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What You Should Know about Honeywell Aerospace’s Regional Markets

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Mar. 29 2016, Updated 1:04 a.m. ET

Transportation

Turbo penetration is likely to experience substantial growth in the coming decade due to rising fuel economy–related regulatory requirements. Due to a brutal cost structure, there are limited avenues for auto manufacturers (VCR) to achieve these targets, and turbochargers present a viable option.

As shown in the above graphic, China and the US are among the lowest turbo-penetrated regions of the world. Both regions also have extremely ambitious fuel economy targets. The United States must improve its average fuel economy by 54% by 2025, and China must improve that metric by 39% by 2020. Therefore, both countries are likely to be its fastest-growing markets at least in the next five years.

The graphic also shows the locations where Honeywell’s powertrains and turbochargers are produced. Local R&D and production shops keep Honeywell (HON) well-positioned to effectively capitalize on these trends in the coming years.

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Honeywell Aerospace

The United States is the largest market for Honeywell’s Aerospace (XAR) unit, accounting for 48% of total sales by region. Honeywell notes that although the US market is mature in comparison to other high-growth regions, it is likely to grow by 2% annually until 2018 due to a relatively subdued space and defense market.

Internationally, the company anticipates a growth of 10% annually until 2018, mostly driven by high-growth regions such as the Middle East, India, Indonesia, and Malaysia. In particular, the company continues to do well with high APU (auxiliary power unit) win rates in low-cost airlines such as Indigo, Vietjet, and Ethiopian Airlines.

BorgWarner (BWA), General Electric (GE), Cummins (CMI), and United Technologies (UTX) are among the companies that compete with Honeywell on the global stage.

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