We're very happy and honored to be the first, I guess, standalone presentation as we approach. Well, you guys have done standalone presentations before, but like.
We have, yep.
This is a little more special because the Form 10's out and Honeywell Aerospace is gonna have their investor day soon. We have Jim Currier, who's CEO of Honeywell, soon to be a public company, Honeywell Aerospace, and my colleague, obviously, Seth Seifman up here, who's gonna be covering the stock, is probably gonna be asking most of the questions. I'll chime in every once in a while 'cause it's just hard to let go.
Yeah.
Seth, you know, fire away.
Well, thanks, and yeah, definitely, ask some questions, and we'll go out to the room as well and see if anyone wants to ask any questions. Thanks for coming, Jim. Maybe just to start off at a high level, we've got a Form 10 out there, Investor Day coming up in early June. I guess, what's your main message for investors as they think about Honeywell Aerospace becoming a standalone public company?
Yes, by the way, Steve and Seth, thanks for the opportunity to come up here and speak a little bit about Honeywell Aerospace. You know, the Form 10 submittal and now being public with the Form 10, a major milestone, a significant milestone on our journey towards separation, and really puts us on that path to have that complete in the third quarter of 2026. As to your point, you know, early June, we'll have our Investor Day in Phoenix, Arizona. Specifically, it'll happen on June third. If I think about key points and key messages around Honeywell Aerospace, you know, one of the things that comes to mind first and foremost is, you know, the breadth of the portfolio and the depth of the portfolio.
What I refer to relative to that is, you know, anywhere that you can think of some of the most complicated integrated systems on an aircraft platform, whether it's in the cockpit, throughout the cabin itself, flight controls, flight management systems, engine systems, we are on nose to tail on every single one of those platforms. About 90% of all the platforms that fly in the free world have Honeywell Aerospace content on board. You combine that in terms of the depth that we talk about, and that's really around the end markets that we serve, whether it's gonna be in the commercial air transport space, whether it's gonna be in business aviation, or whether it's in defense and space segment.
We have a very broad breadth of portfolio of highly integrated systems, highly complex systems, that are in the most high-value portions of an aircraft platforms, and then therefore spread across those three end markets that I was mentioning a moment ago. The key things I would mention is that you take that and you combine it with a business whose growth is driven by innovation, driven by technological differentiation, again, going to those complex systems on these aircraft platforms. Combine that with our operational management operating system within the business, which is near best in class, and you combine that with the strong financial strength of the business, you really create a scenario whereby Honeywell Aerospace is going to be able to create long-term value for our shareholders. That's really the key points and themes that we have within the business.
Okay. Yeah, I mean, one of the things that's always striking to me is the breadth of the business and how you guys are on pretty much everything. We talk about, you know, biz jets, and we talk about commercial and defense and engines and systems. When you think about the relative growth rates of the main end markets, so, say, commercial transport, biz jets, defense, how do those stack up for you?
For full year 2026, we're guiding high single-digit growth for the business. If you break that down into those three elements that you described, the commercial OE business for Honeywell Aerospace will be high single digits in 2026. The commercial aftermarket will be mid-single to high single digits. Then where we're seeing also tremendous strength is in our defense business, in our defense portfolio, where we're talking high single to low double-digit growth across those businesses. That's how we see the end markets, you know, playing themselves out in support of the business here, both near term throughout 2026. We don't see the defense demand, you know, waning at all.
60% of our business is commercial, 40% of our business is defense, and we're seeing that continued strong demand, and we anticipate that's gonna continue for the foreseeable future. The one thing I would say also is that, you know, we had a very strong fourth quarter of 2025 in terms of our supply base output and factory outputs across the organization. You know, typical seasonality for us is we tend to see after a very strong fourth quarter like that, we see a little bit of a slower start, you know, in that January and February timeframe, and then we see that start to ramp in the March. That's exactly the same thing that is happening this year.
Given the ramp that we're seeing in the March timeframe and that seasonality that I mentioned in January and February gives us that confidence combined with the demand that we have across the portfolio in those end markets to look at that high single-digit growth for the business full year.
I wanna talk a little bit more about defense because, you know, it sounds like that is probably the fastest growing of the three market segments this year. You know, when we think about where this goes going forward, we did a number of kind of thematic panels yesterday, and the demand for missiles was kind of at the center of a lot of what we
Mm-hmm
We spoke about. I know that navigation systems are a key part of the Honeywell portfolio. Maybe if you could talk a little bit about your exposure there.
