Fresh off a top- and bottom-line beat Thursday morning, Honeywell International (HON) Chairman and CEO Darius Adamczyk gave an exclusive interview to CNBC to discuss the industrial conglomerate’s business outlook, inflationary pressures and more. In addition to our full recap of Honeywell’s second-quarter , here’s what Adamczyk had to say. 1. Demand picture Industrials are generally considered a cyclical sector, vulnerable to an economic slowdown, and that’s played into the weakness of Honeywell shares so far this year. However, HON’s year-to-date decline of roughly 8.5% has been less severe than the S & P 500 ‘s nearly 15% drop. The company’s performance has exceeded Wall Street expectations in both its Q1 and its just-released Q2 numbers. Third-quarter (current quarter) earnings guidance did come in a little light, but the stock was able to add about 3.5% in Thursday trading. Honeywell’s sizable exposure to the aerospace and energy industries is very beneficial right now, Adamczyk said, even as there’s growing concerns about a broader recession. The aerospace industry accounts for about one-third of Honeywell’s revenue, while oil and gas is about 12%, according to Bank of America analysts estimates. “Our market exposure is actually very favorable. If we think about our top two businesses, being aerospace and energy, we actually see very favorable trends. … Our orders were up 12%. Our backlog was up 12%,” Adamczyk told CNBC. “So, a lot of these headwinds that others are seeing, with us being a little bit more long-cycle oriented, we’re actually seeing a pretty strong environment, and there’s a lot of debate out there about whether or not we have a recession coming. But in my view, as we look at a couple of our top markets — namely aerospace, energy, building technologies — all of these showed very robust in Q2 and I expect that to continue independent of what may happen with the broader economic conditions.” Travel demand has surged after Covid-related disruptions, and some airlines are looking to modernize their fleets and capitalize on the recovery. Honeywell makes parts used by aircraft manufacturers Boeing (BA) and European rival Airbus. Both planemakers have been working to scale up production, although supply chain snarls have been a major impediment in the near term. “Although we’ve had some tailwinds in terms of air travel, we think there’s still more ahead. And obviously, as anticipated, private aviation has been a big winner, too. That’s been up substantially, both on the air miles flown as well as the build rates and order rates for some of our customers,” he said. In the second quarter, Honeywell’s aerospace sales rose 5% year over year on an organic basis. Its Performance Materials and Technologies segment, which includes its divisions that make products and software that serve the oil and gas industry, saw revenues rise 10% compared with a year ago. 2. Inflation and chips Inflation has been a thorn in the side of businesses and consumers alike, prompting an aggressive monetary tightening campaign from the Federal Reserve in recent months. While some commodities have rolled over, Adamczyk said he’s not ready to signal the worst of the cost pressures are behind Honeywell just yet. However, he expressed confidence in Honeywell’s ability to navigate it in ways that allow the company’s sales and profits to keep growing. Honeywell on Thursday raised the lower end of its full-year earnings guidance to $8.55 from $8.50, although the top end stayed stable at $8.80 per share. It also hiked its full-year segment margin guidance to a range of 21.3% to 21.7%, up from 21.1% to 21.5%. “I’m not ready to say inflation has flattened yet. I really need more time to see what happens. We’re anticipating more inflation in the second half. We’re just going to have to say ahead of it,” Adamczyk said, using both price increases and cost-cutting strategies to protect earnings. “You have to use all those things. No. 1, you have to stay cost cautious. Obviously, you have to get price where you can. You have to manage your mix. That’s something else we’re doing, in terms of availability and really driving the products that have a higher margin profile. All those levers we’re using.” The CEO said Honeywell is also rethinking the design of some of its products, specifically those that require semiconductors to be completed. A shortage of microchips during the Covid pandemic has disrupted all sorts of industrial production and been among the many inflationary pressures. At a high level, Adamczyk said semiconductor availability is “slightly getting better,” but Honeywell isn’t waiting for the situation to return to pre-Covid conditions. It’s not that all chips are unavailable. It’s that some chips are unavailable, and what we’re really trying to manage is to work with our suppliers to figure out what chips are actually available and which ones are not. What we’re doing is redesigning some of our offerings to the chips that there’s much greater availability.” 3. Currency headwinds The strength of the U.S. dollar this year has been yet another challenge for multinational corporations this year, potentially serving as a drag on results. Charlotte, North Carolina-based Honeywell gets about 60% of its revenue in the U.S., while the remaining 40% is foreign. That’s not the most international revenue exposure in our portfolio — a full breakdown of all 33 firms can be read here — but it’s still notable. Some companies, such as Club holding Johnson & Johnson (JNJ), have trimmed their full-year forecasts and cited dollar strength as a result. Adamczyk told CNBC it also has been an issue for Honeywell, but it did not stand in the way of the company raising the low end of its earnings forecast. “It’s a problem for us … It’s a 14 cent year-over-year headwind [in our full-year earnings per share outlook], and it’s a nickel worse than we even anticipated at the beginning of the year. With Honeywell, we take great pride in being able to operate through all environments. We had the perfect excuse to lower our numbers based on FX. We didn’t do that. Our beat and raise that we’re demonstrating here at the end of Q2 is actually much greater because we’re also overcoming the impact of FX. So, it is a substantial headwind to the tune of 14 cents on a year-over-year basis.” (Jim Cramer’s Charitable Trust is long HON and JNJ. See here for a full list of the stocks.) 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