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HONEYWELL INTERNATIONAL INC (HON) Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid top-line and earnings outperformance vs guidance: sales $10.35B (+8% YoY) and adjusted EPS $2.75 (+10% YoY), with segment margin 22.9% within guidance despite aero and ESS mix headwinds .
  • Against Wall Street, HON beat S&P Global consensus for revenue ($10.35B vs $10.06B*) and adjusted EPS ($2.75 vs $2.66*) in Q2; Q1 also beat on EPS and revenue, while Q4 2024 beat on revenue and adjusted EPS* [GetEstimates].
  • Full-year 2025 guidance raised: sales to $40.8–$41.3B (from $39.6–$40.5B), organic growth to 4–5% (from 2–5%), and adjusted EPS to $10.45–$10.65 (from $10.20–$10.50); segment margin narrowed to 23.0–23.2% (from 23.2–23.5%) .
  • Portfolio catalysts continue: closed $2.2B Sundyne, announced £1.8B Johnson Matthey Catalyst Technologies acquisition, completed $1.3B PPE sale, and evaluating strategic alternatives for PSS/WWS; Solstice Advanced Materials spin targeted for Q4 2025 .

What Went Well and What Went Wrong

What Went Well

  • Building Automation led with 8% organic growth and 90 bps margin expansion to 26.2%, driven by volume leverage and Access Solutions integration .
  • Defense & Space +13% YoY and Commercial Aftermarket +7% drove Aero organic +6% and double-digit backlog/order growth; management reiterated bullish aero outlook post supply-chain healing .
  • Record backlog and healthy orders: backlog +10% organically to $36.6B and Q2 orders $10.5B, underpinning second-half visibility .

Management quote: “Honeywell delivered outstanding results… both organic growth and adjusted earnings per share exceeding guidance despite the unpredictable macroeconomic backdrop.” — Vimal Kapur, CEO .

What Went Wrong

  • Aerospace margin contracted 170 bps to 25.5% on cost inflation, acquisitions (CASE), and OE destocking; pricing to offset tariffs in aero OE will lag contractual resets .
  • ESS margin contracted 110 bps to 24.1% due to a customer settlement, cost inflation, and mix shift from catalysts/projects timing .
  • Free cash flow fell 9% YoY to $1.02B as inventories rose amid tariff-related cost inflation and capex ramp .

Financial Results

Consolidated performance vs prior quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$10,088 $9,822 $10,352
EPS (Diluted, $)$1.96 $2.22 $2.45
Adjusted EPS ($)$2.47 $2.51 $2.75
Operating Income ($USD Millions)$1,745 $1,970 $2,114
Operating Margin %17.3% 20.1% 20.4%
Segment Profit ($USD Millions)$2,110 $2,258 $2,366
Segment Margin %20.9% 23.0% 22.9%
Operating Cash Flow ($USD Millions)$2,281 $597 $1,319
Free Cash Flow ($USD Millions)$1,888 $346 $1,016

Actual vs S&P Global consensus (quarterly)

MetricQ4 2024Q1 2025Q2 2025
Revenue Actual ($USD Millions)$10,088$9,822$10,352
Revenue Consensus Mean ($USD Millions)$9,852*$9,599*$10,063*
Adjusted EPS Actual ($)$2.47$2.51$2.75
Primary EPS Consensus Mean ($)$2.35*$2.21*$2.66*

Values retrieved from S&P Global. (*)

Segment breakdown

SegmentQ4 2024 Sales ($MM)Q4 2024 Margin %Q1 2025 Sales ($MM)Q1 2025 Margin %Q2 2025 Sales ($MM)Q2 2025 Margin %
Aerospace Technologies$3,986 20.3% $4,172 26.3% $4,307 25.5%
Industrial Automation$2,566 19.6% $2,378 17.8% $2,380 19.2%
Building Automation$1,798 26.8% $1,692 26.0% $1,826 26.2%
Energy & Sustainability Solutions$1,733 24.9% $1,561 22.2% $1,837 24.1%

KPIs and cash metrics

KPIQ4 2024Q1 2025Q2 2025
Backlog ($USD Billions)$35.3 —$36.6
Orders ($USD Billions)——$10.5
R&D Expense ($USD Millions)$426 $439 $481

Guidance Changes

MetricPeriodPrevious Guidance (Apr 29)Current Guidance (Jul 24)Change
Sales ($B)FY 2025$39.6 – $40.5 $40.8 – $41.3 Raised
Organic Growth (%)FY 20252% – 5% 4% – 5% Raised
Segment Margin (%)FY 202523.2% – 23.5% 23.0% – 23.2% Lowered
Segment Margin Expansion (bps)FY 2025Up 60 – 90 Up 40 – 60 Lowered
Adjusted EPS ($)FY 2025$10.20 – $10.50 $10.45 – $10.65 Raised
Adjusted EPS Growth (%)FY 20253% – 6% 6% – 8% Raised
Operating Cash Flow ($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

