Honeywell CEO Says Business Growth Exceeds Expectations

Honeywell reported third-quarter adjusted earnings of $2.27 per share, exceeding the consensus estimate of $2.17. Revenue increased 1% from a year earlier to $4,994 million, below the $5,007 million consensus estimate. Honeywell International uses the Honeywell Technologies name after separating the company's aerospace business. CEO Vimal Kapur said the business was growing faster than expected. Kapur said organic sales growth surpassed the three-year target presented at Honeywell's June Investor Day, with contributions from all three business segments.

Organic sales grew 7%. Short-cycle organic orders increased 8%, excluding businesses sold during the quarter. GAAP earnings per share from continuing operations declined 20% to $2.40, mainly because the prior-year period included a one-time gain. Adjusted earnings per share increased 34% to $2.27, helped by organic sales growth, increased segment profit and reduced net interest expense. Backlog grew 7% from a year earlier to nearly $19 billion, excluding the Warehouse and Workflow Solutions and Productivity Solutions and Services divestitures completed during the quarter.

Building Automation organic sales increased 8%. Building products revenue grew 11% amid strong demand for fire and security products. Building solutions sales increased 4%, helped by services. Building Automation segment margin increased 30 basis points to 27%, with higher prices and volumes offsetting inflation.

Process Automation and Technology organic sales increased 8%. Project sales grew 14%, particularly in liquefied natural gas and petrochemicals. Aftermarket sales increased 4%, helped by refining demand. However, segment margin declined 210 basis points to 22.2% because of an unfavorable project mix and the anticipated effect of the Johnson Matthey Catalyst Technologies acquisition.

Industrial Automation organic sales increased 4%. Solutions revenue grew 16%, particularly in industrial measurement and utilities. Product sales were unchanged because delayed utility meter deployments offset double-digit sensing growth. Industrial Automation segment margin increased 350 basis points to 18.4%, helped by pricing and productivity improvements.

Honeywell's operating income increased 79% from a year earlier. Segment profit increased 23%, helped by productivity improvements, higher prices and greater volumes. Operating margin increased 640 basis points to 14.8%. Segment margin increased 370 basis points to 21.3%.

Operating cash flow declined 74% to $607 million, mainly because the prior-year period included a one-time settlement associated with the Resideo termination agreement. However, free cash flow increased 15% to $688 million, helped by higher operating income and reduced capital spending. Free cash flow conversion reached 95%. Honeywell held $5.69 billion in cash and cash equivalents at the end of September.

Honeywell increased its fourth-quarter adjusted earnings forecast from $2.28 to $2.43 per share to $2.42 to $2.47, above the $2.41 consensus estimate. Honeywell retained its quarterly revenue forecast of $5 billion to $5.1 billion, below Wall Street's $5.15 billion estimate. Honeywell increased its full-year 2026 adjusted earnings forecast from $8.05 to $8.35 per share to $8.40 to $8.45, above the $8.30 consensus estimate. Honeywell raised its annual revenue forecast from $19.8 billion to $20 billion to $20 billion to $20.1 billion. However, the revised annual revenue range remained slightly below analysts' $20.13 billion estimate.

Benzinga Pro data showed Honeywell International shares declining 0.33% to $214.03 during Thursday premarket trading after the results.