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 that Honeywell has performed in line with DBRS Morningstar’s expectations. Additionally, Honeywell's strong business risk profile, the primary support for the current ratings, remains stable. Operating results at Honeywell were materially affected by the recessionary conditions caused by restrictive actions taken by governments to control the spread of the Coronavirus Disease (COVID-19). All key credit metrics in 2020 weakened meaningfully as anticipated. However, improving market conditions have led to a solid recovery in operating results in H1 2021, and DBRS Morningstar expects that continued improvement in Honeywell's performance will restore its financial risk profile to within the current rating range in the near future.

Honeywell has maintained its strong market position in its businesses despite disruptions caused by the pandemic. The diversity of the businesses underscored the resilience of Honeywell’s business profile during the pandemic with gains in the safety products, warehouse automation equipment, software and solutions, and defense and space businesses partially offsetting the sharp decline in the industrial businesses, which were depressed by the pandemic. The Company continues to strengthen its business profile by actively managing its portfolio of businesses and executing on its three transformative initiatives: Honeywell Connected Enterprise, Honeywell Digital, and Integrated Supply Chain.

The pandemic caused a decline in the demand for most of the products and services at Honeywell's businesses, especially those in the commercial aviation sector. Honeywell took prompt actions to adjust its operations to the weakened environment and implemented cost-reduction programs. While operating results at Honeywell suffered a meaningful decline in 2020 compared with 2019, strong government stimulus programs helped boost consumer demand in the latter part of 2020 and the rollout of vaccines in early 2021 has further strengthened economic conditions. As a result, Honeywell reported improvement in operating results in H1 2021 compared with H1 2020. However, Honeywell's action to raise debt to strengthen its liquidity position through the pandemic has weighed on its key credit metrics and slowed the recovery of its financial risk profile. DBRS Morningstar expects market conditions to remain positive for most of the Company's businesses and Honeywell's operating results to continue to improve in the medium term. However, the proliferation of variants of the virus and continued disruptions in the global supply chain are potential headwinds to Honeywell's recovery.

DBRS Morningstar notes that Honeywell is still in recovery mode and, hence, does not expect to take any positive rating actions in the near future. However, a decline in the Company’s key credit metrics to below 2020 levels on a sustained basis could lead to DBRS Morningstar taking negative rating actions.

ESG CONSIDERATIONS
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/373262.

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

The principal methodology is Rating Companies in the Industrial Products Industry (January 29, 2021; https://www.dbrsmorningstar.com/research/372944), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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