Honeywell International Inc Q3 2025 results
Snapshot
Honeywell International Inc reported $10.41B of revenue in Q3 2025, up 7.0% year over year, with diluted EPS of $2.86 and an operating margin of 24.8%.
- Revenue
- $10.41B
- YoY growth
- +7.0%
- Diluted EPS
- $2.86
- Operating margin
- 24.8%
What management said
- •This morning, we will review our financial results for the third quarter, share our guidance for the fourth quarter, and provide an update on full year 2025.
- •Growth in organic sales took another step up and finished ahead of expectations, driven by our commitment to developing new solutions that solve our customers' most challenging problems.
- •Better top-line results translated into earnings well above our guided range, while strong orders across the portfolio demonstrate early results of our focus on innovation.
- •Our excellent third-quarter performance is powering another increase in our full-year guidance.
- •We are raising our 2025 EPS guide for the third time this year, even as we incorporate the impact of impending spin-off of Solstice Advanced Materials.
- •This move is another significant step in our simplification of Honeywell, which will provide the strategic focus, organizational agility, and tailored capital allocation to grow faster and drive value for all our stakeholders.
- •On our slide four, I will go over segment realignment in more detail.
- •I'm pleased to take this next step in evolving Honeywell's streamlined portfolio with the aim of unlocking incremental value and driving long-term growth and margin expansion.
- •We then mine this install base by providing customers with high-value, outcome-based solutions with a combination of software and services.
- •The new structure will allow us to better prioritize R&D efforts, capital expenditure, and go-to-market strategy with a growth mindset.
- •As we continue our journey of transforming the portfolio, I would like to highlight another level of value creation with the recently announced Quantinuum capital raise on slide five.
- •Honeywell delivered exceptional third-quarter results, again exceeding the high end of organic growth and adjusted earnings per share guidance, as we have done each quarter this year.
What went well
- •Honeywell delivered third-quarter organic sales growth that accelerated to 6% year-over-year, finishing ahead of expectations and driving adjusted EPS of $2.82 (up 9%) and GAAP EPS of $2.86 (up 32%), both above the guided range.
- •Orders grew 22% organically to $11.9 billion with a book-to-bill above one and acceleration across all four segments, pushing backlog to another record.
- •Aerospace Technologies returned to double-digit growth at 12% organic, led by commercial aftermarket and defense and space, while Building Automation delivered its fourth straight quarter of high single-digit growth at 7% with 80 basis points of margin expansion.
- •The company raised full-year EPS guidance for the third time this year, even while absorbing the impact of the impending Solstice Advanced Materials spin-off.
- •Management completed the Solstice separation roughly a quarter ahead of the original schedule and de-risked the balance sheet by divesting the Bendix asbestos liability and terminating the Resideo indemnification agreement for $1.6 billion in cash.
- •Honeywell also announced a simplified four-segment structure effective Q1 2026 and highlighted a Quantinuum capital raise as additional value creation.
What went wrong
- •Segment margin was flat to down across several businesses, with Aerospace margin declining 160 basis points year-over-year to 26.1% on cost inflation and acquisition-related headwinds, Industrial Automation margin down 150 basis points to 18.8% on inflationary pressures, and ESS down 2% organically as licensing and catalyst delivery delays at UOP offset strong refrigerants performance.
- •Third-quarter free cash flow fell 16% to $1.5 billion on capital expenditure timing and higher working capital.
- •Full-year segment margin guidance was reduced modestly versus prior expectations because of lower project licensing, catalyst shipments, and certain high-incremental-margin short-cycle Industrial Automation products.
- •Management characterized 2025 as a year affected by heightened economic uncertainty, incremental tariffs, and significant cost inflation that pressured underlying margin expansion.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Organic sales growth (full year) | FY2025 | ~4.5% (prior midpoint) | ~6% | Raised ~150 bps from prior midpoint |
| Sales (full year) | FY2025 | — | $40.7B-$40.9B | Raised |
| Adjusted EPS (full year) | FY2025 | — | $10.60-$10.70 | Raised third time this year; up 7%-8% |
| Free cash flow (full year) | FY2025 | — | $5.2B-$5.6B | Unchanged on a like-for-like basis |
| Segment margin (full year) | FY2025 | — | Up 30-40 bps | Modestly lower than prior guidance |
| Organic sales growth | Q4 2025 | — | 8%-10% (4%-6% ex-Bombardier) | — |
| Sales | Q4 2025 | — | $10.1B-$10.3B | — |
| EPS | Q4 2025 | — | $2.52-$2.62 (up 2%-6%) | — |
| Segment margin | Q4 2025 | — | 22.5%-22.8% | Up 160-190 bps (down 120-90 bps ex-Bombardier) |
| Solstice spin-off impact | FY2025 | — | Sales -$700M, adj EPS -~$0.21, FCF -$200M | Newly incorporated into guidance |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Organic sales | +6% | Return to double-digit growth in Aerospace and fourth straight quarter of high single-digit growth in Building Automation |
| Orders | +22% organic to $11.9B | Broad-based growth led by long-cycle Aerospace and energy projects; order growth accelerated in all four segments, book-to-bill above one |
