Honeywell International Q2 Earnings Call Highlights

Key Points

• Honeywell Technologies posted stronger-than-expected Q2 results, with 4% organic sales growth, 16% organic order growth, and 100 basis points of margin expansion. Adjusted EPS rose 10% to $1.95, helped by higher segment profit, lower interest expense, and a lower share count.
• The company raised its full-year 2026 outlook, now expecting 3% to 4% organic sales growth, adjusted EPS of about $8.20 at the midpoint, and segment margin expansion of 250 to 290 basis points. It reaffirmed roughly $2 billion in free cash flow for the year.
• Honeywell said portfolio transformation is advancing, having completed the Aerospace spin-off and the Quantinuum IPO, while also closing the Johnson Matthey Catalyst Technologies acquisition. The company expects upcoming divestitures to simplify Industrial Automation and sharpen its focus on higher-growth areas like data centers, LNG and life sciences.

Honeywell International NASDAQ: HON reported stronger-than-expected second-quarter 2026 results for its newly defined Honeywell Technologies business and raised its full-year outlook, citing broad order strength, margin expansion and momentum across its automation-focused portfolio.

Chairman and Chief Executive Officer Vimal Kapur said the quarter marked “an important milestone” as the company began operating as a pure-play automation company following the June 29 spin-off of Honeywell Aerospace. Senior Vice President of Investor Relations Mark Macaluso noted that the results and guidance discussed on the call exclude Honeywell Aerospace, remove pension income and Quantinuum from adjusted results, and reflect the impact of a one-for-two reverse stock split on adjusted earnings per share.

Kapur said Honeywell Technologies delivered 4% organic sales growth in the quarter, driven by continued strength in Building Automation and better-than-expected performance in Process Automation and Technology, or PA&T, and Industrial Automation. Organic orders rose 16%, while ending backlog increased 9%.

“Our results this quarter have demonstrated the strength of the new Honeywell Technologies portfolio,” Kapur said.

Second-Quarter Results Top Expectations

Chief Financial Officer Mike Stepniak said total sales grew 4% organically in the second quarter. Building Automation led the company’s growth with a 9% organic sales increase, supported by double-digit growth in products and continued strength in solutions. Stepniak said the segment saw double-digit growth in both fire and services, with regional strength led by Asia Pacific, the Middle East and the Americas.

Industrial Automation sales rose 4%, exceeding expectations, with strength in solutions and continued momentum in sensing and industrial measurement. Excluding planned divestitures, the core Industrial Automation business grew 2% organically.

Process Automation and Technology sales declined 1% organically, but Stepniak said the result was materially ahead of Honeywell’s prior outlook. Projects grew 5%, driven by gas, LNG and petrochemicals, while aftermarket sales declined 6% due largely to a tough comparison with a large catalyst shipment in the second quarter of 2025.

Segment profit increased 9%, and segment margin expanded 100 basis points to 19%. Building Automation margin rose 90 basis points to 27.1%, while Industrial Automation margin increased 90 basis points to 17.2%. PA&T margin contracted 180 basis points to 22.1% because of unfavorable mix from lower catalyst volumes, though Stepniak said that was also ahead of the company’s original margin outlook.

Adjusted earnings per share were $1.95, up 10% from the prior year. Stepniak said the increase was primarily driven by higher segment profit, lower net interest expense tied to debt paydown and a lower share count, partially offset by higher repositioning costs and a $0.16 headwind from a higher adjusted effective tax rate.

Honeywell Raises 2026 Guidance

Honeywell raised its full-year organic sales growth outlook to 3% to 4%, up from previous guidance of 2% to 3%. The company now expects second-half organic growth of 4% to 6%, compared with its prior outlook of 3% to 5%.

Stepniak said Building Automation is expected to deliver mid-single-digit-plus organic growth, supported by strong orders in focus verticals including healthcare, hospitality and data centers. PA&T is expected to accelerate to high-single-digit growth in the second half as global energy projects resume, backlog conversion improves and catalyst shipment volumes rise significantly. Industrial Automation is also expected to grow in the second half, supported by short-cycle demand for industrial measurement and sensing, continued growth in Europe and China, and strengthening demand in the Americas.

