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HONEYWELL INTERNATIONAL INC (HON) Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 beat across metrics: sales $9.82B (+8% YoY), organic +4%, GAAP EPS $2.22 (flat YoY), adjusted EPS $2.51 (+7% YoY); operating margin 20.1% (-30 bps YoY), segment margin 23.0% (flat) . Wall Street consensus for Q1 was EPS $2.21*, revenue $9.60B*; HON beat on both; EBITDA also exceeded consensus at ~$2.52B actual vs ~$2.39B estimate* (adjusted EPS used as “actual”) [GetEstimates]* .
  • FY25 guidance: sales $39.6–$40.5B (top-end trimmed), segment margin 23.2–23.5% (narrowed), adjusted EPS raised to $10.20–$10.50; OCF $6.7–$7.1B and FCF $5.4–$5.8B maintained .
  • Segment mix: Aerospace strength led by +15% commercial aftermarket and double-digit defense growth; Building Automation +8% organic with margin expansion; Industrial Automation -2% organic with margin compression; ESS margins +230 bps YoY .
  • Management flagged tariff exposure (~$500M 2025 gross) but expects full mitigation via pricing and direct material productivity; maintained organic growth guidance and raised EPS despite macro uncertainty .
  • Capital actions: ~$2.9B deployed in Q1 (buybacks $1.9B, dividends, capex), ~$1B further buybacks in April; declared $1.13/share quarterly dividend payable Jun 6, 2025; pending Sundyne $2.16B acquisition (accretive to sales/margins/EPS) .

What Went Well and What Went Wrong

What Went Well

  • Aerospace aftermarket sales +15% on improved supply chain and air transport demand; defense & space +10% organic; Aerospace orders +9%, book-to-bill 1.1 .
  • Building Automation organic +8% with +11% in solutions and +6% in products; segment margin +150 bps to 26.0% on volume leverage and productivity .
  • ESS margin +230 bps to 22.2% on commercial excellence, productivity, and accretive LNG acquisition; UOP +2% organic with strength in refining/petrochemicals/sustainability projects .
  • “Honeywell started the year off exceptionally well, exceeding guidance across all metrics” — Vimal Kapur (CEO) .

What Went Wrong

  • Industrial Automation -2% organic; margin -130 bps to 17.8% due to receivables write-downs and volume deleverage; PPE weakness in China/Europe weighed on Sensing & Safety .
  • Aerospace segment margin -190 bps to 26.3% on mix pressure and acquisition impacts despite strong aftermarket; OE mix and timing weighed on reported revenue .
  • Operating margin contracted 30 bps YoY to 20.1%; management added demand contingency for 2H given tariffs/macros (assumes ~1% organic sales, ~2% segment profit, ~$0.18 EPS impact vs February guide) .

Financial Results

Headline Results vs Prior Year and Prior Quarter

MetricQ1 2024Q4 2024Q1 2025
Sales ($USD Millions)$9,105 $10,088 $9,822
EPS (GAAP) ($USD)$2.23 $1.96 $2.22
Adjusted EPS ($USD)$2.34 $2.47 $2.51
Operating Margin (%)20.4% 17.3% 20.1%
Segment Margin (%)23.0% 20.9% 23.0%
Operating Cash Flow ($USD Millions)$448 $2,281 $597
Free Cash Flow ($USD Millions)$215 $1,888 $346

Results vs Wall Street Consensus (S&P Global)

MetricQ1 2025 ConsensusQ1 2025 Actual
EPS (Primary) ($USD)2.209*2.51
Revenue ($USD Millions)9,599*9,822
EBITDA ($USD Millions)2,394*2,518*

Values retrieved from S&P Global.*

Segment Performance (YoY)

SegmentQ1 2024 Sales ($MM)Q1 2025 Sales ($MM)ChangeQ1 2024 Segment Margin (%)Q1 2025 Segment Margin (%)Change
Aerospace Technologies$3,669 $4,172 +14% 28.2% 26.3% -190 bps
Industrial Automation$2,478 $2,378 -4% 19.1% 17.8% -130 bps
Building Automation$1,426 $1,692 +19% 24.5% 26.0% +150 bps
Energy & Sustainability Solutions$1,525 $1,561 +2% 19.9% 22.2% +230 bps

KPIs

KPIQ4 2024Q1 2025
Backlog ($B)$35.3 $36.1
Orders ($B)—$10.6
Book-to-Bill—>1.0
Organic Sales Growth (%)2% 4%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales ($B)FY 2025$39.6–$40.6 $39.6–$40.5 Lowered top end
Organic Growth (%)FY 20252–5 2–5 Maintained
Segment Margin (%)FY 202523.2–23.6 23.2–23.5 Narrowed (lower top end)
Adjusted EPS ($)FY 2025$10.10–$10.50 $10.20–$10.50 Raised midpoint
Operating Cash Flow ($B)FY 2025$6.7–$7.1 $6.7–$7.1 Maintained
Free Cash Flow ($B)FY 2025$5.4–$5.8 $5.4–$5.8 Maintained
EPS ex-Bombardier ($)FY 2025Down 2% to up 2% Down 1% to up 2% Slightly better
Q2 Sales ($B)Q2 2025n/a$9.8–$10.1 New
Q2 Segment Margin (%)Q2 2025n/a22.8–23.2 New
Q2 EPS ($)Q2 2025n/a$2.60–$2.70 New
Dividend per Share ($)Q2 2025n/a$1.13 (payable Jun 6) New

Management added a contingency for tariffs/macro vs February guide: ~1% organic sales, ~2% segment profit, ~$0.18 EPS impact .

