HON · Q1 2026 Earnings

Neutral

Honeywell

Reported October 23, 2025

30-second summary

Sourcing note: This brief is based solely on the Honeywell Q3 FY2025 earnings press release (SEC 8-K exhibit). The transcript provided alongside the release was from Honeywell's Q1 FY2026 earnings call, not the Q3 FY2025 call, so no management commentary, tone, or color from that transcript has been incorporated. All quotes and qualitative framing below come from the press release itself. 30-second take: Honeywell delivered Q3 revenue of $10.41B (+7% YoY, +6% organic) and adjusted EPS of $2.82, both above the high end of guidance. Segment margin landed at 23.1% — top of the guide range, but still down 50bps YoY; operating margin contracted 220bps to 16.9%. Management raised FY organic growth to ~6% and FY adjusted EPS to $10.60–$10.70 (+$0.10 at midpoint reported). The headline FY revenue and free cash flow guide reductions are fully attributable to the Solstice Advanced Materials spin-off (closing October 30); on a spin-adjusted, like-for-like basis, the FY revenue guide of $40.7–$40.9B is a raise of ~$0.45B at midpoint over the prior $40.1–$40.6B spin-adjusted range, and the FY FCF guide is unchanged ex-Solstice. On a true like-for-like basis, ex-Solstice underlying FY adj. EPS of $10.81–$10.91 vs. spin-adjusted prior $10.24–$10.44 is a ~$0.52 midpoint raise.

Headline numbers

EPS

Q1 FY2026

$2.82

Revenue

Q1 FY2026

$10.41B

+7.0% YoY

Free cash flow

Q1 FY2026

$1.45B

Operating margin

Q1 FY2026

16.9%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q2 FY2025	QoQ
Revenue	$10.41B	+7.0%	$10.35B	+0.5%
EPS	$2.82	—	$2.75	+2.5%
Operating margin	16.9%	—	20.4%	-350bps
Free cash flow	$1.45B	—	$1.02B	+42.7%

Guidance

Honeywell raised full-year organic growth and adjusted EPS guidance after a strong Q1 beat on revenue and earnings, but reduced absolute revenue and cash flow guidance, signaling a more cautious near-term demand outlook despite positive execution.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$10.0 billion to $10.3 billion	$10.408 billion	+$0.108 billion above guide high end	Beat
Organic Sales Growth	Q1 FY2026	2% to 4%	6%	+2 to 4 percentage points above guide	Beat
EPS (non-GAAP)	Q1 FY2026	$2.50 to $2.60	$2.82	+$0.22 to $0.32 above guide	Beat
Segment Margin	Q1 FY2026	22.7% to 23.1%	23.1%	at high end of guide	Beat

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	$40.8 billion to $41.3 billion	$40.7 billion to $40.9 billion	-$0.1 billion to -$0.4 billion at midpoint	Lowered
Organic Sales Growth	FY2026	4% to 5%	approximately 6%	+1 to 2 percentage points	Raised
EPS (non-GAAP)	FY2026	$10.45 to $10.65	$10.60 to $10.70	+$0.05 to $0.15 at range	Raised
Segment Margin	FY2026	23.0% to 23.2%, up 40 to 60 basis points YoY	22.9% to 23.0%, up 30 to 40 basis points YoY	-0.1 to -0.2 percentage points; YoY expansion now +30-40bps vs. prior +40-60bps	Lowered
Operating Cash Flow	FY2026	$6.7 billion to $7.1 billion	$6.4 billion to $6.8 billion	-$0.3 billion to -$0.3 billion across range	Lowered
Free Cash Flow	FY2026	$5.4 billion to $5.8 billion	$5.2 billion to $5.6 billion	-$0.2 billion to -$0.2 billion across range	Lowered

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Aerospace Technologies	$4.511B	+12.0%
Industrial Automation	$2.274B	+1.0%
Building Automation	$1.878B	+7.0%
Energy and Sustainability Solutions	$1.742B	-2.0%
Aerospace Commercial Aftermarket Growth	19%	—
Defense and Space Growth	10%	—