Yeah, exactly. Well, I mean, suffice to say the heightened geopolitical concerns and conflicts that are happening around the world and have been for quite some time is fueling a substantial amount of investment into the defense sector, whether that's gonna be domestic investment or whether it's international investments that are occurring. There's two foundational relevant areas as to why there's so much investment is occurring. I mean, beyond the fact that there's conflicts that have happened between Ukraine, the Israeli conflict, and now the ongoing conflict with Iran. If you think about mission readiness and operational readiness, you know, those are investments that have not been made at the proper levels for greater than 20 years.
As you think about these conflicts, and you think about operational readiness of fixed-wing aircraft, rotary-wing aircraft, and the like, there's a substantial amount of investment that's occurring both domestically and abroad in terms of spares, repair, and overhaul to increase and improve the operational readiness of not only the U.S., but as well as our NATO allies overseas as well. Specifically on the lines of missiles and munitions for a moment, again, it's a kind of a similar, you know, scenario that's played itself out. For the last 20+ years, there's been a lack of investment in stockpiling of missiles and munitions.
You combine that fact with the usage that's been occurring over the conflicts that I mentioned a moment ago, it does create that critical need to not only increase munitions and munitions production for stockpiling purposes, but also for theater in use today as a result. We're seeing strong emphasis in demand and growth in that particular area. I think it's important to realize, because we don't talk about it very often, is that where are we positioned on these missiles and munitions, and where are we positioned on fixed-wing and rotary-wing aircraft with our products and services? Nearly every single fixed-wing, rotary-wing aircraft, both with our NATO allies and domestically, have our engines, our APUs and some avionics systems and thermal cooling solutions on board. As mission readiness becomes a critical factor in operational readiness, we're seeing strong investments there.
On the missiles and munitions side, there isn't a single precision-guided missile or munition that does not have a Honeywell navigational product on board. I talk about, you know, the proliferation of those missiles and munitions. You can think about, you know, GMLRSs, you can think of AMRAAMs, you know, PAC-3 Patriots, THAAD, Tomahawk, PrSM, LRASM, JDAMs, and JASSMs and the like. Every single one of those have our navigational products on board at a minimum. Across those missile platforms, and again, with the breadth of our products and technologies, you start to see other products on board those as well, whether it's electromechanical actuation systems, whether it's electronic warfare capability on these missile systems, seekers, flight control systems, radar altimeters.
You can see across all of that, which is in a very high demand portion of the portfolio, the proliferation of Honeywell Aerospace products across those missiles and munitions.
Yeah. Just to maybe dig a little deeper on that and put some numbers around it. You know, we see these framework agreements between DOD and Lockheed and Raytheon to, in the case of PAC-3, tripling production.
Mm-hmm
Over the next several years. In the case of THAAD, quadrupling production. When you think about your missile business, is that kind of the scale of the multiyear increase that you think about?
It is.
Okay.
It is directly in line with doubling, tripling, and quadrupling, depending upon which specific missile platform you are referring to. Our ability to be able to support that is the fact that we You know, 60% of our business is commercial, 40% of our business is defense. We tend to develop products in the commercial segment and then move them over into the defense environment. We actually consider ourselves to be really a commercial company that happens to sell commercial products into the defense segment. The reason why that's important when you think about the necessity to augment production and capacity accordingly to meet the ramps that you're talking about, is that since we do develop these on a commercial basis, we self-fund the development of those products.
We self-fund the capitalization of our factories as well, and we also support our supply base to meet those needs from a capitalization standpoint. The point being is that as a commercial company selling into defense, you tend to be much more agile in your ability to move, much more nimble to respond to the demand requirements, and we will self-fund as required because these are commercial products that we are funding into that therefore then translate into our ability to move them into the defense segment.
Excellent. I guess when you think about that need for investment to produce at higher level, is there, you know, a significant capacity investment that's required to drive that level of growth?
There is, but it's already been factored in as part of our plans, right?
Right.
As you look at our Form 10 that is out there that projects out our financials past and future, all of that investment was built in, and we've been investing in that area now for quite some time, and particularly in the commercial space for those commercial products as a result. We will continue to do that on a go-forward basis. Over the last few years, in terms of trying to add resiliency, robustness, and increasing output from our supply base, we've invested well north of $1 billion over the last couple of years, and that's a result of dual sourcing, multi-sourcing, in-sourcing, in-shoring, and also supporting our suppliers as well in terms of their capitalization needs.
