy capital more effectively, according to Kapur, who was elected as Honeywell’s chair in February.
Kapur said he’s seeking growth through a combination of higher prices and volume. “This year is a demonstration of that,” he said, noting Honeywell’s forecast of roughly 3% higher prices, as well as volume gains of 2-3%.
“I would expect that will be a generic model moving ahead,” Kapur said. “I mean, I can’t give you a number for ‘25, but it will be in a similar ZIP code if we have to look ahead for next few years.”
On the acquisitions front, Kapur said “doing (a) more transformational deal is not a smart idea” for Honeywell because it would run counter to simplifying and sharpening the focus of operations.
By contrast, he said, the company’s pursuit of smaller “bolt-on” acquisitions, such as its $1.9 billion purchase of CAES Systems Holdings in June, takes advantage of opportunities in its three segments.
“Bolt-on gives us an opportunity to drive the better execution and low risk,” Kapur said.
To pursue deals, he said, one of his business leaders “has to raise their hand to say, `I really believe in it….and we are going to do X and my business is going to do even better.'”
Kapur added that he determines whether an acquisition “is pivoted to (an) end market” projecting growth in the next 10 years.
Achieving sales synergies is another requirement, the CEO said.
“Honeywell will get cost synergies,” he said. “We are a machine and we’ll get the run-rate cost synergy, but if we do not get sales synergies, we are not adding any value.”
Another requirement is financial discipline, Kapur said. “There are no trophy projects,” he said, explaining Honeywell expects earnings accretion in the first year after an acquisition and a 10% return in the fourth or fifth year.
Kapur, who grew up in India, joined a Honeywell joint venture in 1989. He headed the company’s process solutions, building technologies and performance materials and technologies units before becoming president and chief operating officer in 2022. He succeeded Darius Adamczyk as CEO a year later.
