Honeywell (HON) Q1 2026 Earnings Transcript

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DATE

Thursday, April 23, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Vimal Kapur
• Chief Financial Officer — Mike Stepniak
• Chief Operating Officer — Jim Courier

TAKEAWAYS

• Organic Sales Growth -- 2% organically, led by Building Automation and Aerospace Technologies, despite geopolitical and supply chain challenges.
• Building Automation Sales -- Grew 8% organically, supported by high demand in data center and healthcare verticals, and double-digit sales growth in the Middle East and India.
• Segment Margin -- Expanded 90 basis points to 23.3%, with all four segments achieving margin expansion, most notably Industrial Automation (+260 basis points) and Process Automation and Technology (+200 basis points).
• Adjusted EPS -- $2.45, up 11%, attributed to higher segment profit and lower share count.
• Orders Growth -- 7% organically, with the book-to-bill ratio above 1.1, and backlog up 15% to over $38 billion.
• Aerospace Backlog -- $19 billion, up 20%, driven by 28% orders growth over twelve months and book-to-bill at 1.1.
• Aerospace Segment Margin -- 26.5%, up 20 basis points, aided by pricing, productivity, and favorable mix.
• Process Automation and Technology Sales -- Decreased by 6% organically, primarily due to timing delays and Middle East conflict exposure, though orders and backlog remained robust.
• Industrial Automation Sales -- Increased 1% organically, with Solutions up 7% and Products slightly down, offset by strength in Sensing.
• Process Automation and Technology Backlog -- Rose 22%, reflecting double-digit order growth and positioning for a strong ramp in the second half.
• First Quarter Free Cash Flow -- Nearly $100 million, down from $200 million in the prior year, due to timing of collections in the Middle East and inventory headwinds in Aerospace.
• Capital Deployment -- $1.8 billion returned to shareholders, comprising $1 billion in share repurchases and $800 million in dividends; over $220 million funded in CapEx.
• Middle East Conflict Impact -- Estimated 0.5% revenue impact in the first quarter, rising to a projected 1% in the second quarter, particularly in Process Automation and Technology.
• Second Quarter Guidance -- Organic sales growth expected at 2%-4%; segment margin of 22.2%-22.5%; adjusted EPS guide of $2.40-$2.50, with a $0.16 headwind from a higher 21% tax rate.
• Full Year Guidance -- Organic growth outlook maintained at 3%-6%; full-year segment margin expected at 22.7%-23.1%; tax rate anticipated at approximately 19%.
• Aerospace Spin-Off -- On track for completion on June 29, with $20 billion in spin financing raised and investment grade credit ratings secured.
• Portfolio Changes -- Announced sale of Productivity Solution and Services and Warehouse and Workflow Solution businesses; expected closure in 2026.
• Major U.S. Defense Agreement -- Signed a supplier framework agreement with the U.S. Department of Defense tied to a $500 million commitment, indicating multi-billion dollar revenue potential.
• Large Project Wins -- Over $2 billion in project wins across LNG, refining, and sustainable aviation fuel; Dangote selected Honeywell for advanced technology and services at Africa’s largest refinery.

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RISKS

• Geopolitical Volatility -- Revenue headwinds cited from the Middle East conflict, with management stating, "our guidance assumes the conflict persists through the end of the quarter and the resulting logistics and shipment delays cause a roughly 1% impact to revenue."
• Supply Chain Disruptions -- Temporary constraints among critical suppliers impacted Aerospace volumes in January and February, contributing to lower output and sales growth that only recovered in March.
• Free Cash Flow Pressure -- First quarter free cash flow fell to nearly $100 million from $200 million last year, attributed to collection delays from the Middle East and Aerospace inventory headwinds.
• Margin Pressure -- "loss of revenue we are having in the Middle East is also high-margin revenue. So that has associated margin pressure because of services and software, which are impacted the most due to disruptions there."