Earnings Call Themes & Trends

TopicQ3 2024Q4 2024Q1 2025Trend
Tariffs/MacroLimited mention; focus on execution and backlog growth Announced intent to separate Automation/Aerospace; macro acknowledged Explicit tariff exposure (~$500M), local-for-local mitigation, cautious 2H demand contingency Rising risk focus; mitigation in place
Supply ChainAerospace OE/aftermarket growth aided by improved output Continued supply chain improvements in defense/space Better output supporting 15% aftermarket growth Improving throughput
Portfolio ActionsAccess Solutions, LNG acquisitions closed; AM spin intent Board concluded review; pursue separation; FY25 guide initiated Sundyne acquisition announced; separation management office formed Accelerating portfolio transformation
Building Automation+3% organic; margin up +8% organic; margin +250 bps +8% organic; margin +150 bps; strategy pivot to data centers/hospitality Sustained strength; secular tailwinds
Industrial Automation-5% organic; margin +60 bps Flat organic; margin -200 bps -2% organic; margin -130 bps; receivable write-offs; PPE weakness Mixed; short-cycle softness, cleanup actions
Defense & Space+14% organic +14% organic 5th straight double-digit growth; funded multi-year programs Persistent strength

Management Commentary

  • “Our outlook now incorporates the impact of current tariffs and macroeconomic uncertainty, fully offset by our ongoing mitigation efforts, local-for-local strategy, accelerated operating system and resilient market position” — Vimal Kapur, CEO .
  • “We had a very strong start to the year… exceeding the high end of our organic sales, segment margin and adjusted EPS guidance” — Mike Stepniak, CFO .
  • “We hold strong conviction that separating Automation, Aerospace and Advanced Materials can unlock significant value… we have taken many steps forward in preparation” — Vimal Kapur .

Q&A Highlights

  • Tariffs: Exposure ~60–70% China-related; mitigation via pricing and direct material productivity; aim to be on-par by 2H and stable by Q4 if conditions don’t worsen .
  • Demand contingency: Primarily top-down prudence; strongest risk in IA (China exposure) and retail-linked short-cycle; orders remained strong in April .
  • Price/volume: 2025 assumption revised to ~3% price and -2% to +1% volume (ex-Bombardier), aligning to maintained sales guidance .
  • Aerospace OE vs aftermarket: OE revenue impacted by product mix (cost-over-sell) and timing; aftermarket remains strong; aerospace margins expected ~26% for year due to mix and integration costs .
  • Separation costs/stranded costs: One-time costs still $1.5–$2.0B; stranded costs targeted for elimination within 18–24 months post-spin .

Estimates Context

  • Q1 2025 beats: EPS $2.51 vs $2.21 consensus*, revenue $9.82B vs $9.60B*, EBITDA ~$2.52B vs ~$2.39B* [GetEstimates]* .
  • Estimate dispersion: 19 EPS estimates and 16 revenue estimates for Q1 2025*, indicating robust coverage; HON raised FY25 EPS guidance midpoint by $0.05, likely supporting upward revisions* [GetEstimates]* .
  • Quarter trajectory: Q4 2024 adjusted EPS $2.47 vs $2.35 consensus*; Q3 2024 adjusted EPS $2.58 vs $2.50 consensus* [GetEstimates]* .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad-based beat and raised FY25 EPS guidance despite tariff headwinds underscores pricing power and operational agility; watch continued mitigation execution through Q2–Q4 .
  • Aero strength driven by aftermarket (+15%) and defense; margins pressured by mix/integration but stable ~26% expected for 2025 — constructive for backlog conversion and earnings quality .
  • Building Automation delivering multi-quarter momentum and margin expansion; strategy pivot to high-growth verticals (data centers, hospitality) provides secular support .
  • IA cleanup continues (receivable write-offs, PPE exit expected early May); margin trajectory to improve as PPE divestiture and productivity actions take hold .
  • Capital deployment remains aggressive: ~$3B buybacks YTD (incl. April), pending Sundyne acquisition (accretive), and consistent dividend ($1.13) — tailwind to EPS via share count reduction .
  • Near-term trading: Stock likely sensitive to tariff headlines and China short-cycle data; Q2 guide ($2.60–$2.70 EPS) sets bar; watch Aero aftermarket cadence and ESS margin mix .
  • Medium-term thesis: Portfolio separation into three companies, accretive bolt-ons (LNG, Sundyne), and backlog growth ($36.1B) support multi-year value creation and potential multiple re-rating as sum-of-the-parts becomes clearer .

Non-GAAP Notes

Adjusted EPS excludes items including amortization of acquisition-related intangibles, acquisition/divestiture-related costs, pension mark-to-market, impairment of assets held for sale, and other items as detailed in the reconciliation . Segment margin is a non-GAAP measure defined as segment profit divided by net sales .

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