Honeywell shares slide 4% despite top and bottom line beat
Honeywell (HON) reported its Q2 earnings, exceeding analyst expectations on several key metrics. Adjusted EPS came in at $2.49, surpassing the consensus estimate of $2.42. Sales totaled $9.58 billion, a 4.7% year-over-year increase, and also ahead of the estimated $9.42 billion. Organic sales growth was 4%, significantly above the 1.95% forecast. However, free cash flow fell slightly short at $1.11 billion compared to the $1.2 billion estimate.
The Aerospace Technologies segment was a standout, with revenue of $3.89 billion, beating the $3.76 billion estimate and reporting a strong 16% organic sales growth against the 12.6% expected. Industrial Automation also performed well, posting revenues of $2.51 billion, just above the $2.5 billion forecast, although it saw an 8% decline in organic sales, close to the 7.85% drop expected. Building Automation and Energy and Sustainability Solutions segments also met or slightly exceeded estimates but showed mixed organic sales performance.
Honeywell revised its full-year guidance, reflecting both optimism and caution. The company now forecasts adjusted EPS between $10.05 and $10.25, slightly lowering the previous range of $10.15 to $10.45. Organic sales growth is expected to be between 5% and 6%, up from the prior range of 4% to 6%. Total sales guidance has been raised to $39.1 billion to $39.7 billion, from $38.5 billion to $39.3 billion, aligning positively with analyst expectations.
Q3 guidance is modestly conservative, with adjusted EPS projected between $2.45 and $2.55, matching the high end of the estimate. Sales are expected to be in the range of $9.8 billion to $10 billion, in line with the $9.83 billion estimate. This cautious approach underscores the dynamic and uncertain operating environment.
Despite the adjusted EPS cut, Honeywell's robust capital deployment strategy remains a focal point. The company has deployed $6.4 billion towards M&A, dividends, share repurchases, and capital expenditures, including significant acquisitions such as Access Solutions for $5 billion, CAES Systems for $1.9 billion, and Air Products' LNG business for $1.8 billion. These strategic moves are aimed at enhancing Honeywell’s portfolio and aligning with major market trends in automation, aviation, and energy transition.
Honeywell's CEO, Vimal Kapur, emphasized the company’s solid performance across all metrics despite a challenging environment. With three out of four segments showing positive growth and sequential improvements, the outlook for the second half of the year appears promising. The company's focus on key megatrends and digitalization is expected to drive further value creation and align with long-term financial goals.
Looking ahead, Honeywell’s updated guidance incorporates the impact of recent acquisitions and reflects confidence in continued organic growth acceleration. The revised full-year sales projection and steady segment margins position the company well to achieve its financial targets, leveraging its differentiated portfolio and the Honeywell Accelerator operating system.