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    HON
    Earnings call· Mar 2026(Q1 FY26)

    HONEYWELL INTERNATIONAL Q1 FY26 earnings call HON

    Apr 23, 2026 Source

    Executive summary

    Honeywell Q1 FY26 — Strong Orders and Margin Expansion Despite Geopolitical Headwinds

    Honeywell delivered robust Q1 FY26 results, marked by strong organic orders and significant margin expansion across all segments, despite facing geopolitical uncertainties and temporary supply chain issues. The company is progressing rapidly with its portfolio transformation, including the Aerospace spin-off and strategic divestitures, positioning both core businesses for future growth. Management maintains its full-year outlook, anticipating a strong second-half ramp driven by solid backlog conversion and improving market conditions.

    Highlights

    5

    • Orders grew 7% organically, driving backlog to over $38 billion with book-to-bill above 1.1.

    • Segment margin expanded 90 basis points to 23.3%, with all four segments showing expansion.

    • Adjusted EPS increased 11% to $2.45, exceeding expectations.

    • Aerospace backlog increased 20% year-over-year to roughly $19 billion, with a 1.1 book-to-bill in Q1.

    • Building Automation sales grew 8% organically, led by strong demand in data center and healthcare verticals.

    Concerns

    5

    • Middle East conflict drove a roughly 0.5% impact to Q1 revenue and is expected to cause a 1% impact to Q2 revenue, primarily affecting Process Automation and Technology.

    • Temporary mechanical supply chain constraints in Aerospace led to lower output and sales growth in January and February.

    • Free cash flow was nearly $100 million, down from $200 million last year, due to timing of collections in the Middle East and inventory headwinds in Aerospace.

    • Q2 segment margin is expected to be down 10 to up 20 basis points, impacted by mix pressure from catalyst sales and Middle East disruptions.

    • Q2 adjusted EPS faces a $0.16 headwind from a higher effective tax rate of approximately 21%.

    Guidance & targets

    17
    CategoryTargetConfidence
    Q2 Organic Sales Growth
    2% to 4%
    high materiality
    High
    Q2 Segment Margin
    22.2% to 22.5%
    high materiality
    High
    Q2 Adjusted EPS
    $2.40 at the midpoint
    high materiality
    High
    Full-Year Organic Growth
    3% to 6%
    high materiality
    High
    Full-Year Segment Margin
    22.7% to 23.1%
    high materiality
    High
    Full-Year Effective Tax Rate
    approximately 19%
    medium materiality
    High
    Full-Year Free Cash Flow
    No change to guidance
    high materiality
    High
    Aerospace Full-Year Organic Sales Growth
    high single-digit growth
    high materiality
    High
    Process Automation and Technology Full-Year Organic Sales Growth
    roughly flat
    medium materiality
    High
    Industrial Automation Full-Year Organic Sales Growth
    continue to recover
    medium materiality
    Medium
    Building Automation Full-Year Organic Sales Growth
    continue strength
    medium materiality
    High
    Aerospace Annual Margin
    modestly up
    medium materiality
    High
    Process Automation and Technology Second Half Revenue Growth
    high-single or PA&T segment
    medium materiality
    High
    Process Automation and Technology Second Half Margin
    improve
    medium materiality
    High
    Industrial Automation Second Half Performance
    low single-digit growth
    low materiality
    Medium
    Short Cycle Orders Growth
    mid- to high single-digit growth
    medium materiality
    High
    New Catalyst Demand
    expected in 2027
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Building Automation
    Sales growth led by strong demand for new products and momentum across high-growth data center and healthcare verticals. Strongest margin expansion expected in Q2.
    Orders growth: 9%Projects orders growth: double-digitServices orders growth: double-digitFire products orders growth: double-digitMiddle East sales growth: double digitsIndia sales growth: double digits
    		—8% organically——
    Aerospace
    Growth supported by commercial OE, commercial aftermarket, and defense and space, despite temporary supply chain headwinds in mechanical products. Margin aided by pricing, productivity, and favorable mix. Q2 margin expected to be roughly flat.
    Segment margin expansion: 20 bps YoY
    		—3% organically—26.5%
    Industrial Automation
    Segment margin expanded 260 basis points. Expected to continue recovery in Europe and China. Positioned as a Sensing and Measurement business.
    Solutions growth: 7%Services demand (measurement): robustWarehouse and Workload Solutions performance: strongProducts decline: slightProductivity Solutions and Services: declinedSensing: continued strengthOrders growth: 10%China orders growth: highlightedEurope orders growth: recovery
    		—1% organically——
    Process Automation and Technology
    Segment margin expanded 200 basis points despite top-line volatility. Expected to be slightly weaker in Q2 due to incremental Middle East pressure, but strong second-half ramp anticipated.
    Timing delays: refining catalyst reloads, automation service upgradesMiddle East conflict impact: driver of declineProject sales: flatLNG demand: elevatedProcess Technology orders growth: double-digit in Q1PA&T backlog increase: 22%
    		—down 6% organically——

    Operational metrics

    18
    Segment Profit
    increased 6%YoY
    Q1 FY26

    Driven by higher segment profit and lower share count.