SUMMARY

Honeywell (NASDAQ:HON) sustained broad-based organic growth and robust margin expansion despite geopolitical and supply chain pressures, and confirmed progress on major portfolio actions including the scheduled spin-off of Aerospace on June 29 and targeted business divestitures. Management highlighted a $20 billion Aerospace spin financing and favorable credit ratings, as well as significant contract wins in LNG and defense. Near-term headwinds from the Middle East conflict and discrete supplier disruptions were acknowledged, but a strong orders performance and backlog provide visibility into an expected second-half acceleration for key industrial segments.

• Management reaffirmed full-year targets for organic growth and segment margin, citing backlog linearity and order conversion as key drivers for second-half improvement.
• Indicated Building Automation’s sustained outperformance—"fifth or sixth successive quarter we are printing high-single-digit growth"—with data center, healthcare, and regional strength.
• Confirmed Aerospace growth was supply, not demand, constrained according to management, and noted recovery in March and April volumes after early year supplier issues.
• Highlighted frequent, high-value project wins in LNG, refining, and defense, supporting a favorable medium-term demand environment and revenue pipeline.
• Described strategic clarity post-spin, with Automation to focus on core sensing, metering, and gas detection segments and expand market position via new products and innovation.

INDUSTRY GLOSSARY

• Book-to-bill: The ratio of orders received to units shipped and billed in a specified period, indicating future demand strength.
• OE (Original Equipment): Sales of brand-new equipment or components to manufacturers or end-users, as opposed to aftermarket or replacement parts.
• P&AT: Process Automation and Technology segment; Honeywell’s division serving the process industries, including catalysts, automation, and software solutions.
• PSS: Productivity Solution and Services business, slated for divestiture.
• WWS: Warehouse and Workflow Solution business, slated for divestiture.
• FID (Final Investment Decision): A formal approval and funding commitment for the launch of a project, often used in energy and industrial infrastructure contexts.
• R&O (Repair and Overhaul): Aftermarket services involving maintenance, repair, and overhaul of equipment and components.
• LAB (Linear Alkylbenzene): A petrochemical used as a key ingredient in detergent production.
• NPI (New Product Introduction): The process of bringing new products to market, referenced here as a driver for margin and share recovery.

Full Conference Call Transcript

Vimal Kapur: Honeywell International Inc. delivered strong results in the first quarter, building on the momentum from 2025 despite a complex geopolitical backdrop and temporary supply chain constraints in Aerospace. Automation grew 7% organically on the strength of our building and industrial automation segment as well as in petrochemical and refining verticals in the Process segment. Including the orders growth in Aerospace, we drove backlog to over $38 billion with book-to-bill above 1.1. Sales growth was robust across Electronic Solutions and Aerospace, fire and aftermarket services in Building Automation, and GTL and LNG in Process Automation and Technology, bolstered by our innovation and new product engine.

We expanded margin 90 basis points to over 23%, driven by pricing discipline, productivity, and accelerated stranded cost removal ahead of the Aerospace spin. All of this drove 11% adjusted earnings growth in the quarter, demonstrating the strength and agility of the Honeywell International Inc. operating system. We also made tremendous progress on the portfolio transformation that began in 2023. We announced the sale of our Productivity Solution and Services and Warehouse and Workflow Solution businesses, respectively, which we expect to close in 2026. We are also excited to announce that we expect to complete the Honeywell International Inc. Aerospace spin-off in the third quarter on June 29, marking the final step in our transformation.

All of the acquisitions, divestitures, spin-off, and simplification efforts over the past three years have positioned both Aerospace and Automation for a bright future as independent, leading industrial companies. Despite the strong start to the year, we are taking a prudent approach to our guidance given the uncertainty surrounding the conflict in the Middle East. We remain confident in our ability to drive accelerating growth in the second half as our backlog supports a pickup in growth in Process Automation and Technology. We will continue to closely monitor the situation and provide any further updates if the situation changes materially.

