When: Tonight, Friday, April 20th at 6PM ET
Where: “Mad Money w/Jim Cramer”
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with David Cote, Chairman & CEO of Honeywell, on CNBC’s Mad Money w/Jim Cramer” (M-F, 6PM & 11PM ET) tonight, Friday, April 20th at 6PM ET.
All references must be sourced to CNBC.
JIM CRAMER, host: We've reached the end of Green Week here at NBC Universal, a celebration of Earth Day this Sunday, and to cap things off, I want to highlight a great American manufacturer that's quietly but surely helping to fight climate change and make the environment a cleaner place. I'm talking about Honeywell, HON for you home gamers. The diversified industrial company that makes everything from aerospace components to automation and climate control equipment to security gear, special materials, auto parts. You got one in your home, I bet. When you think green, your mind normally goes to solar power companies, maybe the makers of wind turbines. But these often uneconomic solutions don't amount to much energy at all, especially when you take away the government subsidies that make them viable. But you know what makes a real difference and actually turns a profit at the same time? Energy efficiency, something Honeywell's uniquely involved in. Half of their products are linked to energy efficiency and 40 percent of all the electricity that is used in the United States is controlled by Honeywell's building automation technology. Plus, Honeywell makes more fuel-efficient power trains for cars, turbochargers that can improve your car's gas mileage by 35 percent. Just two days ago, the company announced that they're flight testing a new green jet fuel. It's a biofuel based on an oilseed seed stock. Honeywell is one of the most innovative and best run companies I know. So it's no surprise when the company reported terrific quarter this morning....99 cent basis. Story that expected revenues that rose 7.3 percent year over year, driven in part by the phenomenal strength of their aerospace business. The stock was up a buck 39 or 2.4 percent today, and it's giving you an excellent return of over 40 percent, including reinvest of dividends since they got behind in September of 2010. That's why I'm thrilled that Dave Cote, Honeywell's bankable chairman and CEO, who just celebrated his 10th anniversary in that position, here with us tonight to talk about the quarter and where his company is headed.
Mr. Cote, welcome back to MAD MONEY. Good to see you, Dave. Have a seat.
Mr. DAVE COTE: What a wonderful intro. Thanks.
CRAMER: Well, it was...
Mr. COTE: Always nice to see you, Jim.
CRAMER: I take my cue from you. This was the most bullish I've heard.
Mr. COTE: Yeah.
CRAMER: You started out with the word terrific. You must feel much more confident than the last time I saw you.
Mr. COTE: I would say the economy is still something that I think could be a little iffy globally, just because of the interconnectedness and what's going on in Europe. But even within that, I feel pretty confident about our ability to outperform. So, yes, I guess I probably am.
CRAMER: And this aerospace. I mean, it sounds like this is multiyear move. I'm talking--you didn't break out exactly how many planes. But it sounds like this is not something that's going to be done in a year or two.
Mr. COTE: No. And it's not just number of planes for us. I don't know if you just saw, we just got a $2.8 billion order with Inmarsat.
CRAMER: So I can stream my videos on an airplane.
Mr. COTE: Well, here's--actually, that's exactly right. And the cool thing about this is this was a $500 million deal that we did about eight months ago and now we just landed a $2.8 billion order. So we're...
CRAMER: That's what I like about Honeywell is I never know where the money is going to come from next.
Mr. COTE: We feel pretty good about that one.
CRAMER: So if aerospace is good, there's another business that I was glad to see is doing well, which is this performance materials business.
Mr. COTE: Yeah.
CRAMER: People don't know what performance materials are. Describe like the big order that you got that drove that terrific number.
Mr. COTE: I wouldn't say it was just any particular orders.
Mr. COTE: I would say it was three segments, really. The biggest one of them is this UOP that you hear us talk about...
Mr. COTE: ...where we're the leading designer of processed technologies for refineries throughout the entire world.
Mr. COTE: There's incredible US confidence...
CRAMER: You refine even oil sands oil, right? The worst...
Mr. COTE: It's not just oil sands, but when you think about even household detergent...
Mr. COTE: The stuff that you use--it's usually refined using our stuff.
Mr. COTE: It is unbelievable what our guys are able to do.
CRAMER: OK. Now, I mentioned the turbo engines and I mentioned...
Mr. COTE: Yeah.
CRAMER: ...a bit--now, that is a business where I did not see great growth and you correctly--I mean, you really ascribed a lot of that to--you're talking about United States maybe being strong, but Europe is...
Mr. COTE: Europe is tough right now.
CRAMER: Everything is making up for it. It's tough, right?
Mr. COTE: Yeah, because sales, auto sales in Europe are down about 10 percent.
CRAMER: That's big.
Mr. COTE: And you say, OK, they're down 10 percent. But we were down only 1 percent and the big driver of that is we're just winning so many platforms. So we're going on to so many new things.
