Industrial conglomerate Honeywell (NASDAQ: HON) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 7% year on year to $10.41 billion. The company expects the full year’s revenue to be around $40.8 billion, close to analysts’ estimates. Its non-GAAP profit of $2.82 per share was 9.9% above analysts’ consensus estimates.

Is now the time to buy HON? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Honeywell’s third quarter was marked by broad-based organic sales growth and robust order momentum, which management attributed to recent investments in new product development and operational execution across its core segments. CEO Vimal Kapur highlighted that organic sales growth outpaced expectations, with double-digit increases in Aerospace and ongoing strength in Building Automation, driven by “commitment to developing new solutions that solve our customers’ most challenging problems.” Notably, the quarter’s outperformance reflected steady execution on commercial wins and early returns from portfolio transformation, even as operating margins faced pressure from cost inflation and acquisition-related headwinds.

Looking forward, management’s raised profit guidance for the year is underpinned by confidence in continued demand across long-cycle businesses, improved supply chain performance, and anticipated margin expansion in key segments. Kapur stated that Honeywell’s plan to simplify its segment structure and separate key businesses, including the upcoming Aerospace spin-off, is designed to “provide the strategic focus, organizational agility and tailored capital allocation to grow faster and drive value for all our stakeholders.” While management expects some near-term margin headwinds, they believe pricing actions and ongoing productivity initiatives will set the stage for improved profitability in 2026.

Key Insights from Management’s Remarks

Management pointed to strong commercial execution, strategic portfolio actions, and momentum in orders as key drivers of both the quarter’s results and the updated outlook.

• Organic growth led by Aerospace: Aerospace Technologies delivered double-digit organic sales growth, supported by both commercial aftermarket and Defense and Space, as improved supply chain performance enabled higher volumes. Management noted that commercial original equipment (OE) sales rebounded as shipment rates aligned with customer schedules.

• Building Automation sustained momentum: The Building Automation segment posted a fourth consecutive quarter of high single-digit organic growth, with particular strength in North America and the Middle East. Demand in data centers, healthcare, and hospitality contributed to the outperformance, while management highlighted margin expansion from strong volume leverage.

• Order growth across all businesses: Honeywell reported 22% organic order growth, with backlog reaching new highs. This was attributed to wins in long-cycle aerospace and energy projects, as well as broad-based acceleration across all segments, providing a solid base for future revenue.

• Portfolio simplification and restructuring: The company moved forward on its separation strategy, completing the spin-off of Solstice Advanced Materials and announcing a future Aerospace separation. Honeywell also unveiled plans to realign its automation business into three core segments—Building Automation, Process Automation and Technology, and Industrial Automation—aiming to drive operational agility and higher growth.

• Margin pressures and cost actions: Despite strong top-line results, margins declined due to cost inflation, tariffs, and acquisition-related headwinds, particularly in Aerospace and Industrial Automation. Management stated that ongoing productivity initiatives and pricing actions are expected to offset these pressures over time.

Drivers of Future Performance

Honeywell’s outlook centers on execution of its simplification strategy, recovery in key end markets, and margin improvement through pricing and productivity.

• Segment realignment and separation: The planned spin-off of Aerospace and the restructuring of automation businesses are expected to create more focused, agile units. Management believes this will enable better capital allocation and faster growth, particularly in automation, where segments will be aligned to cohesive business models and software-enabled solutions.

• Pricing and productivity as margin levers: Management sees pricing actions—especially as tariff and inflation pressures stabilize—alongside ongoing productivity improvements as the primary drivers of margin expansion in 2026. They indicated that these levers are expected to offset recent headwinds in Aerospace and Industrial Automation as pricing “becomes a good enabler for 2026 margin expansion.”

• Innovation and R&D investment: Continued investment in new product development and R&D is viewed as essential for maintaining competitive advantage, with specific focus on outcome-based solutions in automation and growth in high-demand verticals such as data centers and sensors. Management cited the Quantinuum quantum computing partnership as a potential long-term differentiator, suggesting eventual monetization of this stake could unlock further value.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the execution of Honeywell’s segment realignment and Aerospace separation, (2) the pace of margin recovery in Aerospace, Industrial Automation, and Energy and Sustainability Solutions as pricing actions take effect, and (3) the conversion of record backlog into revenue, particularly in long-cycle businesses. Progress on monetizing Quantinuum and further portfolio optimization will also serve as important signposts.

Honeywell currently trades at $220.40, up from $206.49 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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