Yahoo Finance's Alexis Christoforous and Brian Sozzi sit down with Honeywell Chairman and CEO Darius Adamczyk to discuss the company joining the Dow Jones Industrial Average, its ongoing work to find solutions for COVID-19 across the globe, its role in aerospace and much more.
Video Transcript
BRIAN SOZZI: Honeywell is set to enter the Dow Jones Industrial Average after the Apple stock split. And, alongside other membership changes, it will hold nearly 3.8% of the weight in the Dow according to an S&P analyst. This comes as Honeywell marks its 100th anniversary as a publicly traded company next month. We sat down with Honeywell CEO, Darius Adamczyk, to talk more about the moment he found out about the Dow inclusion, and the company's fight against the global COVID-19 pandemic.
DARIUS ADAMCZYK: I actually found out at the same time the whole world found out. I literally was looking at my phone and I had a little message that flashed across that said Honeywell, MGEN, and Salesforce.com are now part of the Dow. I said, well this is welcome news. And I think what's really interesting for us is we were part of the Dow until I think 2008. And I don't know if we were the only company, but we're the ones that kind of make a return appearance. But, obviously, it's a terrific outcome for us. We're thrilled to be a part of it.
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We do think we reflect the number of the segments of the economy, whether it be aerospace, or warehouse automation, or industrial automation, or some chemicals businesses, some of the oil and gas exposure that we have. So a pretty wide range of exposure to the economic cycles. And I think what's most important is that we are an industrial technology company, and that's been a point of focus for a while, especially since I've taken over, and we're being recognized as such. So it's terrific to be part of that group.
BRIAN SOZZI: And Darius, you've also quickly pivoted to making PPE, and you've done so very, very fast. By year end, how much PPE in terms of equipment will you have made to help fight this pandemic?
DARIUS ADAMCZYK: Yeah, just to give you a perspective, we're going to increase our capacity 60x from the April level by the end of the year. So that's pretty dramatic. And our production rates are going to be in the hundreds of millions of units. So it's going to be quite a business for us by the end of it. And not only did we get new manufacturing centers open here in Arizona and Rhode Island, we also opened something in the UK, in the Middle East, in India and other places to really help a lot of the countries across the globe fight this thing that every country is currently fighting called COVID-19, and protect their citizens.
ALEXIS CHRISTOFOROUS: You're in a nice position, sitting on a bunch of cash there at Honeywell. Last I saw, something like $15 billion at the end of the second quarter. What are the plans for that? Your CFO came out pretty publicly and said you're in the game for acquisitions. What kinds of companies are you targeting? And I'm curious if you're going to do that before you plan on buying back some more stock.
DARIUS ADAMCZYK: Obviously, our investment in our own stock has been a terrific return, and so we're never afraid to do that. We've done that relatively aggressively over the course of the last couple years, and I anticipate that's always going to be part of our investment thesis is to buy back our own stock. But we want to also complement that with M&A, and that's why Greg said that that's going to be a point of focus. And I think we love all the platforms that we're in. So whether it's augmenting our aerospace business, whether it's augmenting our warehouse automation business, maybe even more importantly augmenting our Honeywell-connected enterprise, which is our software play under the brand name Forge, that's obviously an area of focus.
So we have a lot of different adjacencies to do a lot of bolt-ons in many, many different areas. Obviously, we are moving to be much more digitally oriented, not just external in terms of what we generate for customers, but also internally through our efforts for Honeywell digitals. So I think, obviously, that's a key area of interest in our M&A pursuits.
BRIAN SOZZI: Honeywell, as you mentioned, it's just a big-time player in the aerospace market. The aerospace market has been hit hard because of the pandemic. Talk to us about the road to recovery. Is it a quick ramp? When do you think you can get back to those pre-COVID type levels?
DARIUS ADAMCZYK: Our defense and space segment has been doing well. It's going to continue to do well, so actually continues to grow. We're not that worried about that segment. Our second segment is business aviation. Business aviation and private travel is recovering at a rate that's faster than air transport. So we see some recovery already, but, obviously, until everybody comes back a bit more to the offices and you can go out and visit customers, visit some of your installations, that's when it's going to come back. And then lastly, and also importantly, is air transport, which is really the airlines and so on.
I think there is a real catalyst that we're looking for. The real catalyst for us is a medical solution. So whether it's a vaccine, whether it's an effective therapeutic, my strong belief is that once we get a medical solution, there is a tremendous amount of pent-up demand for travel. Whether it be business travel or personal travel. We see personal travel recovering somewhat this summer, and we're actually pleased with what we're seeing. But most of the travel taking place on aircraft today is personal, consumer-oriented travel. We think business travel is going to return when we get a medical solution. And personally I don't think we're that far away. I think we're-- I anticipate we'll have something even before the end of the year.
ALEXIS CHRISTOFOROUS: You're talking here about the race for vaccine, Darius, and, of course, that's top of mind for Wall Street and for Main Street, but what role is Honeywell playing in that race?
DARIUS ADAMCZYK: The world is going to need billions of vials for vaccines. They're generally made out of glass, and there is a shortage. And one of the businesses that we have is called Aclar Packaging for Health Care. And what we've been able to do is, using that Aclar packaging, we actually created a new vial that's not made from glass. That's lighter, that's cheaper, that's less susceptible to damage, and we think it offers a real alternative for many of the potential vaccine makers out there, and there's well over 100 of them, to have a different type of package. So again, we're trying to come up with all these various solutions for the world as we emerge out of this crisis that we're in. And that's just one great example which will help us get there faster.
BRIAN SOZZI: You're also a member of the Business Roundtable. Davos is going to be postponed to the summer of 2021. As you look forward, when we are at that Davos convention in 2021, what do you think the biggest concern amongst American businesses will be?
DARIUS ADAMCZYK: I think everybody is asking the same question, which is what's the post-COVID business world going to be like? And there's a lot of speculation about that. In my view, Davos 2121 is going to be all about how do we prepare for the next black swan event, whatever that may be? How are we more ready? How are we more ready for the next pandemic, whatever that may be? And how do we operate in this new post-COVID business world?
BRIAN SOZZI: Alexis, you and I were reflecting a little bit after this interview and, wow. Honeywell truly has seen a lot of different things in the economy. Not only in the US, but really around the globe.
ALEXIS CHRISTOFOROUS: It has, and I think one of the big takeaways for me from that interview was just how Honeywell, as diversified as it is, is really embracing information technology and becoming sort of an IT company in many ways. I also thought it was kind of amusing that Darius gets his news the same way we do. He found out that his company was going to be added to the Dow Jones Industrial Average when he got a news alert on his phone. And he also said that he was not going to attend Davos if it was going to be held in January. But now that it's going to be held next summer, it's looking better. Darius might be there.
BRIAN SOZZI: Yeah, and also interesting too, they have pivoted to a lot of this technology, Alexis, you're right. You're totally right. Quantum commuting. But they're also making vials for the vaccine.