| Segment profit | +5% | Led by ongoing margin expansion in Building Automation; margin met high end of guidance |
| Adjusted EPS | +9% to $2.82 | Strong segment profit growth and lower effective tax rate more than offset higher interest expense |
| GAAP EPS | +32% to $2.86 | Includes one-time items from balance-sheet de-risking transactions |
| Free cash flow | -16% to $1.5B | Capital expenditure timing and modestly higher working capital to support sales growth |
| Aerospace Technologies sales | +12% organic | Strength in commercial aftermarket and defense and space; commercial OE returned to growth |
| Aerospace margin | -160 bps to 26.1% | Commercial excellence and volume leverage offset by cost inflation and acquisition-related headwinds |
| Industrial Automation sales | +1% organic | Returned to growth, exceeding guidance, led by continued strength in sensing business |
| Industrial Automation margin | -150 bps to 18.8% | Commercial excellence and productivity offset by inflationary pressures |
| Building Automation sales | +7% organic | Strength in both building solutions and building products; North America and Middle East led, Europe grew fourth consecutive quarter |
| Building Automation margin | +80 bps | Leverage on strong volume performance |
| ESS sales | -2% organic | Strong refrigerants performance offset by licensing and catalyst delivery delays in UOP |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio simplification / separations | Solstice spin targeted early 2026; Aerospace separation planned | Solstice begins trading October 30, ahead of schedule; Aerospace separation in 2H 2026; new four-segment automation structure effective Q1 2026 | Accelerating |
| Margin trajectory | Margins more flattish through 2025 with growth prioritized | Transitory pressures from mix, catalyst push-outs, tariffs; expansion expected to return in 2026 | Pressured near-term, improving |
| Pricing | Lag effect was a 2025 headwind | Expected to become a good enabler of 2026 margin expansion as tariffs stabilize and inflation clarifies | Improving |
| Acquisitions (since 2023) | Expected ~1%-2% accretion in 2025 | Performing ahead of TVA on revenue and cost synergies; ~12x average multiple; becoming organic starting Q4 | Ahead of plan |
| Aerospace recovery | Destocking and OE recoupling underway | Recoupling largely behind; Q2 2025 was margin bottom; sequential improvement expected; past-due backlog over $2B | Recovering |
| Data center exposure (Building Automation) | Historically a small vertical | Becoming a larger contributor via fire safety, security, and building management; partnerships with hyperscalers and REITs | Growing |
| Geographic demand | — | Growth across all regions: solid US, Europe returning to low-to-mid single digit, strong Middle East/India, China flattish (high single including Aero) | Broadening |
Q&A summary
Nigel Coe (Wolfe Research) asked whether Q4 ESS margin implies a 3%-4% year-over-year decline and how much the Solstice spin and advanced materials loss contributes.
Management said Q4 ESS softness is predominantly mix-driven with continued catalyst push-outs, that LNG is performing extremely well with rising orders, and that ESS will normalize back to historical margins through 2026; advanced materials had been modestly accretive. IR added that UOP typically has a seasonal volume/mix build in Q3 and Q4, but an unusually strong Q2 pulled volume forward, making the timing the main factor rather than a severe full-year impact.
Julian Mitchell (Barclays) asked about Industrial Automation's return to organic growth in Q3 reversing in Q4 and whether any one-time margin headwinds exist.
Management attributed variability to large-order timing, especially in warehouse automation, said IA margin should grow sequentially in Q4 with no one-timers, and expressed good visibility to IA margin expansion in 2026 supported by improving backlog, fixed-cost leverage, and pricing.
Steve Tusa (JPMorgan) asked about the trend in Building Automation margin, which looked slightly weaker than expected, and the outlook into 2026.
Management said the Q3 result was simply project-versus-product mix with nothing concerning, that BA will continue expanding margins sequentially and in 2026, and that BA exemplifies the broader Honeywell strategy of higher growth plus margin expansion that other businesses are expected to follow.
Scott Davis (Melius Research) asked whether the 22% order growth was driven by discrete large projects or was broad-based.
Management said growth was broad-based across all segments, with Aerospace maintaining momentum and strong orders in Building Automation, ESS, and IA; long-cycle was even stronger than short-cycle, and the trend is expected to continue in Q4.
Amit Mehrotra (UBS) asked about pricing strategy and whether there is an unexploited future pricing opportunity given rising revenue but lower margin expectations.
Management said the North Star is preserving margins while protecting volume, that the only 2025 pricing headwind was a 30-45 day lag effect that will not recur in 2026, and that pricing will become a stronger enabler of 2026 margin expansion; the CFO added Aerospace was behind on price this year and will see it as a 2026 tailwind.
Sheila Kahyaoglu (Jefferies) asked about the biggest Aerospace opportunities and margin implications into 2026.
Management said OE mix is becoming less intense, tariff pressure and the CAES acquisition headwind will fade (CAES becoming a tailwind), and that with the Q2 2025 margin bottom confirmed, Aerospace margins are clearly directed higher in 2026 and beyond.