Before we get into the details, I want to thank all our employees for their focus, commitment, and dedication throughout our multiyear transformation. The future is bright as we set both businesses and gear to thrive with the right strategic focus and capital allocation priorities that will drive value for our customers, employees, and shareholders. Let me turn to slide three to discuss the progress on our portfolio transformation. As I mentioned, we are progressing on the final separation milestone with the Aerospace spin-off now expected to complete on June 29, just over two months away. The leadership team for both Honeywell International Inc. and Honeywell International Inc. Aerospace are in place and already executing for our customers today.

In March, we successfully raised $20 billion of Aerospace spin financing, while delivering strong investment grade credit ratings of A3, A-, and BBB+ with a positive outlook from Moody’s, Fitch, and S&P, respectively. Proceeds from the financing will be used primarily to redeem Honeywell International Inc. debt, the majority of which has been completed as of quarter end, and to fund cash to the Aero balance sheet. Aerospace also announced a groundbreaking supplier framework agreement with the U.S. Department of Defense to rapidly increase the production of critical defense technology, tied to a $500 million commitment.

Honeywell International Inc. was among the first tier-one suppliers to sign an agreement of its kind, and we are honored to support the U.S. and allied forces with these increased production capabilities. This agreement demonstrates the criticality of Honeywell International Inc. Aerospace to national security interests and supports a multibillion-dollar revenue opportunity. Turning to Automation, we amended an agreement to acquire Johnson Matthey’s Catalyst Technologies business, which adjusts the total consideration and extends the date to close the deal to July. We continue to believe the combination of the business with our capability in process technology will unlock future growth by broadening our portfolio, growing our installed base, and creating a more integrated offering for our customers.

As I mentioned, we announced our agreements to sell Productivity Solution and Services to Brady Corporation and the Warehouse and Workflow business to American Industrial Partners in two all-cash transactions. These businesses are well positioned to grow profitably under highly capable new leadership with deep industry experience. And for Honeywell International Inc., the sales allow us to further simplify our portfolio along the planned separation from Aerospace. Following these sales and spin, we will have a more cohesive portfolio focused on three principal end markets. We are excited to share much more about our business with the investment community at our upcoming investor day for both Honeywell International Inc. Aerospace and the Automation business in June.

Both companies have exciting futures ahead. Before we get into the details, I want to discuss our outlook for Process Automation and Technology in light of the current Middle East conflict. Let us turn to slide four. In the first quarter, the Middle East conflict drove a roughly 0.5% impact to revenue for all of Honeywell International Inc., most notably in Process Automation and Technology given the energy exposure and presence in the region. Clearly, the situation in the Middle East is evolving rapidly. We hope for a fast resolution to the conflict. However, our guidance assumes the conflict persists through the end of the quarter and the resulting logistics and shipment delays cause a roughly 1% impact to revenue.

We continue to effectively manage through this, with the safety and well-being of our employees being the top priority. Despite the conflict, demand continues to be strong for differentiated technology on a global scale. We have secured over $2 billion in project wins over the past three quarters, including for LNG, refining and petrochemicals, and sustainable aviation fuel across the U.S., Brazil, Africa, and the Middle East. These wins include both rebuilding of the impacted facilities with key customers, including QatarEnergy LNG, and new expansion projects, helping further reinforce the growth outlook for P&AT and securing a long tail of high-margin services and software opportunities.

Notably, in November, Dangote Petroleum Refinery and Petrochemicals selected Honeywell International Inc. to supply advanced technology, services, proprietary catalysts, and equipment to help double production capacity at Africa’s largest refinery in Nigeria. In addition, Dangote will license Honeywell International Inc.’s Oleflex technology, which converts propane to propylene, and Honeywell International Inc.’s petrochemical technology to produce linear alkylbenzene, or LAB, a key ingredient in detergents for household needs. With this agreement, the customer will nearly double its production of polypropylene, with support of manufacturing of packaging materials, consumer goods, and industrial products, and once at full production, will operate one of the world’s largest LAB plants.