Mr. COTE: So when the auto industry comes back just a little bit, that business is going to perform really well. Those guys are executing extremely well for us.
CRAMER: And you're also doing well, despite the fact that you're still not getting the building construction that you thought you'd get.
Mr. COTE: Correct, yeah. Even in--so you think about automation and control solutions...
Mr. COTE: ...and there is an impact there to housing and nonresidential construction. That's been pretty much flat for a while. We don't think it goes down further.
CRAMER: Right. Right.
Mr. COTE: But we're performing this well and that hasn't even started to take off yet. So I feel pretty good about where things could go here.
CRAMER: Now when I look at this aerospace, what I come down to is just that I don't think people realize you're in everybody's plane. You're agnostic, right? So that's why...
Mr. COTE: Generally.
CRAMER: And if I had to look at the division that did worry me the most, defense and space. Is that just going away?
Mr. COTE: I don't know that it's going to go away, but I would say I've been--I've been predicting a defense industry downturn for six years.
Mr. COTE: So I might finally be right.
CRAMER: Right, right.
Mr. COTE: So we've been kind of planning for this for a long time, saying this is unsustainable. It can't keep going this way.
Mr. COTE: So I think this year we're right. And...
CRAMER: It finally happens.
Mr. COTE: It finally happens. But I don't think it's going to be precipitous. So we're--we've got like a first half, second half difference here.
Mr. COTE: We'll see it more impact in the second half. But then it only declines 1 or 2 percent a year after that.
CRAMER: OK. So you can handle that.
Mr. COTE: It's not a killer.
CRAMER: Now, China was weird for you guys. It seems like you got--you know, a lot of people wouldn't think that China would get stronger during a quarter.
Mr. COTE: Well, we...
CRAMER: Started slow.
Mr. COTE: Yeah, well, we ended up with 20 percent growth in China this quarter.
CRAMER: Right. You should feel pretty good.
Mr. COTE: Yeah. So if that's what bad is...
CRAMER: Right, right.
Mr. COTE: ...great, we'll take more of it. But a big chunk of that was driven by long-cycle stuff. So you think about aerospace, oil and gas.
Mr. COTE: That kind of stuff. Short cycle, we did see the rate of orders growth decline a little bit but starting to pick up. And personally, I think, as you start to get in the second half with a leadership transition...
Mr. COTE: ...you'll see more financial flexibility in the country helping to boost the new president coming in. Nobody wants the new president to come in and have a bad economy right...
Mr. COTE: ...right away.
CRAMER: Now, it is Earth Week and I think that you guys have done more than almost any other company to come up with economic solutions.
Mr. COTE: Yeah.
CRAMER: Not pie in the sky solutions but solutions that don't need government subsidies. And also, you're acutely conscious of government deficits. We don't want those. So why don't you just show us some of the things that you're coming up with because you seem to make money on what you do but you also seem to help.
Mr. COTE: Yeah. Well, we've always thought that that was the way you had to do it, right...
Mr. COTE: ...because it's got to be a good product. It's got to accomplish a good end but it's got to be easy to use and it has to make sense. Because if it doesn't make economic sense, it's not going to last. So you start with this one. This one is really simple. It's just a prestige thermostat. Now, you wouldn't believe the amount of complexity that is behind the simplicity that's in this.
Mr. COTE: And there's this terrific quote, I think, that "simplicity is the ultimate sophistication."
Mr. COTE: Yeah. It's in Steve Jobs' book. It goes back to Leonardo da Vinci. But that's what our guys have done with this thermostat. It can connect to the Internet. It gives you--it's a--has learning algorithms in it so it knows when you're in, when you're out. You start to learn your lifestyle. Something like this, when you consider that half of your energy use is your heating and cooling system...
CRAMER: Right, right.
Mr. COTE: ...and all of that could be controlled through this thermostat, you can cut by 30 percent without affecting your comfort. Because nobody wants to save energy and be warmer in the summer, colder in the winter or have a car that doesn't go like the last one did.
CRAMER: Yeah, right.
Mr. COTE: So you've got to find a way to do that, and this thermostat does it. Our guys have done a tremendous job with this thing. And like I said, connects with the Internet, which is important because that leads to this, what we call the Total Connect system. Now, this is a more sophisticated version. We call it Tuxedo.
Mr. COTE: And what it allows you to do is--I don't know if you can see this...
Mr. COTE: ...but you can tie in your security system...
CRAMER: Sure, right.
Mr. COTE: ...your automation system, your energy system, and you can even get multimedia.
Mr. COTE: And what this means is now with a single button you can actually control your whole house. So you can put--save energy, you can reduce the--turn on the fans, you can bring the window shades down, everything, get the temperature outside. You can see your video, you can see your--so you can be at work, hone in on the camera at home and see that your child arrived safely at home and that that was nobody with your child when they walked in the door.
CRAMER: That's the Holy Grail to have that.