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Segment Margin	23.1%
Operating Cash Flow	$3.3B
Backlog	Record high
Orders Growth	Up 22%
Building Automation Segment Margin	26.7%
Organic Revenue Growth	6%

Management tone

Confident headline framing, with reported margins still contracting. The release language remains confident: "we are well positioned to continue building on our momentum and value creation efforts in the fourth quarter." The structural story underneath: organic growth raised to ~6%, adjusted EPS raised, but reported segment margin down 50bps YoY and operating margin down 220bps YoY. The FY segment margin expansion guide also narrowed from +40–60bps to +30–40bps — a modest walk-down of the margin story not attributed to the spin.

Aerospace margin contraction is the print's softest spot. Aerospace segment margin contracted 160bps to 26.1% as cost inflation and acquisition impacts more than offset commercial excellence and volume leverage. The segment is at the 26% threshold but down materially YoY, not on an expansion path.

Industrial Automation margin contracted 150bps. IA segment margin fell to 18.8% from 20.3% as cost inflation outweighed commercial excellence and productivity. Sequential ex-PPE sales grew 2%, but the margin print is a step back.

UOP licensing delays show up in the print. ESS organic went to −2%, with UOP −13% on licensing delays and lower catalyst shipments. Orders in ESS grew double digits in both advanced materials and UOP, which keeps the back-half/2026 recovery thesis alive, but the reported quarter is the first time the deferral has translated into segment-level revenue decline.

Portfolio transformation is the structural story. Solstice Advanced Materials spin closes October 30. New automation segmentation (Building Automation; Process Automation and Technology; Industrial Automation) takes effect Q1 2026. The July Resideo indemnification termination ($1.6B received) and October divestiture of Bendix legacy asbestos liabilities free capital and management capacity. The Aerospace/Automation separation remains on track for second half of 2026.

Recurring themes management leaned on this quarter:

Earnings call opening protocolPending management Q&A (where tone typically reveals posture shifts)

Q&A highlights

Nigel Ko · Wolf Research

Details on aerospace supply chain challenges in Q1, particularly in a low-volume quarter, and measures to solve the problem

Jim Currier explained the supply chain issues were acute and transitory, specific to key mechanical suppliers affecting engines and control systems businesses in late January and early February. Recovery began in March with momentum continuing into April, supporting confidence in mid to high single-digit Q2 growth guidance.

Supply chain issues were acute in January-February, specific to mechanical suppliersBoth engines and control systems businesses were impactedRecovery began in March with momentum into AprilMid to high single-digit growth expected in Q2

Julian Mitchell · Barclays

Process automation organic sales ramp through the year; understanding how flattish full-year guidance reconciles with tough first half results

Vimal Kapoor emphasized that Middle East impact (0.5% in Q1, 1% in Q2) is the only change from prior guidance. Strong backlog and orders growth support confidence in high single-digit second half ramp offsetting first half weakness, with flat full-year outcome supported by historical linearity.

Middle East conflict caused 0.5% revenue impact in Q1, 1% expected in Q2Process automation orders up double-digit in Q1P&T backlog increased 22% year-over-yearFlat full-year guidance maintained for process automation technology

Dean Dre · RBC Capital Markets

Sizing the Middle East rebuild opportunity and timeline for recovery across three phases

Vimal Kapoor outlined three phases: (1) initial services to restart plants (8-12 week typical startup), (2) refurbishment of impacted facilities with Honeywell equipment, and (3) long-term benefits from elevated oil prices supporting services and catalyst demand. Near-term headwinds reflected in guidance; long-term outlook favorable.

Three-phase recovery: services restart, refurbishment (8-12 weeks typical), long-term demandOil prices at $100+ per barrel supporting favorable spreadsIncremental demand expected in second half as normalization occursNo quantified rebuild opportunity size provided

Sheila Cayolo · Jefferies

Middle East commercial aftermarket exposure detail; three- to six-month lag impact specifics; supply chain impact on Q1 aerospace margins

Jim Currier indicated growth is limited by supply not demand in Middle East aftermarket. Business aviation showed resilient growth despite higher fuel prices. Defense seeing strong replenishment and sustainment demand. Supply chain created favorable mix (electrical vs. mechanical) in Q1, with margins expected to normalize as output increases and mechanical mix normalizes.

