Honeywell International Q4 Earnings Call Highlights

Honeywell International (NASDAQ:HON) reported what management described as a strong finish to 2025, with fourth-quarter adjusted sales and adjusted earnings per share exceeding expectations and orders up 23%, pushing backlog to more than $37 billion. The company also used the call to outline its 2026 outlook and provide updates on its portfolio transformation, including a planned aerospace separation in the third quarter of 2026 and intended sales of two automation-related businesses.

Fourth-quarter performance and cash flow

Chief Executive Officer Vimal Kapur said the company exited 2025 with 6% sales growth excluding the impact of a 2024 Bombardier agreement, and attributed momentum to portfolio actions and increased investment in research and development. Chief Financial Officer Mike Stepniak said fourth-quarter sales grew 11% organically, or 6% excluding the Bombardier impact, with roughly four percentage points of the top-line growth driven by price.

By segment, Stepniak highlighted:

• Aerospace: Sales grew 11% organically excluding Bombardier, with strength in commercial aftermarket and defense and space. Orders grew for a third consecutive quarter, with book-to-bill of 1.2.
• Building Automation: Sales grew 8% organically, supported by 9% growth in solutions and 8% in products. North America and the Middle East led results, while Europe grew mid-single digits. Orders increased year over year and sequentially.
• Industrial Automation: Organic sales rose 1% for a second consecutive quarter, led by Warehouse and Workforce Solutions and sensing, with a return to growth in Productivity Solutions and Services.
• Process Automation/Process Solutions: Sales were flat as strength in aftermarket services was offset by lower measurement and controls volumes.
• Energy and Sustainability Solutions (ESS): Organic sales declined 7% due to lower petrochemical catalyst shipments and project deferrals, though management cited continued order momentum in UOP, including over 40% order growth in refining and petrochemicals projects.

Adjusted segment profit increased 23% (or 2% excluding Bombardier) and segment margin was 22.8%. Stepniak said margin strength in Building Automation was partially offset by the timing of high-margin catalyst shipments in ESS and a step-up in R&D. Adjusted EPS was $2.59, up 17% year over year, with a 24-cent tax timing headwind. Free cash flow was $2.5 billion, up 48%, driven by higher operational income and collections, partially offset by higher cash taxes and interest payments.

Honeywell returned $900 million to shareholders during the quarter through dividends and repurchases, funded $300 million of capital projects, and repaid $2.3 billion of debt.

Full-year 2025 results and capital deployment

For the full year, Stepniak said sales increased 7% organically (6% excluding Bombardier). Adjusted segment profit grew 11% (6% excluding Bombardier). Adjusted EPS was $9.78, up 12% year over year (7% excluding Bombardier), while free cash flow was $5.1 billion, up 20% (7% excluding Bombardier), representing a 14% margin.

Honeywell deployed $10 billion of capital in 2025, including $3.8 billion for share repurchases (18 million shares), $2.2 billion for acquisitions, $1 billion in capital expenditures, and $3 billion in dividends. The company also repaid $3.8 billion of debt.

Portfolio transformation: segments, spins, and divestitures

Management reiterated that Advanced Materials was reclassified as discontinued operations beginning in the fourth quarter of 2025 following the spin of Solstice Advanced Materials on Oct. 30, 2025. Kapur said Honeywell is progressing “faster than originally anticipated” on separation milestones and now expects the aerospace spin in the third quarter of 2026. The company said Aerospace and Automation will host investor days in June.

Kapur outlined leadership and governance updates tied to the aerospace separation, including Jim Currier as the future President and CEO of Honeywell Aerospace and Josh Jepsen as CFO, with Craig Arnold (former Eaton chairman and CEO) named non-executive chair of the Honeywell Aerospace board. Kapur also said Indra Nooyi (former PepsiCo chair and CEO) is joining Honeywell’s board.

Beginning in 2026, Honeywell said it will report four segments: Aerospace Technologies, Building Automation, Process Automation and Technology, and Industrial Automation. Kapur also said Honeywell concluded its strategic review of Productivity Solution and Services and Warehouse and Workflow Solutions and intends to pursue sales of both businesses in the first half of 2026. In Q&A, Kapur said Honeywell expects to sign deals in the second quarter, with closing subject to customary regulatory approvals.

Quantinuum updates and investment impact

Kapur highlighted progress at Quantinuum, noting the business raised approximately $840 million at a $10 billion pre-money valuation. He cited new partnerships with shareholders including NVIDIA, J.P. Morgan, Amgen, and Mitsui, and said the company launched Helios, which Honeywell described as the “world’s most accurate commercial quantum computer,” nearly doubling the qubit count of its predecessor. Kapur also discussed a partnership to integrate Helios with NVIDIA’s AI supercomputing technology.

On the financial impact, Stepniak said Honeywell fully consolidates Quantinuum and expects a roughly 30-basis-point headwind to margins in 2026 due to increased investments. In Q&A, he said the year-over-year increase in Quantinuum investment is about $100 million.

2026 guidance and what management expects to drive results

For 2026, Honeywell guided to sales of $38.8 billion to $39.8 billion, up 3% to 6% organically, and adjusted EPS of $10.35 to $10.65, up 6% to 9%. Segment margin is expected to rise 20 to 60 basis points to 22.7% to 23.1%. The company guided to free cash flow of $5.3 billion to $5.6 billion, up 4% to 10%, and said it intends to prioritize debt reduction ahead of the separation.

Stepniak said guidance includes full-year outlooks for aerospace, Productivity Solutions and Services, and Warehouse and Workflow Solutions, and does not incorporate the pending acquisition of Johnson Matthey’s Catalyst Technologies business. Honeywell said it will update its outlook when those transactions are complete.

Segment expectations included high single-digit organic growth in Aerospace, sales growth “above mid-single digits” in Building Automation, roughly flat organic sales in Process Automation and Technology, and Industrial Automation sales down low single digits to roughly flat. In Q&A, management discussed pricing expectations, indicating an average price contribution “most likely 3.5%” in 2026, with variation by geography and vertical.

For the first quarter, Honeywell guided to 3% to 5% organic sales growth and segment margin of 22.4% to 22.6%, with adjusted EPS growth of 2% to 6%. Stepniak also noted a one-time $377 million cash payment related to the settlement of Flexjet-related litigation matters, made in the first quarter and excluded from full-year free cash flow guidance.

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.