Industrial conglomerate Honeywell (NASDAQ:HON) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 6.4% year on year to $9.76 billion. The company’s full-year revenue guidance of $39.3 billion at the midpoint came in 0.7% below analysts’ estimates. Its non-GAAP profit of $2.59 per share was 2.1% above analysts’ consensus estimates.
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Honeywell (HON) Q4 CY2025 Highlights:
- Revenue: $9.76 billion vs analyst estimates of $9.91 billion (6.4% year-on-year growth, 1.6% miss)
- Adjusted EPS: $2.59 vs analyst estimates of $2.54 (2.1% beat)
- Adjusted EBITDA: $1.41 billion vs analyst estimates of $2.55 billion (14.5% margin, 44.6% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $10.50 at the midpoint, beating analyst estimates by 0.8%
- Operating Margin: 10.2%, down from 17.7% in the same quarter last year
- Organic Revenue rose 11% year on year (beat)
- Market Capitalization: $144.3 billion
StockStory’s Take
Honeywell’s fourth quarter was met with a positive market response, despite revenue coming in below Wall Street expectations. Management attributed the performance to robust order growth across aerospace and building automation, as well as disciplined pricing strategies that offset persistent inflationary pressures. CEO Vimal Kapur highlighted the company’s increased investment in new product development—especially in quantum computing and automation—while noting that a record backlog positions Honeywell well for future growth.
Looking forward, Honeywell’s guidance reflects confidence in continued organic growth, driven by backlog conversion, targeted cost reductions, and new product launches. Management emphasized progress in its business portfolio transformation, including the upcoming aerospace spin-off and ongoing investments in QuantiNUM, its quantum computing subsidiary. Kapur stated, “We expect to drive strong organic growth fueled by record backlog, disciplined price execution, and momentum in new product introductions,” while CFO Mike Stepniak noted that efforts to eliminate stranded costs and achieve margin expansion are central to Honeywell’s outlook for 2026.
Key Insights from Management’s Remarks
Management pointed to several factors underpinning the quarter’s results, including strategic divestitures, strong demand in key markets, and a focus on R&D to fuel product innovation.
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Aerospace and automation strength: Double-digit organic growth in aerospace and high single-digit gains in building automation were driven by sustained demand in commercial aftermarket, defense, and building solutions. Management credited improved supply chain performance and ongoing investments in capacity as core contributors.
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Portfolio transformation advances: Honeywell completed the spin-off of Solstice Advanced Materials and confirmed plans for the aerospace spin-off in 2026. The company announced new leadership for the soon-to-be-independent aerospace segment, signaling greater strategic focus and capital allocation flexibility for both entities.
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New product introduction momentum: Approximately 4% of 2025’s organic growth came from newly launched products, supported by a significant increase in R&D hiring and investment. The company highlighted the importance of its vitality index—measuring the revenue share from new offerings—and aims to sustain this pace to drive future expansion.
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QuantiNUM commercial progress: The quantum computing subsidiary raised $840 million and launched Helios, a new commercial quantum computer. Partnerships with technology and financial leaders—such as NVIDIA and JPMorgan—are expected to accelerate commercial adoption in areas like drug discovery and cybersecurity.
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Divestiture and market realignment: Honeywell intends to sell its productivity solutions and warehouse and workflow solutions businesses in 2026, simplifying its focus to three core end markets. This move aims to streamline operations and concentrate growth efforts on process, buildings, and industrial automation.
Drivers of Future Performance
Management’s guidance is shaped by the conversion of a record backlog, margin expansion through pricing and productivity, and targeted investments in innovation and portfolio simplification.
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Backlog conversion and market demand: Honeywell expects high-single-digit organic growth in aerospace, supported by strong order rates in commercial original equipment, defense, and aftermarket services. Building automation is projected to benefit from continued demand in data centers and healthcare infrastructure, with both segments leveraging the company’s backlog to drive revenue.
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Margin expansion priorities: The company plans to expand segment margins through volume leverage, disciplined pricing, and productivity actions, while working to eliminate stranded costs following divestitures and the upcoming aerospace spin. Management cautioned that increased R&D, especially in quantum computing, will be a modest headwind, but expects productivity gains and price discipline to more than offset these investments.
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Risks and execution challenges: Ongoing softness is expected in short-cycle industrial and petrochemical catalyst markets, particularly in Europe and China. The company’s outlook assumes no rebound in these segments, with management focused on launching new products and increasing recurring revenue through its Forge platform to help counterbalance market-specific pressures.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will closely watch (1) progress on the aerospace spin-off and the successful sale of non-core businesses, (2) evidence of margin expansion as Honeywell executes on fixed cost reductions and productivity initiatives, and (3) the pace of recurring revenue growth from digital platforms like Forge. Execution on new product launches and management’s ability to offset headwinds in industrial and catalyst markets will also be critical signposts.
Honeywell currently trades at $227.08, up from $216.64 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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