Additional color: Guidance includes Sundyne close and PPE sale; ex-Bombardier 4Q24 impact, organic growth 3–4%, segment margin −30 to −10 bps YoY, adjusted EPS +1–3% YoY .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs & pricing2025 guide incorporated tariff impacts and mitigation; cautious macro noted Pricing offset improving; aero OE pricing lags due to 10-year contracts; price now +100 bps vs prior view (2–3%) Mitigation improving; timing lag remains in Aero
Supply chainDefense & Space last to heal; improving in Q4 OE destocking drove temporary softness; electromechanicals catching up; normalization expected H2 Sequential improvement; normalization expected
Energy projects & catalystsUOP orders +19% in Q4; Q1 UOP modest growth Some catalysts pulled into Q2; sustainable fuels projects pushed to 2026 amid policy timing; LNG strong Near-term timing headwind; positive medium-term
R&D investmentHigher R&D supports growth; margin trade-off Elevated R&D across segments to upper quartile; aero +$200M YoY Strategic acceleration
Building AutomationBA margins/ growth improving post Access Solutions Organic +8% and margin +90 bps; focus on hospitals/hotels/data centers; install-base mining Sustained outperformance
Regional mixMiddle East and North America strong in BA Europe/China headwinds subsiding; US leads growth Normalizing geographically
Portfolio actionsSeparation plan, PPE sale; pipeline active Evaluating PSS/WWS strategic alternatives; Sundyne close; Li-ion Tamer tuck-in Continued simplification

Management Commentary

  • “Three out of four segments grew sales at better than 5%… record backlog.” — Vimal Kapur, CEO .
  • “Adjusted EPS was $2.75… organic and inorganic segment profit growth, and lower tax rate, offset higher interest and lower pension income.” — Mike Stepniak, CFO .
  • “Aero OE destocking is transitory… margins will improve as CASE drag normalizes and pricing catches up.” — CFO .
  • “Sustainable fuels projects most impacted by timing; LNG remains very strong… two‑in‑a‑box strategy benefits ESS and Process Automation.” — CEO .

Q&A Highlights

  • Aerospace: OE destocking with a North America platform; expect normalization in H2; aero margins pressured by CASE and R&D but not a new baseline .
  • UOP/ESS: Strong Q2 catalysts/licensing; second-half cautious as projects shift; IRA/OB3 largely preserved longer-term .
  • Pricing/tariffs: Short cycle pricing offsets; aero OE pricing lag due to contract mechanics; price now +100 bps vs prior guide .
  • Building Automation margins: High incrementals; BA likely highest-margin business in 2025 .
  • FCF: Inventory headwinds from aero; targeting >90% conversion in 2026 .
  • PSS/WWS review: Choices aimed at pure-play automation focus; seeking clarity by year-end .

Estimates Context

  • Q2 2025: Adjusted EPS $2.75 vs $2.66* consensus; revenue $10.35B vs $10.06B* — beat on both lines [GetEstimates].
  • Q1 2025: Adjusted EPS $2.51 vs $2.21*; revenue $9.82B vs $9.60B* — beat [GetEstimates].
  • Q4 2024: Adjusted EPS $2.47 vs $2.35*; revenue $10.09B vs $9.85B* — beat [GetEstimates].

Values retrieved from S&P Global. (*)

Where estimates may adjust:

  • Likely upward revisions to BA margins and 2H sales trajectory; modestly lower segment margin expectations for aero and IA due to tariffs/mix, consistent with updated full-year margin guide .

Key Takeaways for Investors

  • HON executed a clean beat-and-raise in Q2; narrative supported by backlog strength ($36.6B) and orders ($10.5B), with BA and Defense/Space leading .
  • Expect aero margins to improve sequentially as OE destocking fades and pricing resets; near-term tariffs create timing, not structural, headwinds .
  • ESS project timing and catalyst shipment pull-forward suggest a softer Q3 for UOP; LNG remains a durable tailwind into 2026 .
  • Guidance shifts signal confidence: higher sales and EPS, cautious margin range reflecting tariff/mix; free cash flow guide maintained ($5.4–$5.8B) .
  • Portfolio actions are a meaningful stock catalyst: PSS/WWS strategic alternatives, Solstice spin in Q4 2025, aero separation in 2H 2026, and recent M&A (Sundyne; JM Catalyst Technologies) .
  • Near-term trading: favor strength into BA/Aero updates and spin milestones; watch Q3 ESS/IA mix and aero pricing cadence per management commentary .
  • Medium-term thesis: elevated R&D and focused portfolio should accelerate organic growth and support margin resilience post-separation .

Additional relevant Q2 2025 press releases

  • Strategic alternatives for PSS/WWS announced July 8, 2025 .
  • Completed Sundyne acquisition (June 9, 2025) .
  • Li-ion Tamer tuck-in (July 1, 2025) supports energy storage/data center exposure .
  • Quarterly dividend declared July 25, 2025 .

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