As a follow-up to this award, earlier in April, we announced that Dangote also selected Honeywell International Inc. to provide Connected Services, advanced digital performance monitoring, and operator training at the same refinery. This will help customers like Dangote improve operational performance, increase asset reliability, and enhance their workforce, ultimately unlocking greater value for their facility. On LNG, we recently signed agreements to provide integrated liquefied natural gas pretreatment and liquefaction solutions for Commonwealth LNG’s export facility in Louisiana and NextDecade’s Rio Grande LNG project in Texas through an agreement with PACTL. We expect strength in our LNG vertical to continue given the projects we expect to be awarded in the second quarter.

Longer term, we expect that favorable crack spreads in petrochemical and refining will generate incremental catalyst and services demand to maximize performance of our customers’ plants, in addition to needed repairs and modifications related to rebuild. Once the conflict stabilizes, we expect the industry will benefit from pent-up demand and more stable feedstock supply, enabling better plant utilization rates. Despite the near-term disruption, Process Technology orders increased double digits, driving a 22% increase in P&AT backlog. We remain on track for an expected second-half ramp as LNG and large module equipment deals convert to sales in the back half of the year, which will be followed by new catalyst demand in 2027.

So while we acknowledge the challenges the business faced over the last few quarters, we are encouraged by the resiliency of orders growth and backlog, which will generate a strong runway as we progress through 2026 and into 2027. I look forward to sharing more with you during the June Investor Day. Let me now turn to slide five to talk more about Aerospace growth trajectory in 2026. We continue to see strong Aerospace demand across commercial OE, commercial aftermarket, and defense and space, which is driving sustained orders growth of 28% over the last twelve months and drove a roughly $19 billion Aerospace backlog, a 20% increase from the prior year and 1.1 book-to-bill in the first quarter.

Against this backdrop, our mechanical supply chain overdelivered in 2025, enabling double-digit organic sales growth. However, certain critical suppliers experienced temporary constraints to start the year, which led to a slowdown in January and February, and lower output and sales growth. Output improved considerably in March, our highest revenue month for the quarter, making us confident that our supply chain efforts will produce better results moving forward. Given the significant amount of demand we see in the Aerospace portfolio, Honeywell International Inc. has invested more than $1 billion over the past three years into expanding the capacity and resiliency of our supply chain.

Our 2026 guidance incorporates the continuation of this elevated level of spending, focused on onboarding new suppliers, developing internal capabilities, and assisting our supply partners with engineering and operations. The strategy drove double-digit output growth for fourteen straight quarters prior to the first quarter, and we are confident in getting back to this trajectory in the near term. Given the progress exiting the first quarter, our history of recovering from supply chain constraints, and continued positive demand trends, we are maintaining our Aerospace guidance of high single-digit organic sales growth for the year. As you can see on this page, the outlook is consistent with historical linearity in the business, as we typically experience a sequential ramp throughout the year.

To further support this ramp, Electronic Solutions deliveries are meeting accelerating defense requirements and we are investing in the new capacity necessary to ensure we can continue to do so. In the first quarter, Electronic Solutions sales grew double digits. With that, I will now turn the call to Mike to go through Honeywell International Inc.’s first quarter results and 2026 outlook in more detail on slide six.

Mike Stepniak: Thank you, Vimal, and good morning. In the first quarter, we successfully navigated the difficult geopolitical and macroeconomic environment while exceeding expectations for both segment margin and adjusted EPS. Sales grew 2% organically, led by growth in Building Automation and Aerospace Technologies, and pricing execution remained strong across the portfolio, fueled by new product introductions. On a segment basis, Building Automation surpassed our expectation once again in the first quarter, with sales up 8% organically across both Solutions and Products. Sales growth was led by strong demand for new products and momentum across the high-growth data center and healthcare verticals. On a regional basis, sales in the Middle East and India were both up double digits.