Mr. COTE: Yeah. Pretty neat stuff. This one, I know you might have said..
CRAMER: The agave? Hundred percent agave?
Mr. COTE: This is Dragones tequila. This is the best...
CRAMER: That is the most expensive tequila. I could not believe And it didn't win the taste test, $400 a bottle.
Mr. COTE: It should. That stuff is tremendous. This is--really, it says Honeywell green jet fuel and that's exactly what this is.
Mr. COTE: When you read about jet planes being flown back and forth across the Atlantic...
Mr. COTE: ...about how we flew our own plane to Le Bourget for the Paris Air Show, it was using this stuff. This is made from camelina, a weed. And--yep. And this will actually fly a plane.
CRAMER: And the military is buying into this.
Mr. COTE: A million gallons so far because as they look at how can you become more energy independent...
Mr. COTE: ...this is one of the fuels that has to--this is one of the capabilities that has to get developed within the country.
CRAMER: Now, we also wanted to do natural gas. You're involved in a natural gas turbine.
Mr. COTE: Oh, yeah. Well, I like all fuels. I'm...
CRAMER: Right. Now, that's important.
Mr. COTE: I think it's important to have--and we were talking about this earlier. You need a portfolio of opportunity here.
Mr. COTE: Because you never know which way things are going to go. Just because something looks great now doesn't mean it will 10 years from now. So you need all of this stuff every.
CRAMER: OK. All right. What else you got cooking?
Mr. COTE: The turbocharger. This seems like a simple item but if you look at this gray piece right here, this is really a small version of a jet engine. This is actually derived from jet engine technology. So the fact that we have a jet engine business makes us particularly good here. This one goes on the Chevy Cruze.
Mr. COTE: Yeah.
Mr. COTE: And this allows a four-cylinder engine to perform like a six-cylinder engine.
CRAMER: This is--this is what we've always needed. We need to feel like we're getting the same power because a lot of...
Mr. COTE: Exactly.
CRAMER: ...guys I know, they simply won't adopt because they think, `You know what? There is not the power. I still'--Americans need power, right? They want--they want strong--more power.
Mr. COTE: Yeah, exactly. Yeah, right.
CRAMER: And this will do it.
Mr. COTE: It goes back to the point, nobody wants to be warmer in the summer...
CRAMER: Right, you got that.
Mr. COTE: ...colder in the winter or have a car that doesn't go.
CRAMER: All right. Now...
Mr. COTE: And all our stuff tries to do that. This will--this, by the way, gets 40 miles to a gallon.
CRAMER: That's it. That's what we need.
Mr. COTE: You're going to see this more and more in the US also.
CRAMER: That's how we're going to save money, even though gas is...
Mr. COTE: Yeah.
CRAMER: Now how about some videos? You got...
Mr. COTE: We've got a real cool one.
CRAMER: Oh, to see?
Mr. COTE: This is a...
CRAMER: You really came here. You really brought it today, Dave. You brought it.
Mr. COTE: Well, this is just a small sampling. You wouldn't believe everything we have.
Mr. COTE: This is an example of something that we call 3-D weather radar.
Mr. COTE: And if you take a look at most radar, all you get is a 2-D look at it. The display is 2-D but it's actually only looking at it 2-D, also. You have no idea of the depth of a cell, how difficult it is, does it have--does it have lightning, does it have hail. And those are the important things that you need to know.
Mr. COTE: So this is what you'd like to be able to see. Of course, this is more of a 3-D rendering...
CRAMER: Right, right.
Mr. COTE: ...which is tough to do on a--on a 2-D screen. What our guys have been able to do is take this and transform it to a 2-D image so that you can actually, as a pilot, know where the hail is, know where the lightning is without seeing it outside your window. You can just look at your screen.
CRAMER: I mean, that's what they're doing now without this?
Mr. COTE: Yeah, yeah.
CRAMER: They're just looking?
Mr. COTE: Yeah. They look and they have a sense for the cell but they don't know how big it is.
CRAMER: I don't want a sense of the cell. I want the actual. I want the deal!
Mr. COTE: They don't--well, and they don't always know their way around it, right, because they'll start to go where they think is around it but there's lightning there, there's hail. And hail destroys a plane and it isn't a safe thing to fly in.
CRAMER: Right. Well, I've got to say...
Mr. COTE: It saves a lot of energy because 40 percent of all flight delays are caused by weather.
CRAMER: Well, I got to say, this is why I like Honeywell. This is why I like the stock. It's also a fun, fun company but it makes a lot of money. And, you know, and it boost the dividends. And you've done a remarkable job. Thank you so much for coming on MAD MONEY.
Mr. COTE: Thank you. Always a pleasure.
CRAMER: OK. That's Dave Cote, chairman and CEO of Honeywell. Look, you can go through the presentations. It's all there. It's quite exciting and it can make you some money. Stay with Cramer.
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