    Adjusted EPS
    $2.45up 11%
    Q1 FY26

    Driven primarily by higher segment profit and lower share count. Foreign currency provided a modest benefit and below-the-line items were favorable primarily due to higher pension income.

    Capital Returned to Shareholders
    $1.8 billion
    Q1 FY26

    Total capital returned to shareholders.

    Capital Expenditures
    over $220 million
    Q1 FY26

    To drive future growth.

    Aerospace Supply Chain Investment
    more than $1 billion
    Past 3 years

    This strategy drove double-digit output growth for 14 straight quarters prior to Q1.

    Middle East Conflict Revenue Impact
    roughly 0.5%
    Q1 FY26

    Impacted total Honeywell revenue, most notably in Process Automation and Technology.

    Middle East Conflict Revenue Impact
    roughly 1%
    Q2 FY26

    Assumes conflict persists, causing logistics and shipment delays.

    Q2 Effective Tax Rate
    approximately 21%versus 16% in Q2 2025
    Q2 FY26

    Represents a $0.16 headwind to adjusted EPS.

    Q2 EPS Benefit from Higher Segment Profit
    roughly $0.06
    Q2 FY26

    Expected contribution to Q2 adjusted EPS.

    Q2 EPS Benefit from Lower Below-the-Line Expenses
    $0.04 to $0.07
    Q2 FY26

    Due to higher pension income, partially offset by increased repositioning costs.

    Q2 EPS Impact from Share Count Reduction
    roughly $0.01
    Q2 FY26

    Impact on Q2 adjusted EPS.

    Q2 EPS Impact from Foreign Exchange Translation
    roughly $0.01
    Q2 FY26

    Impact on Q2 adjusted EPS.

    Pricing Discipline
    above 3%
    Q2 FY26

    Expected to continue in Q2, trending towards 4% for the year.

    Stranded Cost Takeout
    ahead of plan
    Q1 FY26

    Accelerating ahead of the Aerospace spin, contributing to margin expansion.

    Process Technology Project Wins
    over $2 billion
    Past 3 quarters

    Includes rebuilding of impacted facilities and new expansion projects.

    Aerospace Output Growth
    double-digit
    14 straight quarters prior to Q1

    Driven by supply chain investments, aiming to return to this trajectory.

    Electronic Solutions Sales Growth
    double digit
    Q1 FY26

    Meeting accelerating defense requirements.

    Process Automation Aftermarket Revenue Loss
    about $50 million
    Q1 FY26

    Due to Middle East conflict impacting ability to ship products and provide on-site services.

    Industry KPIs

    6
    MetricValueDetails
    Backlog book to billover $38 billionUSD
    Organic orders growth7%%
    Named project wins pipelineover $2 billionUSD
    Aftermarket demand indicators—
    Segment organic growth margin—
    Spin stranded cost portfolio moves—

    Orderbook & backlog

    3
    Total Backlogover $38 billionQ1 FY26 end

    15% increase

    Driven by 7% organic orders growth and book-to-bill above 1.1.

    Aerospace Backlogroughly $19 billionQ1 FY26 end

    20% increase from prior year

    Driven by 28% orders growth over last 12 months and 1.1 book-to-bill in Q1.

    Process Automation and Technology Backlog22% increaseQ1 FY26 end

    Driven by double-digit Process Technology orders growth in Q1, following strong order growth in Q4 2025.

    Deals & partnerships

    9
    Honeywell Aerospacespin-off

    Final step in portfolio transformation, leadership teams in place, secured investment-grade credit ratings (A3, A-, BBB+ from Moody's, Fitch, S&P respectively).

    Brady Corporationdivestitureall cash transaction

    Sale of Productivity Solutions and Services business.

    American Industrial Partnersdivestitureall cash transaction

    Sale of Warehouse and Workflow Solutions business.

    Johnson Mattheyacquisitionadjusted total consideration

    Amended agreement to acquire Johnson Matthey's Catalyst Technologies business.

    U.S. Department of Warcustomer contract$500 million commitment

    Supplier framework agreement to increase production of critical dense technology. Honeywell was among the first Tier 1 suppliers to sign such an agreement.

    Dangote Petroleum Refinery and Petrochemicalscustomer contract

    To provide Connected Services, Advanced Digital Performance Monitoring and Operator Training at Africa's largest refinery in Nigeria. Follow-up to November award.

    Dangote Petroleum Refinery and Petrochemicalscustomer contract

    Selected Honeywell to supply advanced technology services, proprietary catalyst and equipment. Dangote will license Honeywell's Oleflex Technology and Petrochemical Technology.

    Commonwealth LNGcustomer contract

    To provide integrated liquified natural gas pretreatment and liquification solution for planned export facility in Louisiana.

    Bechtelcustomer contract

    To provide integrated liquified natural gas pretreatment and liquification solution for next decade's Rio Grande LNG project in Texas.

    Risks & headwinds

    6
    Geopolitical conflict in the Middle EastQ1 and Q2 FY26

    Roughly 0.5% impact to Q1 revenue for all of Honeywell; roughly 1% impact to Q2 revenue for all of Honeywell.

