DBRS Morningstar Confirms Honeywell’s Issuer Rating and Senior Unsecured Rating at “A” With Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Debt rating of Honeywell International Inc. (Honeywell or the Company) at "A" and the Company's Short-Term Debt rating at R-1 (low), all with Stable trends. The rating actions reflect Honeywell’s operating performance through the first half of 2022, which has been at or above expectations. While the actions also take into account the global macroeconomic headwinds being faced by the Company going forward, Honeywell’s robust structural business risk strengths, which are the main drivers of the ratings, remain solid. The ratings continue to be underpinned by the Company’s strong global market position, its technological expertise, its demonstrated operational excellence, and its highly diversified product lines and destination markets. The ratings also acknowledge the cyclical nature of certain of the Company’s important end markets and its continued exposure to fluctuating input costs, which are especially relevant in today’s macroeconomic environment.

Honeywell’s recent performance has been supported by its ability to expand margins to a greater extent than expected, continue to grow the business organically, increase backlog, and ultimately deliver earnings above expectations. All of this has been achieved in spite of continuing global supply chain challenges, the winding down of Russian operations, and decreased Coronavirus Disease (COVID-19)-related mask sales. The ability of Honeywell to expand margins in a rising input cost environment illustrates, in part, the Company’s ability to increase pricing without suffering significant demand destruction. This is consistent with expectations given the very strong business risk profile.

Over the next 12 months, DBRS Morningstar is not anticipating significant change in the Company’s strong business risk profile. Certain implications of structural business risk challenges such as cyclical industry exposures and exposure to input cost increases are likely to be observed; however, these long-term challenges are already incorporated into DBRS Morningstar’s rating perspective and are expected through the cycle.

Over the next 12 months, DBRS Morningstar anticipates some weakening of the forward-looking financial risk profile due to global macroeconomic headwinds, including slowing growth, continued higher inflation levels, and rising borrowing costs.

While Honeywell presents a very robust business risk profile, it is not impervious to unfavourable macroconomic trends. Therefore, it is possible that a particularly severe and extended global economic downturn could lead to a negative rating action. Since the Company’s business risk profile is already robust, it would be difficult for Honeywell to achieve a positive rating action at this stage; however, if the Company could demonstrate over an extended period of time a commitment to an even more robust financial risk profile, DBRS Morningstar could consider a positive rating action.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating Companies in the Industrial Products Industry (January 28, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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