A big portion of that was actually in the space around missiles and munitions to increase capacity that we saw that was necessary not just for commercial, but also for the defense, and we will continue to do that on a go-forward basis as well, and it's all built into our financial projections.
Because these are commercially developed products, I guess the fact that the defense end market is growing relatively quickly does not present a mixed headwind.
It does not.
Right.
It will not present a mixed headwind for us in that particular space because the commercial nature of those products.
Yeah.
Cool. Maybe I'll take a brief pause, look out at the audience and see if anybody wants to ask any questions, but we've got plenty more to ask here.
Can you maybe delve into, maybe you were gonna get to this, but?
Yeah
The space aspect of defense?
Sure.
Space, what your exposure is there?
Yeah. Our space business, as categorized as pure play space, is about mid-single digit revenue as a % of total revenue of the business. That encompasses many facets, whether that's part of what's called Golden Dome, whether that's part of interceptor programs, whether that's part of exquisite capability that we provide in providing stabilization of satellite systems for ISR reconnaissance purposes, whether it's optical communications that are happening in space as well. That's sort of where we have proliferated across, and it's more on the government and more on the exquisite end of the equation. Even though we have systems that support launchers, navigational products, if you think about Orion as an example, we have all of the avionics, flight control systems, navigational products, computers, flight control computers as well. I mean, that's sort of where you see us on the commercial side.
We don't play on the low-end commercial satellite portion of the portfolio just because the capability of what we provide in terms of rad-hardened equipment, radiation-hardened equipment, is what's necessary to maintain these systems in space for 15, 20, 30, and 40 years. We tend to play more on the higher end of the space spectrum in terms of products and portfolios and technology.
Okay.
Oh, we've got a question. Let's go to the group here.
Thank you. I'm curious how you're thinking about the landscape, more skewed to the defense side. It seems to be changing rapidly as you think about when you look at private companies that are, you know, growing substantially, the government's turning to them, companies that I don't wanna mention names, but make drones and other sort of, you know, autonomous vehicles, autonomous watercraft. A little bit on the edge of what you're doing, but when you think strategically about your business over the next five- 10 years, how does that impact you? Partnerships, potential acquisitions, something else? Just love to get your thoughts because the landscape's changing very rapidly. Thank you.
You won't see us actually producing or manufacturing drones as an example, right? The technologies that we provide are applicable into drone applications and more along the lines of not the small commercial drones that you see in use in a defense segment, but more on the medium to high-end version, 'cause that's where our technologies play, and play very well in terms of capability that they provide. As you think about some of those entrants that are coming into play, we are absolutely working with them in terms of providing the necessary integrated systems that allow said drone to carry out said mission. You know, whether that's gonna be cooling solutions, sensors, autonomous capability, whether it's gonna require engine systems or APUs as you move towards the mid to higher end combat collaborative aircraft as well as part of that.
We definitely are playing with all of those entrants and working with them in terms of providing products and services to support the growth of their respective drone that they may be providing. The other thing I would say, though, is the true realization that we really are a commercial company, and that allows us to move at speed and a technology cadence in terms of development of said technology at a pace that's very different than what happens in the typical government applications of said programs. My point there being is that what we do in our industry within Honeywell Aerospace specifically is our design philosophy is around develop once and deploy everywhere, which means we don't develop any specific technology or core technology that is bespoke for any end market or any specific aircraft platform.
That allows us this ability to move at a technological speed in terms of development and the cadence of speed that's necessary, that's required for that is very different, and we look much more like a commercial company to the U.S. government, which is what they're looking for. They're looking for that speed and cadence of technology development in concert with some of the new entrants that are coming into play to provide that capability on their drones and on their platforms that they're developing as well. We fit very, very well into the desires in terms of how to develop this technology and who to play with in the space. That's not just domestically, it's also internationally as well.
When you think about growth opportunities that exist, you know, today there's this incredibly strong push in the international markets, particularly in the EU and with our allies overseas in the Pacific Rim region as well, to be more self-reliant on their defensive needs, to be a little bit more autonomous in their needs to defensive capabilities and move away from some ITAR-controlled technologies or away from some current U.S. technologies and the like. We've been doing that already for 20+ years. You know, I have over 1,000 engineers sitting in the EU that do nothing but develop non-ITAR technology for use there in region and in theater. It's really important because if you think about our defense business, you know, of that 40% that is defense, about a third of that is international defense, and that's not foreign military sales.
