By Utkarsh Shetti

(Reuters) -Honeywell on Tuesday raised its 2025 profit forecast despite flagging a $500 million exposure to tariffs, saying it aims to cushion the impact through a mix of higher pricing and local sourcing.

Shares rose 6% as the industrial and aerospace giant surpassed first-quarter expectations for revenue and profit and said its forecast accounts for the impact of tariffs on demand.

Honeywell (NASDAQ: HON ) said 60% to 70% of its tariff exposure is tied to China, where it is a net exporter mainly through its aerospace business.

The mitigation efforts include higher pricing paired with its strategy of each business line serving local markets, CEO Vimal Kapur told analysts.

"We are confident we can fully offset the impact of current tariffs and are well-positioned to manage future trade uncertainty," Kapur said.

Honeywell has benefited from a shortage for new jets. With airlines flying older, more maintenance-intensive planes, sales for firms that supply parts and provide aircraft maintenance services have surged.

However, these companies are also likely to come under pressure from rising costs and supply-chain snags due to Trump’s broad levies on metals such as aluminum and steel along with steep tariffs on countries including China.

Honeywell now expects adjusted profit per share of between $10.20 and $10.50 for 2025, compared to its earlier forecast of between $10.10 and $10.50.

The company in February announced it would separate the automation and aerospace businesses after activist pressure.

It said on Tuesday it will spin off the aerospace unit as part of the separation, while Honeywell Automation, the remaining entity, will be led by Kapur.

Its quarterly sales of about $9.82 billion beat expectation of $9.59 billion, according to data compiled by LSEG. Adjusted profit per share was $2.51, beat Street estimate of $2.21.