The company also raised its full-year segment margin expansion outlook to 250 to 290 basis points, up 25 basis points at the midpoint. Stepniak said the improvement reflects second-quarter outperformance, progress on stranded cost elimination and accretion related to the accelerated timing of divestitures.

Honeywell now expects full-year adjusted EPS of $8.20 at the midpoint, up from $8.10 previously and approximately 27% higher than the prior year. The company maintained its expectation for roughly $2 billion of free cash flow in 2026, with most of that expected in the second half and an approximately 95% conversion rate.

Portfolio Transformation Advances

Kapur said Honeywell completed the separation of Honeywell Aerospace and supported Quantinuum’s successful initial public offering in June. Honeywell retains a 47% ownership stake in Quantinuum, and Kapur said the company expects to provide more color on its plans for that stake by early next year.

The company also closed its acquisition of Johnson Matthey’s Catalyst Technologies business on July 17. Kapur said the business will become part of the PA&T segment and will expand Honeywell UOP’s capabilities across refining, petrochemicals and renewable fuels. He said the acquisition adds a differentiated technology portfolio and expands Honeywell’s installed base.

In response to an analyst question, Kapur said Honeywell acquired the business for commercial synergies, though the company is not counting those in the early stages. Stepniak added that Honeywell believes it acquired the business “at the bottom” and said second-half catalyst activity looks stronger, including within Honeywell’s own catalyst business.

Honeywell also expects to close divestitures of the Productivity Solutions and Services and Warehouse and Workflow Solutions businesses by early August, about two months ahead of its initial planning assumption. Kapur said the accelerated timing reduced 2026 revenue expectations by about $400 million but should sharpen focus and simplify the Industrial Automation portfolio.

Orders Strength and End-Market Trends

Kapur highlighted broad-based order momentum across the company. PA&T orders rose 24% organically, with process technology orders up roughly 50%, producing a book-to-bill ratio above 1.2 for the segment. Total company book-to-bill was 1.1.

Building Automation orders were supported by high-growth verticals, where Kapur said orders rose more than 50% and organic sales grew 30%. The fire business also posted approximately 30% orders growth. In Industrial Automation, orders in the remaining core business after divestitures rose 11%, or 7% sequentially, while sensing and industrial measurement orders increased more than 20%.

On the Middle East, Kapur said Honeywell is assuming current conditions persist without a significant escalation or further supply chain disruption. He said the company experienced some revenue loss in the first and second quarters and modest collection issues in pockets, but no major disputes. Stepniak said most of the collection issues occurred in March and April and have started to normalize.

Asked about data centers, Kapur said Honeywell sees opportunities beyond fire, security and building management systems. He cited growth outside the U.S., on-site power generation that could involve Process Automation, and longer-term opportunities in liquid cooling sensors.

Long-Term Targets Reaffirmed

Kapur said Honeywell’s strategy is centered on growing its installed base and monetizing it through software, services and outcome-based solutions. He said the company is increasing exposure to higher-growth verticals such as data centers, LNG, grid infrastructure and life sciences.

The company reiterated long-term goals discussed at its June Investor Day, including adjusted EPS of approximately $12, more than 10% annual adjusted EPS growth and free cash flow conversion above 90%. Kapur said margin expansion is expected to come from stranded cost removal, portfolio actions, an aerospace trademark agreement, price, mix, new product introductions and productivity.

“We are pleased with Honeywell Technologies’ second quarter results, which enabled us to increase our 2026 outlooks across all key metrics,” Kapur said. “Today is only the beginning of that journey.”

About Honeywell International (NASDAQ:HON)

Honeywell International Inc is a diversified, publicly traded multinational conglomerate NASDAQ: HON that designs and manufactures a wide range of commercial and consumer products, engineering services and aerospace systems. The company operates through major business platforms that historically include Aerospace; Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. Its portfolio spans avionics and propulsion systems, building controls and HVAC equipment, process technologies and advanced materials, industrial automation software, and personal protective equipment and scanning solutions.

Honeywell's aerospace business supplies aircraft manufacturers and operators with engines and auxiliary power units, avionics, flight safety systems and aftermarket services.

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