Honeywell International Inc Q1 2026 results
Snapshot
Honeywell International Inc reported $9.14B of revenue in Q1 2026, up 2.4% year over year, with diluted EPS of $1.29 and an operating margin of 16.2%.
- Revenue
- $9.14B
- YoY growth
- +2.4%
- Diluted EPS
- $1.29
- Operating margin
- 16.2%
What management said
- •This morning, we will review our financial results for Q1 of 2026, provide guidance for Q2, and discuss our full year outlook.
- •Orders grew 7% organically on the strength of our Building and Industrial Automation segment, as well as in petrochemical and refining verticals in Process segment.
- •Including the orders growth in Aerospace, we drove backlog to over $38 billion with book-to-bill above 1.1.
- •Sales growth was robust across electronics solutions in Aerospace, fire and aftermarket services in Building Automation, and gas and LNG in Process Automation and Technology, bolstered by our innovation and new product engine.
- •We expanded margins by 90 basis points to over 23%, driven by pricing discipline, productivity, and accelerated stranded cost removal ahead of the Aerospace spin.
- •All of this drove 11% adjusted earnings growth in the quarter, demonstrating the strength and agility of the Honeywell operating system.
- •Despite the strong start of the year, we are taking a prudent approach to our guidance, given the uncertainty surrounding the conflict in the Middle East.
- •We remain confident in our ability to drive accelerating growth in H2 as our backlog supports a pickup in growth in Process Automation and Technology.
- •The future is bright as we set both businesses in gear to thrive with the right strategic focus and capital allocation priorities that will drive value for our customer, employees, and shareholders.
- •In March, we successfully raised $20 billion of aerospace spin financing while delivering strong investment grade credit rating of A3, A-, and BBB+ with a positive outlook from Moody's, Fitch, and S&P respectively.
- •Department of Defense to rapidly increase the production of critical defense technology through a $500 million commitment.
- •This agreement demonstrate the criticality of Honeywell Aerospace to national security interests and supports a multi-billion-dollar revenue opportunity.
What went well
- •Honeywell delivered strong Q1 results that exceeded expectations on both segment margin and adjusted EPS, building on momentum from 2025 despite a complex geopolitical backdrop and temporary aerospace supply chain constraints.
- •Orders grew 7% organically, broad-based across all segments, driving backlog above $38 billion (up 15%) with book-to-bill above 1.1; Industrial Automation orders were up 10%, Building Automation up 9%, Aerospace up 6%, and Process Automation and Technology up 3%.
- •Segment margin expanded 90 basis points to 23.3% with margin expansion in all four segments, led by Industrial Automation up 260 basis points and Process Automation and Technology up 200 basis points from pricing and productivity actions.
- •Building Automation sales rose 8% organically, the fifth or sixth consecutive quarter of high single-digit growth, led by new products and strength in data center and healthcare verticals, with Middle East and India sales both up double digits.
- •Adjusted EPS of $2.45 was up 11%, driven by higher segment profit and lower share count, and the company returned $1.8 billion to shareholders through roughly $1 billion of buybacks and $800 million of dividends.
- •The company advanced its portfolio transformation, setting a firm Aerospace spin-off date of June 29, raising $20 billion of spin financing at investment-grade ratings, and announcing the sales of its Productivity Solutions and Services and Warehouse and Workflow Solutions businesses.
What went wrong
- •Process Automation and Technology sales fell 6% organically, driven by timing delays in refining catalyst reloads and automation service upgrades, including impacts from the Middle East conflict.
- •The Middle East conflict drove a roughly 0.5% revenue impact to all of Honeywell in Q1 and is expected to cost about 1% of revenue in Q2, concentrated in high-margin aftermarket services and software in the energy-exposed Process segment.
- •Aerospace results were hurt by acute, temporary mechanical supply chain headwinds affecting engines, power systems, and control systems across commercial OE, commercial aftermarket, and defense, limiting Aerospace organic growth to 3%.
- •Free cash flow was nearly $100 million, down from $200 million a year earlier, as higher operational income was offset by timing of collections in the Middle East and inventory headwinds in aerospace.