    Mitigation: Effectively managing through with safety of employees as top priority; assuming conflict persists through Q2 in guidance; confident in strong second half ramp.

    Aerospace Mechanical Supply Chain ConstraintsQ1 FY26

    Led to slowdown in January and February, lower output and sales growth in Aerospace.

    Mitigation: Output improved considerably in March; invested over $1 billion over past 3 years into expanding capacity and resiliency; on-boarding new suppliers, developing internal capabilities, assisting supply partners.

    Process Automation and Technology Timing DelaysQ1 FY26

    Driven principally by Middle East conflict, contributing to 6% organic sales decline in PA&T in Q1.

    Mitigation: Strong orders momentum and robust backlog levels expected to deliver a strong second half ramp.

    Unfavorable Mix in Process Automation and TechnologyQ2 FY26

    Contributes to Q2 segment margin being down 10 to up 20 basis points.

    Mitigation: Expected to be largely offset by pricing and productivity actions; margins will improve in H2 for the business.

    Higher Effective Tax RateQ2 FY26

    Approximately 21% in Q2 FY26 versus 16% in Q2 FY25, amounting to about $0.16 headwind to adjusted EPS.

    Mitigation: Full year tax rate still expected to be approximately 19%.

    Quantinuum InvestmentsFY26

    30 bps drag on margin expansion operationally for the year.

    Mitigation: Expected to de-consolidate results in Q2, but not adjusting segment margin or adjusted EPS guidance at this time.

    Q&A highlights

    7

    Seeking more details on the supply chain issues in Q1, especially in a low-volume quarter, and measures to solve them.

    Jim Currier explained that the Q1 slowdown was more acute than anticipated, specifically due to temporary constraints with key mechanical suppliers affecting Engines and Control Systems. He noted that recovery began in March and is carrying into April, giving confidence in the Q2 forecast.

    “The start of the quarter, however, was more acute in terms of the decline versus what we had anticipated. And we recognize that this issue at the end of January and early February, and it was a very acute transitory issue specifically with some key suppliers in the mechanical space that adversely affected both our engines business and our Control Systems business.”

    asked by Nigel Coe · answered by James Currier

    2 min read6 chapters

    Detailed Narrative

    01

    Portfolio Transformation Progress

    Honeywell is nearing completion of its multi-year portfolio transformation, with the Aerospace spin-off now expected on June 29, 2026. This follows the successful raising of $20 billion in Aerospace spin financing, which secured investment-grade credit ratings and will be used to redeem Honeywell debt and fund Aero's balance sheet. The company also announced agreements to sell its Productivity Solutions and Services and Warehouse and Workflow Solutions businesses, further simplifying its portfolio to focus on three principal end markets.

    02

    Middle East Conflict Impact and Outlook

    The ongoing Middle East conflict impacted Q1 revenue by approximately 0.5% for Honeywell, primarily affecting Process Automation and Technology, and is projected to cause a 1% revenue impact in Q2. Despite this, demand for differentiated Process Technology remains strong globally, with over $2 billion in project wins over the past three quarters across LNG, refining, and petrochemicals. Management anticipates a strong second-half ramp for Process Automation and Technology, driven by robust backlog conversion and expected catalyst demand, with long-term favorable outcomes once the situation stabilizes.

    03

    Aerospace Supply Chain and Demand

    Aerospace experienced temporary mechanical supply chain constraints in January and February, impacting output and sales growth, particularly in Engines and Power Systems and Control Systems. However, output improved considerably in March, and the company is confident in recovering its growth trajectory. Honeywell has invested over $1 billion in the past three years to expand supply chain capacity and resiliency. Demand remains robust across commercial OE, commercial aftermarket, and defense and space, with a 28% orders growth over the last 12 months.

    04

    Building Automation Strength

    Building Automation continued its strong performance, with 8% organic sales growth in Q1, driven by new products and momentum in high-growth data center and healthcare verticals. Sales in the Middle East and India were up double digits, and orders grew 9%, including double-digit growth in projects, services, and fire products. The company attributes its success to new product introductions, a common supply chain, and benefiting from market fragmentation against mid-sized regional competitors.

    05

    Industrial Automation Recovery

    Industrial Automation saw 1% organic sales growth, with solutions up 7% due to strong services demand and Warehouse and Workflow Solutions performance. Products declined slightly, but Sensing showed continued strength. Orders for Industrial Automation were up 10%, highlighted by recovery in China and Europe, and the business is expected to trend towards low single-digit growth in the second half for the RemainCo business. The segment is now positioned as a Sensing and Measurement business, focusing on aerospace, medical devices, industrial equipment, metering, and gas detection.

    06

    LNG Vertical Growth

    Honeywell is very bullish on the LNG cycle, with strong performance from its recently acquired liquefaction and Sundyne businesses. Demand is robust not only for existing capacity expansion but also for diversification into new regions like Africa. The company's integrated LNG solutions, including automation, software, and specialized equipment for compressors and pumps, provide a unique proposition. This vertical is expected to remain a high-growth area for the "RemainCo" Honeywell for the next few years.

    AI-generated summary of the company’s earnings call. Not investment advice.