Jim Cramer: Why Dow’s 100-year-old Honeywell inventory is an enormous guess on the long run
Darius Adamczyk, Honeywell CEO
Adam Jeffery | CNBC
Most of the companies that started the Dow Jones Industrial Average won’t make it again. But Honeywell, who was on the Dow from 1925 to 2008, was added back in August.
“I literally looked at my phone and found one of those Wall Street Journal tags that basically said, ‘Honeywell and Salesforce and Amgen are back on the Dow,'” said Darius Adamczyk, CEO of Honeywell, on CNBC Evolve Summit across from CNBC’s Jim Cramer on Tuesday.
This event took place just a short time before Honeywell’s 100th anniversary. Hitting 100 and returning to the Dow speaks for how relevant Honeywell has remained.
According to Adamczyk, technology, especially software, was key to Honeywell. As the company, known for its history of the industrial sector, expands into other business areas, there is a common thread that reinforces the software history, according to the CEO. Whether it’s building systems, aerospace, industrial or warehouse automation, Honeywell is “primarily a control company,” said Adamczyk.
“Whether it is about controlling the way a building works, controlling the way an aircraft flies, or controlling the warehouse, that’s the common thread,” he said. “When you control things, you have to be connected to everything and collect the data that is displayed in all devices and sensors in all systems.”
Honeywell, which faced tough business conditions for many of its operating units during the pandemic, rebounded and hit its highest share price in five years. Jim Cramer says it still isn’t “classically expensive”.
Honeywell not only controls the flow of data, but also uses it to create value, for example to save energy. “Whether it’s our offerings in connected buildings, connected airplanes, or connected warehouses, we’re just using what we’ve done in a very different way. I know we’re seen as that industrial company … that are our roots, but we are also a control company and a technology company. “
The Honeywell-affiliated business operated by Que Dallara is a software-as-a-service company. And it is a leader in cutting-edge technology like the quantum computer, which is intended to replace the era of the microchip as the limit of available computing power.
“We are literally winning customers day by day,” Adamczyk said of quantum computers. “I mean, you know, I made a promise to our investors that this will be real in 2020 and we will start generating income and that is us and it will accelerate next year.”
Software is a big part of Honeywell’s future
This is a microcosm of where the company will move in the long term when it goes beyond its roots. The CEO described this as “a hybrid that will have some hardware presence, but software will become a much more important part of us.” are and how we move forward. “
With the shipping business booming due to the coronavirus, Honeywell is also seeing strong growth in the automated warehouse segment.
“Business is booming right now and it’s no surprise. I mean, obviously the Covid era really led to home delivery and warehouse automation,” Adamczyk said. “We’re trying to focus more on robotics, on the use of what is known as a ‘dark warehouse’ that minimizes the work in a warehouse, and we are making great strides and creating many jobs.”
Honeywell CEO said it had been “a great booking year” for Intelligrated – Intelligrated is the material handling automation and software development company. “I think it’s just the beginning. Sure, Covid has accelerated this trend, but it will continue.”
We try to stay relevant to what is needed for the next decade.
Honeywell also invests in various renewable energy technologies and most recently acquired Ballard Unmanned Systems, which developed hydrogen fuel cell powered drones. Adamczyk described the Dela as “a relatively small but very important acquisition” for the company, which has a long history in the aerospace industry as it moved into the unmanned aerial vehicle systems and urban air mobility space.
“We have put together an entirely new business unit around UAS / AUM, and we believe another way to power them is to use hydrogen. … I don’t think UAMs are a significant part of our sales portfolio in the UAS / AUM will be next year or two, but I think they are going to be very significant in the next decade or two. And we think hydrogen is a very interesting energy to power these types of vehicles, “said Adamczyk Jim Cramer at the CNBC Evolve Summit.
Recently named Honeywell’s development “Dow’s Tesla”, Barron is investing in the early days of energy storage through historic oil and gas and petrochemical refinery company UOP (Universal Oil Processing). Adamczyk said energy storage is “the ultimate linchpin to making renewable energy a reality, and it is being used much more widely around the world.”
Honeywell is still in the research phase of its energy storage business. New battery technology prototypes will be built this quarter, Adamczyk said, adding, “Hopefully they’ll work and I’m confident they’ll work, but if they don’t, we’ll do something else.”
Honeywell’s role in Covid-19
Cramer said he could see the stock rise to $ 250 in an economic recovery, and Honeywell’s CEO said changes to the cuts forced by the pandemic would help as hard-hit companies like aerospace rebound .
“I think our stock is cheap. … When markets and economies return, not only will we grow and grow very profitably, but we also have a number of new solutions that we will bring to the market … I think we will see a huge upturn here with a much improved cost structure, “he said.
“People want to get on a plane, whether it’s personal or business. You know, I want to get out and about, and I think a lot of our colleagues at Honeywell do, a lot of my friends and family members, and I think as soon as they feel safe they will. Hopefully we will roll out the vaccine relatively quickly in the first half of 2021. And I see the trip coming back into effect soon, like maybe even the second half of next year ” said Adamczyk.
There are also several business areas directly related to the pandemic, including mask manufacturing, ventilator sensors; healthier HVAC systems for buildings and airplanes, and even new packaging materials for a vaccine.
Honeywell’s CEO decided early on, reading about vaccination efforts, that billions of doses would be needed over the next few years, meaning “we will need billions for billions of vials”.
Assuming there would be a shortage of glass, and Honeywell already had a healthcare packaging business called Aclar, it went to the big drug companies and it’s been involved in numerous trials, he said. “It will help the world get these vaccines out so much faster than if we just had to rely on glass,” Adamczyk said.
The vaccine bottle effort – the CEO said no one knows if vaccines need to be replicated annually – is an example of Honeywell’s thinking about preparedness for the future.
“We’re trying to stay relevant to what is needed for the next decade,” said Adamczyk.
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