These are direct sales that we are making to ministries of defense, NATO allies, international defense primes, largely non-ITAR technology that we've been developing indigenously within the EU. To your point about maybe acquisitions or JVs and how does that play into it, that was actually one of the cornerstones of why we acquired Civitanavi in 2024, the latter part of 2024, which was because of their technology, non-ITAR technology around navigational products, and being able to bring them to the market at scale there in region within the EU and overseas in the Pacific Rim region as well.
It is foundational as part of our defense strategy as not only supporting the U.S. market from a commercial standpoint, but also focusing on the international market, non-ITAR technologies, and moving in that space and growing because the international defense market for us is one of the higher growth portions of our portfolio as a result. Also the advantage of that is being a commercial company is we're able to get commercial pricing for those products that we're selling into the international defense space. It is a high-focused area for us. Now, last comment I would make around that is, you know, continuing to work in Europe, not only with developing technology but having a manufacturing footprint, is also looking a little bit more European, you know, acting a little bit more as a European company.
Do I see true opportunities to develop some JVs in Europe with some of the major defense primes? Absolutely. I can see that in our future, and that's part of our plans going forward as well because there's gonna be capability that we bring combined with existing technologies or future technologies with some of these international defense companies that will really be able to support the needs there in the EU and elsewhere around the world.
Excellent. I'm told that you guys do some stuff in commercial aerospace as well.
We do a little bit.
Yeah. Maybe we'll pivot to that. It might be early to ask this question, but I kind of feel like I have to ask. You know, what are you hearing, if anything, from airline customers in light of the increase in fuel prices that they're facing now? And how are you thinking about planning out the rest of the year in light of that development?
I'd say it's very early innings, right, in terms of, you know, what will be the impact across, you know, the commercial aftermarket in the airline space, specifically. Clearly, airlines are most, you know, imminently affected by the rising fuel prices that are occurring, and you see that translating into ticket prices as well. What I would say is a sort of a wait and see approach for now. However, what I would tell you specifically as it pertains to us, you know, if this was on a much longer protracted timeline, what would I anticipate to be the outcome that would occur as a result? We tend to be further insulated from what's currently happening today, and so we've seen this before, right?
This is not new in terms of significantly high prices for fuel, the impacts on the airline industry, and how does that roll through the ecosystem as a tier one provider of equipment, and a tier one provider of maintenance repair and overhaul services for the airlines. We tend to see any implications on us about three-six months down the road, and the reason being is it takes time for that to work itself through the ecosystem of the industrial supply base. I mean, our factories are full currently of all the products necessary for airline customers. We have inbounds that are coming in as well of material already, into our factories as a result. Plus customers don't wanna lose their place in line, right?
That when this subsides over a period of time, they wanna be able to have that equipment on board to be able to go back into the growth trajectory. We're rather insulated in that regard, particularly in that three-six-month horizon for many implications. You know, if it's short-lived, you won't see anything ripple through the ecosystem. Long term, you could start to see that. The other insulating factor for us that is very helpful is that because we support a broad commercial segment on the OE side for commercial aftermarket, which is what we're talking about on commercial and defense and space, there's only one industrial supply base. There's not a commercial aftermarket supply base, there's not a commercial OE supply base, and there's not a defense and space supply base.
As I mentioned a moment ago, where we're seeing substantial growth, you know, high single digits in commercial OE, high single digits, low double digits in defense, you know, our growth is truly constrained by what's available in the supply base. It has nothing to do with the demand that we're seeing in Honeywell Aerospace. My point being is that if you start to see a demand wane in terms of the necessity for commercial aftermarket, in terms of flight hours going down and the like, and then therefore the less that you need to repair, ultimately we just pivot. We just pivot the supply base and the demand into our supply base to be more focused in on commercial OE and/or repivot that demand over onto the defense and space.
It further insulates us, and that's part of the benefit of the breadth of the portfolio and the depth of our portfolio in serving multiple end markets because we're not monolithic with our product portfolio, and we're not monolithic in terms of the end market that we serve. That flexibility allows us to move in ways to keep the business growing, even though you may see a perturbation sometime down the road that may result, again, early innings, as a result of the fuel prices and the impact on the airlines.
That's very helpful. I guess maybe if you give us an update on maybe two things. On the OEM side of the business, what kind of rates you're building to on the main platforms, and then maybe on the supply chain and where things stand in terms of supply chain health. Maybe any lingering areas of challenge.