Building Automation also delivered strong orders growth, up 9%, with double-digit growth in projects, services, and fire products. Aerospace sales grew 3% organically, with commercial demand and increasing global defense needs supporting growth in commercial OE, commercial aftermarket, and defense and space. Underlying demand remains robust, but as we discussed on the previous slide, first-quarter results were adversely impacted by temporary supply chain headwinds in mechanical products. On profitability, Aerospace segment margin expanded 20 basis points from the prior year to 26.5%, aided by pricing, productivity, and favorable mix. Industrial Automation sales were up 1% organically in the quarter. Solutions grew 7%, led by robust services demand in Measurement and strong performance in Warehouse and Workflow Solutions.

Products declined slightly, primarily in Productivity Solution and Services, but were partially offset by continued strength in Sensing. Notably, Industrial Automation orders were up 10%, highlighted by strength in China and recovery in Europe. Finally, Process Automation and Technology sales were down 6% organically in the first quarter. This was driven principally by timing delays in refining catalyst reloads and automation service upgrades, including impacts related to the conflict in the Middle East. Project sales were flat, as elevated demand in LNG was offset by delays in Process Automation. However, the orders momentum continued in Process Automation and Technology, with double-digit growth in Process Technology in the first quarter following very strong order growth in 2025.

In total, Honeywell International Inc. orders grew 7% organically, with broad-based demand resulting in book-to-bill above 1.1 and a 15% increase in backlog. On profitability, segment profit increased 6%, while segment margin expanded 90 basis points to 23.3%, with margin expansion in all four segments. This was principally led by Industrial Automation, which expanded 260 basis points, and Process Automation and Technology, which expanded 200 basis points from pricing and productivity actions—a strong result in Process Automation and Technology despite the top-line volatility. Adjusted earnings per share of $2.45 was up 11%, driven primarily by higher segment profit and lower share count. Foreign currency provided a modest benefit, and below-the-line items were favorable, primarily due to higher pension income.

You will find additional information on the first quarter adjusted EPS bridge in the appendix of our presentation. Rounding out the results, we ended the quarter with nearly $100 million of free cash flow, down from $200 million last year. The benefit of higher operational income was offset by timing of collections in the Middle East and inventory headwinds in Aerospace given the mechanical supply chain dynamics. Collections have improved meaningfully in April, and we remain confident in our full year outlook. On capital deployment, we returned $1.8 billion to shareholders through roughly $1 billion of share repurchases and $800 million of dividends, while funding over $220 million in CapEx to drive future growth.

Let us now turn to slide seven to discuss our second quarter guidance. We anticipate second quarter organic sales growth of 2% to 4%. Aerospace should improve sequentially from the first quarter, driven by ramping OE production rates and higher defense spend, supported by incremental improvements in the supply chain, while Process Automation and Technology will be slightly weaker than the first quarter due to incremental pressure stemming from the Middle East.

We expect second quarter segment margin of 22.2% to 22.5%, down 10 to up 20 basis points year-over-year, led by pricing and productivity actions that we expect will largely offset rising inflation and unfavorable mix in Process Automation and Technology due to timing of high-margin catalyst shipments and the impact from the Middle East. We are also seeing an acceleration in stranded cost takeout ahead of the Aerospace spin. On the segment level, we expect the strongest margin expansion in Building Automation, while Aerospace margin will be roughly flat. Adjusted EPS is expected to be $2.40 to $2.50, at $2.45 at the midpoint, reflecting a higher effective tax rate in the quarter amounting to about a $0.16 headwind.

On a normalized tax basis, EPS in the second quarter would be $2.55 at the midpoint of our guidance, driven by higher segment profit and higher expected pension income. Slide eight provides a look at the second quarter dynamics I just described. We expect growth from roughly $0.06 of higher segment profit, while lower below-the-line expenses will drive a similar benefit of $0.04 to $0.07 due to higher pension income, partially offset by increased repositioning costs. But the main item to note is the $0.16 headwind from a higher tax rate of approximately 21% versus 16% in 2025. Nevertheless, we still expect our full year tax rate to be approximately 19%.

