Honeywell International Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Solstice Separation: Solstice to start trading as independent on Oct 30. Honeywell planning Aerospace separation in 2026 and realigned Automation segment structure into 4 segments: Aerospace Technologies, Building Automation, Process Automation, and Technology & Industrial Automation starting Q1 2026.
• Quantinuum: Recently raised capital, with Honeywell planning to monetize stake when appropriate.
• Liability Divestments: Entered into agreement to divest Bendix asbestos liability and terminated indemnification with Resideo, resulting in net cash inflow.

Segment Performance

• Aerospace Technologies: Grew 12% organically, led by commercial aftermarket and Defense & Space. Segment margin decreased 160 basis points year-over-year to 26.1% but improved 60 basis points sequentially.
• Industrial Automation: Sales returned to growth in Q3, up 1% organically. Segment margin declined 150 basis points year-over-year to 18.8%.
• Building Automation: Organic sales increased 7% year-over-year, driven by building solutions and products. Margin expanded 80 basis points year-over-year.
• Energy and Sustainability Solutions: Down 2% organically in Q3. Segment margin flat year-over-year at 24.5%.

Guidance

• 2025 Guidance: Raising 2025 organic sales and adjusted EPS guidance. Full year organic sales expected ~6% growth (5% excluding Bombardier impact). Full year sales projected $40.7B-$40.9B. Q4 organic sales growth 8%-10% (4%-6% excluding Bombardier). Full year EPS $10.60-$10.70, up 7%-8% (5%-6% excluding Bombardier and Solstice spin).
• Segment Guidance:
  • Aerospace: Raising full year sales growth expectations, margins expected ~26% in 2025, improving in 2026.
  • Industrial Automation: Raising full year top line expectations but expecting Q4 sales down low single digits, margin contraction.
  • Building Automation: Anticipating mid-single to high single-digit organic sales growth, margins expanding.
  • Energy and Sustainability Solutions: Maintaining flat to slightly up sales growth guidance, Q4 sales down low single digits.

Risks

• Macro Uncertainty: Elevated geopolitical tensions and macro uncertainty impacting business.
• Tariff Pressures: Temporary outpacing of pricing by cost inflation from tariffs.
• Catalyst Shipments: Delays affecting Energy and Sustainability Solutions margins.
• Mix Dynamics: Unfavorable mix impacting Industrial Automation margins.

Question and Answer

Q: 4Q margin for ESS?

A: Mike Stepniak says ESS margins have transitory softness in Q4 due to mix, but will normalize in 2026.

Q: IA segment reversal in Q4?

A: Mike Stepniak says IA orders were strong in Q3 but timing variability, expecting Q4 sales down low single digits, margins contracting but improving in 2026.

Q: Pricing strategy?

A: Vimal Kapur and Mike Stepniak say pricing will be better in 2026 due to tariff stabilization and clearer inflation picture, with Aero benefiting from price tailwind.