Honeywell International (NASDAQ:HON) reported what executives described as a strong start to 2026, highlighting organic order growth, margin expansion and progress on its multi-year portfolio transformation, while also flagging near-term disruption tied to the conflict in the Middle East and temporary aerospace supply chain constraints.
Chairman and CEO Vimal Kapur said the company delivered “strong results in Q1, building on the momentum from 2025, despite a complex geopolitical backdrop and temporary mechanical supply chain constraints in Aerospace.” Honeywell’s organic orders grew 7% in the quarter, supported by strength in Building and Industrial Automation and in petrochemical and refining within Process. Kapur said book-to-bill was above 1.1 and backlog rose to “over $38 billion.”
Q1 financial performance and cash flow
Stepniak reported adjusted EPS of $2.45, up 11% year over year, driven by higher segment profit and a lower share count, with “favorable” below-the-line items primarily due to higher pension income. Free cash flow was “nearly $100 million,” down from $200 million last year. Stepniak attributed the decline to timing of collections in the Middle East and inventory headwinds in Aerospace related to the mechanical supply chain dynamics, while noting collections improved meaningfully in April.
On capital deployment, Stepniak said Honeywell returned $1.8 billion to shareholders through about $1 billion of share repurchases and $800 million in dividends, and invested more than $220 million in capital expenditures.
Segment highlights: Building strength, aerospace constrained, process disrupted
Stepniak said Building Automation again outperformed expectations, with organic sales up 8% across solutions and products. Growth was driven by new products and momentum in data center and healthcare verticals, and orders increased 9% with double-digit growth in projects, services and fire products. Kapur later said Honeywell’s building automation model competes more often with regional mid-sized companies than with large multinationals due to market fragmentation, and he pointed to continued strength in new product introductions and Honeywell Forge.
Aerospace sales increased 3% organically. Stepniak said commercial demand and “increasing global defense needs” supported growth across commercial OE, commercial aftermarket, and defense and space, but results were “adversely impacted by temporary supply chain headwinds in mechanical products.” Segment margin in Aerospace expanded 20 basis points to 26.5%.
Industrial Automation posted 1% organic sales growth, with Solutions up 7% led by services demand in measurement and performance in Warehouse and Workflow Solutions, while Products declined slightly “primarily in Productivity Solutions and Services.” Orders rose 10%, supported by strength in China and a recovery in Europe. Stepniak said cost simplification tied to the planned separation of certain businesses, improved pricing, and new product introductions were contributing to margin improvement; he also called Industrial Automation a margin expansion driver “for the next year or so.”
Process Automation and Technology declined 6% organically, driven by timing delays in refining catalyst reloads and automation service upgrades, including conflict-related impacts in the Middle East. Stepniak noted project sales were flat as LNG demand was offset by process automation delays, while Kapur said process technology orders increased double-digit and PA&T backlog rose 22%.
Middle East conflict impacts and process outlook
Kapur said the Middle East conflict reduced Q1 revenue by roughly 0.5% for the company overall, “most notably in Process Automation and Technology,” and Honeywell’s guidance assumes the conflict persists through the end of Q2, creating logistics and shipment delays that equate to about a 1% revenue impact.
During Q&A, Kapur said most of the lost revenue in the region has been aftermarket-related, including service migration projects and on-site services, which were constrained by the disruption. He quantified the Q1 impact at “about $50 million, round numbers.” He also said the lost revenue is high-margin, adding that disruption to services and software drives margin pressure.
Despite near-term headwinds, management emphasized demand for process technology remains strong. Kapur said Honeywell secured “over $2 billion” in project wins over the past three quarters across LNG, refining and petrochemicals, and sustainable aviation fuel in multiple regions. He highlighted wins including Dangote Petroleum Refinery and Petrochemicals’ selection of Honeywell technology, services, catalysts and equipment, and an April follow-on award for connected services, digital performance monitoring and operator training. He also cited agreements to provide LNG pre-treatment and liquefaction solutions for Commonwealth LNG in Louisiana and NextDecade’s Rio Grande LNG project in Texas through Bechtel.
Kapur said Honeywell remains “on track” for a second-half ramp in PA&T as LNG and modular equipment deals convert to sales. Stepniak added that PA&T margins should improve in the second half with better mix, volume leverage and strong pricing.
Aerospace supply chain: acute mechanical constraints, recovery underway
Aerospace Technologies President and CEO Jim Currier said the supply chain issue was “very acute” and “transitory,” tied to “key suppliers in the mechanical space” that affected both the engines and control systems businesses. He said Honeywell identified the issue at the end of January and early February, then saw recovery in March with momentum continuing into April. He told analysts that about 50% of aerospace quarterly deliveries typically occur in the third month, making March’s improvement meaningful.
Currier said the disruption impacted commercial OE, commercial aftermarket and defense and space because the same supply base supports those end markets, and he emphasized it was “absolutely not any destocking” by customers, but rather a lack of critical parts from suppliers. Management maintained its outlook for aerospace of high single-digit organic sales growth for the year.
On margins, Currier said Q1 benefited from a more favorable electrical versus mechanical mix “even despite” lower volume leverage, and he reiterated that quarterly margins can fluctuate with mix but that aerospace expects “modest expansion” for the full year.
Guidance and portfolio transformation milestones
For Q2, Stepniak guided to organic sales growth of 2% to 4% and segment margin of 22.2% to 22.5%. He said Aerospace should improve sequentially as OE production rates ramp and defense spending increases, while Process Automation and Technology is expected to be “slightly weaker than Q1” due to additional conflict-related pressure. Adjusted EPS is expected to be $2.40 at the midpoint, reflecting a $0.16 headwind from a higher effective tax rate; Stepniak said the full-year tax rate is still expected to be about 19%.
For the full year, Honeywell maintained its organic growth outlook of 3% to 6% and segment margin guidance of 22.7% to 23.1%, citing prudence amid geopolitical uncertainty. Stepniak said the guidance still includes Productivity Solutions and Services and Warehouse and Workflow Solutions until those transactions close, and it assumes a continued ramp in Quantinuum investments. He noted Honeywell expects to consolidate Quantinuum’s results in Q2 but is not adjusting segment margin or adjusted EPS guidance at this time to reflect it.
On portfolio actions, Kapur said Honeywell expects to complete the Honeywell Aerospace spin-off on June 29, which he described as the final step in the transformation. He said Honeywell raised $20 billion of aerospace spin financing and received investment-grade credit ratings (A3 from Moody’s, A- from Fitch, and BBB+ from S&P, each with a positive outlook). Proceeds are intended primarily to redeem Honeywell debt and to fund cash to the Aerospace balance sheet.
Kapur also noted an amended agreement to acquire Johnson Matthey’s Catalyst Technologies business, adjusting total consideration and extending the closing date to the end of July, and reiterated agreements to sell Productivity Solutions and Services to Brady Corporation and the Warehouse and Workflow business to American Industrial Partners in two all-cash transactions expected to close in the second half of 2026. CFO Mike Stepniak said there would not be tax leakage related to the two divestiture transactions.
Kapur said investors will hear more at upcoming events, including a Honeywell Aerospace Investor Day on June 2-3 in Phoenix and a Honeywell Investor Day on June 11 in New York City.
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.