Growth constrained by supply, not demand in Middle East aftermarketBusiness aviation flight activity resilient despite higher fuel pricesDefense demand strong for replenishment and sustainmentPower-by-the-hour programs are smaller revenue stream vs. time and material/R&O

Andy Kaplowitz · Citigroup

Industrial automation margin improvement drivers in Q1; pricing versus cost dynamics; sustainability of momentum

Mike Stepniak attributed IA margin expansion (260 bps) to structural cost simplification from divesting PSS and WWS businesses, improved pricing (trending toward upper end of 3-4% guidance), and new product introductions gaining traction. Expected to remain source of margin expansion strength through year and next year.

Industrial automation margins expanded 260 basis points in Q1Structural cost simplification from business divestitures driving benefitPricing improved, trending toward upper end (4% vs. 3%) of guidanceNew product introductions (NPI) recovering lost share after 18 months of work

Answers to last quarter's watch list

Q3 segment margin landing inside the 22.7–23.1% guide. Landed at top of range at 23.1%, vs. the guided 50–90bps YoY contraction; actual contraction was 50bps — the shallow end. Status: Resolved positively vs. guide; reported margin still down YoY

Aerospace segment margin recovery toward 26%. Aerospace segment margin came in at 26.1% but contracted 160bps YoY as cost inflation and acquisitions offset commercial excellence and volume leverage. At the threshold of the 26% baseline but moving the wrong direction YoY. Status: Partially resolved / continue monitoring

Energy/UOP large-project bookings. ESS revenue −2% YoY (UOP −13%), but ESS orders grew double digits in both advanced materials and UOP. The reported revenue softness is real; the orders signal supports the 2026 recovery thesis. Status: Mixed

Industrial Automation returning to growth. IA organic +1% — technically positive but margins contracted 150bps to 18.8%. Topline reacceleration has not arrived and the margin story stepped back. Status: Resolved negatively

FCF conversion in H2. Q3 FCF of $1.45B is on path; FY FCF guide reduced to $5.2–$5.6B but the cut is fully Solstice-attributable; ex-Solstice FCF guide unchanged at $5.4–$5.8B. Status: On track ex-Solstice

Separation execution milestones. Solstice spin set for October 30, 2025; Aerospace/Automation separation on track for second half of 2026; new automation segmentation effective Q1 2026. Status: On track

What to watch into next quarter

Q4 revenue and organic growth. FY guide of $40.7–$40.9B with ~6% organic growth implies the Q4 setup once Solstice is removed. Watch the spin-adjusted Q4 organic print.

FY FCF landing inside $5.2–$5.6B. With $1.45B in Q3 (ex-Resideo Q3 OCF closer to $1.7B), Q4 needs roughly $1.6–$2.0B. Watch whether ex-Solstice FCF tracks the unchanged $5.4–$5.8B path.

Aerospace segment margin trajectory. 26.1% with 160bps YoY contraction is the print's softest data point. Whether margin stabilizes or continues to compress is the key tell on the underlying mix and cost story.

ESS revenue trajectory. −2% organic needs to inflect; double-digit ESS orders growth and UOP order strength need to convert to revenue by Q1 FY26 or the 2026 large-project recovery story starts to slip.

Industrial Automation margin. 150bps contraction to 18.8% on cost inflation; whether pricing and productivity catch up to inflation in Q4 determines if this is a one-quarter step-back or a trend.

Solstice spin completion and clean post-spin disclosure. October 30 close; Q4 will be the first print under the new shape. Watch for stranded-cost disclosure and the new automation segmentation rollout.

Sources

Honeywell Q3 2025 earnings press release (SEC 8-K exhibit): https://www.sec.gov/Archives/edgar/data/773840/000077384025000104/exhibit99-q32025earningsre.htm

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