Honeywell Is Getting a New CEO. What He Has Planned for the Industrial Giant.

Text size

Industrial giant

Honeywell International

hosted an event for analysts and investors in New York City on Thursday. It was to be a chance for both groups to get to know incoming CEO Vimal Kapur. He succeeds Darius Adamczyk on June 1.

Leadership transitions are always important for any company—and its stock price. The Adamczyk-to-Kapur change is no exception. Investors wanted to hear about his plan for Honeywell (ticker: HON) and why he’s the person to lead one of the largest industrial enterprises on the planet. (Honeywell’s market value approaches $150 billion.)

Who is Vimal Kapur?

Kapur has been at Honeywell for 34 years and is the current president and chief operating officer. He’s also run Honeywell’s energy-related business and its commercial buildings business.

Before becoming president, he ran half of the company’s business segments. Honeywell reports results along four business lines. Along with energy and buildings, it has large automation and aerospace franchises.

Why did he get the job? 

Barron’s asked Kapur that very question. Here’s what he said: “The biggest contributing factor has been my experience and delivering results.”

The experience is easy to see. The results are more difficult. Kapur wouldn’t have progressed through the organization if the results weren’t there. For investors, though, tracking the results of management below the CEO is difficult. Some managers take over ailing businesses during a recession, when treading water might be considered an accomplishment, while others are given a well-run division and get it running even better. Yet most of the key personnel and product decisions at a business segment are never discussed on earnings calls or at conferences.

Ultimately, the stock price might be the only result that matters. It is certainly a good way to keep score. And Honeywell has been a good stock for a long time. It’s gone from roughly $8 to $200 while Kapur has worked there, up about 25 times. The

S&P 500
is up roughly 14 times over the same span. Coming into Thursday, Honeywell stock is up about 1% over the past 12 months, similar to the gains of the overall market.

What Is Kapur’s vision for Honeywell?

Kapur is focused on four big trends: air travel, automation, digitization, and the energy transition. Those four will help Honeywell grow faster than the overall economy—as long as its solutions are effective.

Air travel, most obviously, helps the company’s aerospace business. People tend to travel more by plane as standards of living rise. The number of people on planes has, for decades, grown faster than the overall economy, though Covid knocked the industry off that trend line for a while.

The other three trends cut across all the company’s business segments and boil down to selling productivity and efficiency to customers. Honeywell has technologies to make buildings more efficient; automate factories; capture carbon; make renewable fuels; and produce hydrogen gas.

It will be Kapur’s job to lead those businesses into the future. “I have to think about Honeywell on a 10-year horizon,” he says, while adding that an operating structure needs to be in place capable of delivering consistent results that investors, and Wall Street analysts, crave.

The Event 

Management reiterated 2023 full-year financial guidance. Honeywell expects sales to fall between $36.5 billion and $37.3 billion and earnings per share to fall between $9 and $9.25. Wall Street currently projects $37 billion in sales and EPS of $9.15.

Looking ahead, it sounds as if Honeywell will be a little more aggressive in M&A. “We can make Honeywell better by making acquisitions in the ZIP Code of $1 billion to $5 billion range [of] enterprise value,” said Kapur, adding his “first principle” in making deals is “shareholder value.”

Honeywell stock is down 1.2%, at $194, in late trading. The S&P 500 and

Dow Jones Industrial Average
are off 0.2% and 0.7%, respectively.

Write to Al Root at [email protected]