Honeywell's Q2 Operating Beat Fails to Impress Investors, RBC Lowers Price Target to $253

Honeywell's Q2 operating results beat expectations, but shares underperformed. RBC Capital analyst Deane Dray lowered the price target to $253 from $254 and maintained a Sector Perform rating. The analyst believes that M&A and portfolio moves are on hold or completed, leading to a near-term range-bound stock performance.

Honeywell International (NASDAQ: HON) reported its Q2 2025 earnings, which exceeded market expectations, yet the company's shares underperformed. Revenue for the quarter grew by 8.1% year-on-year to $10.35 billion, beating analysts' estimates by 2.8% [2]. The company also lifted its full-year revenue guidance to $40.8 billion at the midpoint, a 1.9% increase from previous estimates [2]. The adjusted EPS was $2.75 per share, 3.5% above analysts' consensus estimates [2].

However, RBC Capital analyst Deane Dray lowered the price target for Honeywell shares to $253 from $254 and maintained a Sector Perform rating. Dray believes that the company's M&A and portfolio moves are on hold or completed, leading to a near-term range-bound stock performance [1].

Operational performance showed mixed results. The Defense and Space, and UOP segments reported double-digit gains, while the Building Automation segment surged 16% in revenue. However, the Industrial Automation segment faced flat organic sales, with a 4% decline in warehouse and workflow solutions [1]. Despite these challenges, Honeywell's margin resilience stood out, with operating income rising 7% to $2.4 billion and segment profit up 8% [1].

The company's strategic portfolio moves, including the acquisition of Johnson Matthey's Catalyst Technologies business and the planned separation of its Advanced Materials business into Solstice Advanced Materials, demonstrate a focus on high-growth areas and energy transition [1]. These moves align with broader industrial trends, positioning Honeywell at the intersection of megatrends expected to drive growth over the next decade.

Honeywell's ability to navigate a volatile industrial sector is evident in its updated full-year guidance. The company's organic sales growth is projected to be 4–5%, and adjusted EPS is expected to be $10.45–$10.65 [1]. The company's $35.3 billion backlog provides a buffer against near-term macroeconomic risks, ensuring sustained revenue visibility [1].

Despite the positive earnings report, Honeywell's shares underperformed, reflecting investor concerns about the company's M&A and portfolio moves. The near-term range-bound stock performance suggests that investors are cautious about the company's ability to create value through these moves. However, Honeywell's strategic play in a volatile sector remains a compelling long-term investment thesis, with a forward P/E ratio of 16x and a dividend yield of 1.2% [1].

References:
[1] https://www.ainvest.com/news/honeywell-q2-earnings-strategic-play-high-growth-industrial-sector-2507/
[2] https://www.tradingview.com/news/stockstory:21aac9571094b:0-honeywell-s-nasdaq-hon-q2-beats-on-revenue-full-year-outlook-slightly-exceeds-expectations/