The impact from the share count reduction and foreign exchange translation will be roughly $0.01 each. Additional below-the-line details are available in the appendix of the presentation. With that as the backdrop for the second quarter, let us turn to slide nine to discuss our full year outlook. We are maintaining our organic growth outlook of 3% to 6% despite the temporary headwinds we encountered in the first quarter. We expect strength to continue in Building Automation, while Industrial Automation will continue to recover in Europe and China. Process Automation and Technology should be roughly flat for the year, as order visibility and robust backlog levels deliver a strong second half.

Finally, in Aerospace, as I mentioned earlier, our full year guide of high single-digit growth remains intact, driven by improvement in our supply chain, observed in March. We expect to continue to deliver strong operational execution, driven by pricing discipline, productivity actions, and earlier-than-expected stranded cost takeout. In the first quarter, this allowed us to deliver strong margin performance while navigating near-term volatility related to material cost inflation, mechanical supply chain headwinds in Aerospace, and impact from the Middle East conflict. While we outperformed our expectations in the first quarter, the ongoing geopolitical situation warrants prudence, and we are therefore maintaining our full year segment margin guidance of 22.7% to 23.1%.

Our guidance continues to include the results of PSS and WWS until the transactions close. It also assumes a continued ramp in continuing investments. And while we expect to deconsolidate the results of Quantinuum in the second quarter, we are not adjusting our segment margin or adjusted EPS guidance at this time to reflect this. There is also no change to our free cash flow guidance for the year. Let me now turn the call back over to Vimal to wrap up before Q&A.

Vimal Kapur: Thanks, Mike. We are pleased with our first quarter results, with segment margin and adjusted earnings per share exceeding expectations. Looking ahead, we are successfully navigating an uncertain geopolitical backdrop with the strength of our resilient business model approach and rigor of our Honeywell International Inc. Accelerator operating system. We are tracking ahead of schedule on our separation milestones, with the Aerospace spin-off now expected to be completed on June 29. I am very excited to be on the precipice of this formation of two leading pure-play public companies and witness the long runway of value creation both businesses will deliver. We look forward to hosting investors at our upcoming Honeywell International Inc.

Aerospace Investor Day in June in Phoenix, and our Honeywell International Inc. Investor Day on June 11 in New York City. These events will provide an excellent opportunity to share our strategy and long-term growth expectations. With that, let us take the questions.

Unknown Speaker: Vimal, Mike, and Jim are now available to answer your questions. We kindly ask you to please be mindful of others in the queue by asking one question and one related follow-up. Operator, please open the line for Q&A.

Operator: Thank you. Our first question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your question.

Nigel Edward Coe: Thanks. Good morning, everyone. So momentous day—this is the last quarter of Honeywell International Inc. as is. But just wanted to maybe try and get a bit more information on the supply chain challenges, especially in such a low-volume quarter. It is obviously a very popular inbound question we are getting from investors. So any more details on that, and the measures in place to try and solve this problem?

Jim Courier: Yes. Good morning, Nigel. This is Jim Courier. Just to give you a little bit of color commentary around the supply chain challenges, typical historical patterns are such that we normally have a slower start at the first of the year, particularly as we exited a very strong fourth quarter at 13% output growth for Aerospace. What I would tell you is that the start of the quarter, however, was more acute in terms of the decline versus what we had anticipated. We recognized this issue in January and early February, and it was a very acute, transitory issue specifically with some key suppliers in the mechanical space that adversely affected both our Engines business and our Control Systems business.

And when I say acute, we can actually identify down to specific line items within the portfolio that were impacted. The point being, however, is that as we deployed the resources accordingly, we started to see the recovery in the March timeframe, and we are seeing that momentum carry over into April, which gives us the confidence in terms of our forecast that we have of mid- to high-single-digit growth for the second quarter.