Yeah, in terms of OE growth, I mean, we are aligned to the growth that we're seeing with our customers, and we're delivering at rate necessary for the main commercial OE customers. You know, whether that's gonna be, you know, your commercial or transport customers of, you know, Airbus and Boeing and the like, or whether we're pivoting over into the business aviation segment as well, or international, or I'm sorry, defense primes as well. We are definitely able to deliver on that commercial OE portion of the business. Now what you may see is some quarter-to-quarter fluctuations that happen. That's pretty normal within the commercial OE business, but overall on a protracted timeline, we'll be growing at rate as to how our commercial OE customers are growing.
If you pivot that back into the supply base for a moment, again, I have to mention or reiterate the fact that we've got this broad portfolio, and I tend to bifurcate the supply base into the electronics portfolio and the mechanical portfolio of the industrial supply base. The electronic side and what were root causes of constraint over time are very different than the constraints in the mechanical base in terms of the root cause of that. What I would tell you on the electronic side, it's largely recovered fully, and we don't see any issues happening there anymore like we had seen before. Where the constraint still exists is in the mechanical supply base, and the root cause around that that's underlying across our entire industry is really around labor and labor availability.
When you think about the labor that's required to do castings and forgings, if we think about the labor that's required to do complex machining operations, special processing, coatings, powdered metal availability, raw material availability for bearings and the like, that's still a highly constrained environment. It's improving. It is substantially improved from its low point of a few years ago, but there's still a lot that still needs to occur to unlock, and that's really the constraint that prevents, you know, the demand at being fully realized, that's that we're seeing across our industry, not just in Honeywell Aerospace. So you'll see us to continue to invest, you know, in that supply base. Part of the issue in the mechanical supply base is the fact that it's highly fragmented.
If you look at the electronics industry, you've got four or five major players, so far more automated, and you're basically taking circuit cards and stuffing them in boxes and then, you know, providing, you know, said product to the industry. The mechanical side is highly fragmented. There's a lot of family-owned businesses, you know, 50-person shops, 100-person shops, 300-person shops, and those family-owned businesses are still feeling, you know, the pains financially of what had transpired throughout COVID, and they're still growing, you know, through those pains going forward.
And so that really is where we've been spending a lot of investment and will continue to invest heavily, and that's in terms of, you know, recapitalizing their factories, that's in terms of providing people into their factories to show them lean manufacturing technology or capability to improve efficiency and productivity, as well as buying raw material for them as well. You know, mills now will not provide small batch raw material for some of these, you know, smaller operations. They wanna do large runs. Well, that's very difficult for a small family-owned business to be able to do that and carry that inventory accordingly. Well, we'll go in, and we'll buy all that raw material.
Right
You know, on their behalf, you know, in a large run, and so therefore we'll carry that inventory as a result of doing that to support them. It also provides us that capability of having all that raw material to, when we look at, you know, dual sourcing or multi sourcing, we have that material readily available to be able to accelerate that aspect and continue to unlock the supply base as a result.
Excellent. I've got a couple more, if there's anything you wanna get to.
I don't know if you're gonna get to margins or.
Yeah, that was my next.
Go ahead.
Yep.
Fire away.
If we could talk a little bit about as a standalone company where you see the margin expansion potential, and is there a path to moving further into the mid-20s%?
Yeah. I mean, there's definitely that potential that exists for us and what we anticipate. In 2026 I would say, you would expect to see our margins grow modestly, you know, year over year, from what we've saw in 2025. There's a couple of tailwinds that are enabling that to happen. As we continue to increase volume through our factories, we'll see that volume leverage drop to the bottom line and be a tailwind for us in terms of margin accretion. You know, we've got the ability, in terms of, commercial excellence within the business to get to the right price/cost ratio, to address any cost issues and tariff issues and the like.
The third tailwind that I would mention is that, you know, the integrations that we were doing through the acquisitions with CAES and Civitanavi in late 2024, those integration costs are falling off as well. Those are the tailwinds, you know, for the business, but there are some offsets to that as well a little bit, and that's gonna be, as I mentioned before, if you talk about two of the fastest growing end market segments that we serve, commercial OE and defense, as I mentioned earlier, you know, those tend to be margin dilutive to some extent, particularly on the commercial OE side of the business. If you trade off the tailwinds that I mentioned, and you trade that off versus the headwind, that's why you're gonna see just a modest increase in YoY. That will continue to grow going forward.