- •Industrial Automation products declined slightly, primarily in Productivity Solutions and Services, partially offset by strength in sensing.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Organic sales growth | Q2 2026 | — | 2%-4% | — |
| Segment margin | Q2 2026 | — | 22.2%-22.5% (down 10 to up 20 bps) | — |
| Adjusted EPS | Q2 2026 | — | approximately $2.40 at midpoint (~$2.55 on normalized tax) | — |
| Effective tax rate | Q2 2026 | 16% (Q2 2025) | approximately 21% | higher |
| Organic sales growth | FY2026 | 3%-6% | 3%-6% (maintained) | steady |
| Segment margin expansion | FY2026 | — | 20-60 bps (50-90 bps operationally, less 30 bps Quantinuum drag) | — |
| Effective tax rate | FY2026 | — | approximately 19% | — |
| Aerospace organic growth | FY2026 | — | high single-digit growth (intact) | steady |
| Process Automation and Technology organic growth | FY2026 | — | roughly flat for the year (high single-digit H2) | — |
| Aerospace segment margin | FY2026 | — | approximately 26% (modestly up) | — |
| Pricing | FY2026 | 3%-4% | above 3%, trending toward 4% | higher |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total organic sales | +2% | Growth led by Building Automation and Aerospace Technologies, partly offset by Process Automation and Technology decline and Middle East disruption. |
| Building Automation sales | +8% organic | Strong demand for new products and momentum across data center and healthcare verticals, with double-digit growth in Middle East and India. |
| Aerospace sales | +3% organic | Commercial demand and global defense needs supported growth, but temporary mechanical supply chain headwinds constrained output. |
| Industrial Automation sales | +1% organic | Solutions grew 7% on robust measurement services and warehouse/workflow strength, offset by a slight product decline in Productivity Solutions and Services. |
| Process Automation and Technology sales | -6% organic | Timing delays in refining catalyst reloads and automation service upgrades, plus Middle East conflict impacts; aftermarket down about 10%. |
| Aerospace segment margin | +20 bps to 26.5% | Pricing, productivity, and favorable electrical-versus-mechanical mix despite lower volume leverage. |
| Adjusted EPS | +11% to $2.45 | Higher segment profit, lower share count, modest FX benefit, and favorable below-the-line items from higher pension income. |
| Free cash flow | down to ~$100M from ~$200M | Higher operational income offset by timing of Middle East collections and aerospace inventory headwinds. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio transformation and Aerospace spin-off | Transformation underway since 2023 | Firm Aerospace spin date of June 29; $20 billion spin financing raised at investment-grade ratings; PSS and Warehouse/Workflow businesses sold, leaving a pure-play automation RemainCo. | rising |
| Middle East conflict impact | — | Roughly 0.5% revenue hit in Q1 and ~1% in Q2, concentrated in high-margin Process aftermarket; near-term headwinds but expected rebuild and services demand in H2. | rising |
| Aerospace supply chain constraints | Strong Q4 output growth of 13% | Acute, transitory mechanical supplier shortfalls in January-February hit engines, power systems, and control systems; recovery began in March and carried into April. | improving |
| Process backlog and H2 ramp | Backlog building over prior year | Over $2 billion in project wins across three quarters and double-digit process technology order growth support a high single-digit PA&T H2 ramp from firm, FID-backed backlog. | rising |
| Pricing and inflation | 3%-4% pricing | Pricing above 3% and trending toward 4%, expected to offset rising inflation and support continued margin expansion. | rising |
| Data center demand in Building Automation | Discussed prior quarters | Growing share, especially with tier-two providers, plus emerging opportunities in liquid cooling sensors and behind-the-meter power generation. | rising |
| LNG cycle | Air Products liquefaction and Sundyne acquisitions | Very bullish on LNG; acquired businesses performing well with strong demand in U.S., Africa, and Middle East, including expansion and refurbishment opportunities. | rising |
Q&A summary
Can you give more detail on the aerospace supply chain challenges and measures in place to solve them?
The start of the quarter saw an acute, transitory shortfall from key mechanical suppliers affecting the engines and control systems businesses; resources were deployed and recovery began in March, carrying into April, supporting confidence in mid- to high single-digit Q2 growth.
Why do Q2 margins step down sequentially and is Aerospace margin flat?
Operationally nothing changed; the sequential pressure comes from a mix headwind tied to lower catalyst sales in Q2 plus high-margin Middle East revenue loss; full-year framework of 20-60 bps expansion is intact, with Aerospace around 26% for the year.
How should we think about the Process Automation and Technology organic sales ramp through the year?
The only change since prior guidance is the Middle East impact (about 0.5% in Q1, 1% in Q2); strong and growing backlog plus robust orders support a high single-digit H2 ramp, leaving the full year roughly flat as guided.
Can you size the Middle East rebuild opportunity?
It will come in three phases: initial services to restart plants (not yet started), refurbishment of impacted facilities over eight to twelve weeks of startup, and elevated demand for services and catalysts supported by high oil prices; near-term headwinds are in the numbers while the long-term outlook is favorable.
What were the order trends within the 7% organic growth across short and long cycle?
Broad-based: Industrial Automation up 10% (long and short cycle), Building Automation up 9%, Process Automation and Technology up 3%, and Aerospace up 6%; short-cycle demand is recovering in China and Europe and expected to accelerate to mid- to high single digits in Q2.
What drove the strong Industrial Automation margin improvement in Q1?
Structural cost simplification from separating the warehouse/handheld businesses, improved pricing, and new product introductions recovering lost share; IA is expected to be a margin expansion driver for the next year or so.