Nigel Edward Coe: Okay. That is great. Thanks, Jim. And then just on second quarter margins, you are forecasting quite a step down quarter-over-quarter, and you talked about some of the productivity and obviously getting ahead on the stranded costs. Just wondering if you have any more details on how to think about margins by quarter, why they would be coming down quarter-over-quarter? And I think you called out Aerospace flat. I just want to make sure that was the case.

Mike Stepniak: So, Nigel, this is Mike. Our margin expansion framework for the year remains the same—20 to 60 basis points for the year, and 50 to 90 basis points expansion operationally. We have a 30 basis points drop from Quantinuum. What is happening sequentially versus the first quarter—first, operationally nothing is changing. We are doing extremely well. On stranded cost takeout, that is ahead of plan. Pricing will be above 3% again, so we feel good about what we are doing on pricing, and the teams are progressing well.

What is happening in the second quarter sequentially, we have a mix pressure from catalyst sales—or lack of catalyst sales—in the second quarter, and it also gives us a little bit of pressure year-over-year. As you remember, last year, the second quarter was our strongest quarter on catalyst sales in the year. So on the total year, I do not see any pressure to what we guided. In fact, I feel more confident that we will deliver that 20 to 60 basis points; we just have to get through the second quarter. In Aerospace, we talk about roughly being for the year at 26%, and that is where it is going to be for the year.

Vimal Kapur: Also add that the loss of revenue we are having in the Middle East is also high-margin revenue. So that has associated margin pressure because of services and software, which are impacted the most due to disruptions there. So that becomes an additional driver because it is kind of high dis-synergies associated with that.

Nigel Edward Coe: Makes sense. Thanks, Vimal. Thank you.

Operator: Thank you. Our next question comes from the line of Julian Mitchell with Barclays.

Julian C.H. Mitchell: Hi, good morning. Just wanted to start off with the Process Automation and Technology organic sales ramp through the year. Help us understand how we should be thinking about that. It sounds like you are still thinking sort of flattish for the year as a whole on organic sales, which is consistent with your prior guidance, but obviously a much tougher first half. Maybe flesh out for us some of the main moving pieces and how that organic sales growth trends from here in the year?

Vimal Kapur: Essentially, I think the only change since we provided the guide has been the Middle East, and we lost revenue as we indicated—about 0.5% of Honeywell International Inc. We feel very strongly that our backlog in the business continues to grow. Total revenue impact is in the first quarter and about 1% in the second quarter. Not only did we have strong bookings in the third and fourth quarters of last year, but we also printed a very strong orders number in the first quarter of this year, and the trend remained very robust for the second quarter. That gives us very high confidence of a second-half ramp of revenue of high single digits for the P&AT segment.

Therefore, the first half is, as you have seen, the actual results of the first quarter and then the forecast for the second quarter. They get offset by strong performance in the second half. So net-net, the overall year being flattish—we remain very confident on that. The backlog supports it. The historic linearity supports it. So there are not many out-of-the-way assumptions we have made in this forecast.

Mike Stepniak: And there is also just continued pent-up demand for the second half. We are seeing a lot of requests from customers in the Middle East. So I am confident this demand is coming and, like Vimal said, from a backlog standpoint, we still have a lot of conversion happening sequentially that is going to happen in the second half. So quite excited about that opportunity.

Julian C.H. Mitchell: Thanks very much. And then just secondly, back to Aerospace. I just wondered if you could give us some update on what you are seeing in real time in the commercial aero aftermarket side of things and whether you have moderated your outlook at all for the second half or second quarter on things like flight hours or departures. That would be helpful. And on the supply chain issue, is there any help you can give us on specific product types that were most affected by the supply chain issue?

Jim Courier: Yes. Specifically to the product type, I am not going to provide specificity around the actual line items themselves, other than to say that it was very acute, and we could attribute it to a couple of items specifically within the Engines and Power Systems business. As it pertains to the commercial aftermarket and any implications on a full-year basis, right now we saw no impact in the first quarter as a result of the conflicts, and we see negligible potential impact in the second quarter that is going to be overcomable. The point I would highlight, however, is that the demand is exceptionally strong, and our growth is constrained by supply and not demand across the board.

