Honeywell 1Q15 Earnings Call Notes

Have hedged a lot of currency exposure

“we’ve continued our transactional and translational hedging into 2016. The euro is our biggest exposure. In 2015 we’ve hedged approximately 85% of our euro P&L exposure in an average rate of about $1.24. For 2016 we have again hedged approximately 85% of our euro P&L exposure at a plan rate of $1.10. In the current environment we believe the certainty this provides is prudent and generates the time needed to offset the impact in future years.”

We’re cautious on the macro environment as we have been for five years

“As we look ahead, we’re cautious overall on the macro environment like I’ve been for five years. While we continue to expect that the benefit of lower oil prices will eventually play through in the US and in oil importing nations, this is really yet to be seen.

There was weakness in January across the portfolio that we weren’t able to fully recover from, but we did see good signs of improvement as the quarter progressed. GDP growth rates globally are weaker than most had expected for the first quarter.”

Hedging program had a big impact on margins

“our hedging approach for foreign currency provided a big benefit. As you know, we made a decision last summer to expand our hedging approach from protecting our hundreds of individual P&Ls from foreign currency exposure, that is transactional exposure to one now where we are protecting the consolidated Honeywell enterprise, so that’s transactional, plus translational exposure. The hedge strategy is in place to protect our operating results, but not necessarily at top line, thus the margin lift.”

There was something in January that caused a slowdown but then things turned in February and March

“There was just something about January that caused everything to be a slowdown, and I’d have to say I was a little nervous as we were in January, and then things turned in February and turned bigger in March. So I can’t explain it. It just happened.”

Acquisition prices are high right now

“I’d say its more price now than anything else. Prices are just high. This is – we’re going to continue to be disciplined and be smart about this. But prices are high right now, and you haven’t heard me say that much in the past, but this time they are.”

We were really only affected by currency translation

“I would say in general when it comes to FX, the only effect we’re really seeing is on the translation side, and as you know we hedged the income number there and so it shows up on the sales side. But preserves the income side, which is one of the reasons our margins look good, and jeez, I think we should be getting kudos for being smart on how we hedged this year and next.”

I do think lower oil prices are going to have a big impact on the Macro in the US

” I would say, though, I really do believe that lower oil prices are going to play through bigger in the macro economy than what we’ve seen so far, especially in the US.

And this is the – kind of the longest the consumer is gone historically with not spending kind of newfound riches, whether it’s through oil price or tax refunds. So I think we’re going to start to see the benefit of that sooner rather than later. I don’t think it waits until next year.”