Honeywell's Tepid Sales Forecast: Industrial Automation's Drag

Honeywell International Inc. (HON.O) recently lowered its annual profit forecast, citing weaker demand in its industrial automation business. The company's shares fell by 4.5% in premarket trading following the announcement. Honeywell's industrial automation segment, which includes warehouse and workflow solutions, has experienced volume softness, leading to a decline in sales. The company is also grappling with a slower-than-expected rebound in short-cycle businesses, such as its mask-making safety and productivity solutions unit.


Honeywell's second-quarter sales and earnings beat expectations, driven by a 5% increase in overall sales to $9.58 billion. However, the company's industrial automation segment reported an 8% decline in organic sales, which contributed to the downward revision in the annual profit forecast. Honeywell now expects an adjusted profit of $10.05 to $10.25 per share, down from its previous guidance of between $10.15 and $10.45 per share.


To mitigate the impact of short-cycle businesses on its earnings outlook, Honeywell is focusing on its aerospace and other long-cycle businesses. The company's aerospace unit, which makes parts for Boeing and Airbus, contributed to the overall sales growth. Honeywell is also executing on CEO Vimal Kapur's vision of better aligning the overall business to the megatrends of automation, the future of aviation, and energy transition.

In the long term, recent acquisitions such as CAES Systems and Air Products' LNG business are expected to contribute to Honeywell's earnings growth. These acquisitions will help diversify the company's revenue streams and reduce its reliance on short-cycle businesses. However, the impact of these acquisitions on Honeywell's short-cycle businesses and overall earnings remains to be seen.

The current economic outlook and supply chain dynamics play a crucial role in the slower-than-expected rebound of Honeywell's short-cycle businesses. As the economy recovers, demand for short-cycle products and services is expected to improve, driving a rebound in profitability. Honeywell is also working to improve short-cycle business performance through strategic initiatives aimed at enhancing operational efficiency and customer satisfaction.