Where our focus really is in the business is around execution, growing the business, growing EBIT across the board, creating strong cash flow for the portfolio, and then reinvesting that back into high capital return opportunities that are really grounded around the growth of the business, right? We think about capital allocation and capital allocation priorities for Honeywell Aerospace in a post-separated state. I look at across four pieces of the equation in this priority. First and foremost, there's gonna be continued investment and growth. Being an innovation-driven company, we will continue to invest in new products and new services to support the industry. That also culminates in investing in the supply base. It also looks in terms of capital projects that we would do.
Second priority for us in a post-separated state would be dividends, you know, and we will be in line with our peers in terms of dividend payouts as a standalone, independent, A&D company. The third area of priority for us is gonna be around M&A, whether it is gonna be bolt-on M&A, tuck-in M&A. That kind of follows the same rubric that we have used when we looked at CAES and Civitanavi. High-growth, accretive businesses in high technological spaces, share common customer set with us, create opportunities in terms of enhanced sales synergies, and again, as I mentioned, growing accretive to what the industry is growing today. That's the third priority. The fourth one would be opportunistic share repurchases, you know, if and when they present themselves, and we feel that's valuable. That'd be the fourth, you know, lower priority element of that.
First and foremost, for us, the priority is execution. We have substantial amount of demand in the business, and we wanna capitalize on that demand and continue to reinvest back into the business, whether, again, that's gonna be through capitalization projects or new products and new technologies from an RD&E standpoint. Over 4% of our sales is invested back into the business, self-funded for RD&E purposes. Now, that's the self-funding part of the equation. We do receive a substantial amount of customer funding as well, you know, for our products and for our technologies. That equates to about 6% of total revenue today.
In totality, roughly 10% of our total revenue, and if you go back and you look at 2025, over $1.7 billion is just being reinvested back into the business in new technology, in new products, in new services, and that's largely driven by the fact that over the last three years we've secured over $90 billion of lifetime value wins on certain contracts across all portfolios and across, you know, all end market segments that we serve as well. This is the environment to see substantial demand and substantial growth, and we're gonna fuel that as a priority and execute the business accordingly as a result.
Obviously, there's some corporate costs that kind of play in, but the former 29%, is that still something you feel comfortable with?
It's a long-term goal.
Adjusted for, you know, whatever, then you take it down 'cause of the added corporate costs or whatever?
Yeah, I mean, it's still the long-term goal for the business ultimately.
Okay.
We really wanna focus on EBIT growth, and then drive that on the organization and the cash flow ultimately. You'll continue to see that modest YoY increase on rate.
What do you consider long term? I mean, for aerospace, long term can mean 10 years, so.
Yeah.
What do you consider long term?
I'm not gonna box it in necessarily into certain things, right? Because, again, there's a lot of things that can happen. We could see an M&A opportunity present itself and the like as well, but it is definitely a long-term goal for the business.
Okay.
When you were talking about the capital deployment priority, I think, you know, the company's gonna emerge with some debt-
Mm-hmm
-on the balance sheet. What's the right level of leverage for Honeywell Aerospace?
We'll exit at about a gross leverage ratio of just north of three.
Mm-hmm.
You know, if you think about what our long-term goal is, it's gonna be 2.5. We're committed to a strong investment-grade rating. We've had that now from both, you know, from Fitch, Moody's, and S&P, and we will continue to commit to that going forward. There will be a natural de-leveraging that will occur, you know, as the business is growing and as we're driving EBIT and as we're driving strong free cash flow, so there'll be a natural progression of de-leveraging the business as a result of those elements and the growth of the business happening, but long-term goal for us is gonna be sitting right around 2.5, and our capital allocation practices and policies and the like will ensure that we maintain that strong investment-grade and around that 2.5 point.
All right. Okay. Great. I see one in the front row here, and that's so that'll be our last one I think, 'cause we're right about at time here.
You can just go ahead.
Yeah.
Yeah, yeah.
Talk about maybe how you guys your incentive structures might change with the separation. Is there gonna be a return on capital component? Talk about the main KPIs and how they might be different with it with the separation.
Well, what I would say is that ultimately the incentive structures for executives and the like in the business, is that what you're referring to specifically?
Yes.
It'll be ultimately determined by the board, but what I would tell you, it will all be performance driven, right? It'll be driven around output. It'll be driven around growth of the business. It'll be driven around opportunities for capital allocation, but those have yet to be finalized, but you can see it to be in line with what we've seen with Honeywell today.
Oh, wow.
And what we would see going forward. It's gonna be all performance driven of the portfolio.
All right. I think we're all set. Jim, thanks so much. Look forward to seeing you in Phoenix and at a lot more of these conferences.
Awesome. Thank you.
Excellent. Thanks.