Any impacts that we see in terms of flight hours in the commercial segment tend to have a trailing impact in the Aerospace business. As flight hours go down, as it works its way through the ecosystem, it is anywhere between a three- to six-month delay before we would see something within the Aerospace business.

Julian C.H. Mitchell: Great. Thank you.

Operator: Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed with your question.

Sheila Karin Kahyaoglu: Thank you, and good morning. Maybe just a follow-up on the last question on the commercial aftermarket. Jim, any way you could delve into that a little bit more—talking about your Middle East commercial aftermarket exposure? How do we think about it on engine mix within business aviation, APUs on commercial, powered-by-the-hour? On that three- to six-month lag comment, where would you see the most volatility? And as a follow-up, on Aerospace margins, as we look at the first quarter’s solid start at 26.5%, how much of an impact was the supply chain, and do we see any puts and takes from asset sales or mix in that first quarter figure? Thanks.

Jim Courier: Yes. Good morning, Sheila. A couple of things on the commercial side of the aftermarket, particularly out of the Middle East. Again, as I mentioned, our growth is limited by supply and not by demand. Having said that, we are watching very closely the increase in fuel prices and how much longer they will persist across the board, but we are not seeing any related demand impacts. Powered-by-the-hour programs for us are a smaller revenue stream within the overall aftermarket portfolio as compared to time-and-material and repair-and-overhaul portions of the business overall.

The one point I wanted to highlight—and you mentioned it—about business aviation: we have actually seen very strong, resilient growth in business aviation flight activity even in light of higher fuel prices, and it actually grew much better than what we saw in the commercial air transport. As you know, that is a substantial part of our portfolio in terms of business aviation within the aftermarket and part of the overall revenue of Honeywell International Inc. Aerospace. The one thing I would also add is on defense.

As we see the conflicts that are occurring, the two key words to remember are replenishment and sustainment—replenishment around missiles and munitions, further increasing the magazine capacity that exists not only for the U.S. but for our allies abroad; and then, with the usage of aircraft in-theater and how we are positioned, we are continuing to see very strong demand in terms of sustainment and support of those operations.

Sheila Karin Kahyaoglu: Great. Can I just add the margin question? Can you talk about the solid first quarter margins—how much of an impact was supply chain; was it negative; and any positive one-time items in there?

Jim Courier: As you know, in our mechanical business our mix was much more favorable—Electrical versus Mechanical—and that produced a tailwind for us in the first quarter, even despite lower volume leverage in the quarter. Now, as our output increases throughout the second quarter and is more of a mix around Mechanical due to the recovery that we anticipate will occur, you will start to see that fluctuate and be a little bit more normalized. The focus area I would apply is the full year. You do see fluctuations quarter to quarter, very mix-dependent, but on a full year we expect modest expansion for Honeywell International Inc. Aerospace.

Sheila Karin Kahyaoglu: Very helpful. Thank you.

Operator: Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Deane Michael Dray: Thank you. Good morning, everyone. I do not recall any other time in Honeywell International Inc.’s history where you have had more portfolio moves at one time that you have been orchestrating, as well as navigating all the geopolitical issues. So the fact that you can reaffirm guidance here is impressive. I did want to understand—I know it is early and appreciate that you are assuming the conflict lasts through the second quarter—can you size for us what the Middle East rebuild opportunity is at this point? Maybe not just size it, but give us some dimensions and qualitatively what areas you would be active in.

Vimal Kapur: First of all, Deane, thanks for your comments on portfolio transformation. With the announcement of the firm date of the Aero spin on June 29 and completion of transactions for both businesses that were held for sale, Honeywell International Inc. will be a pure-play Automation company, well positioned for its future. I really feel good about what we have accomplished over the last two years. On your question on the Middle East, I would say that I see that coming up in three different phases. The first phase is the obvious services required to get the plants up and running. That work has not yet started.

The situation has not normalized to a point that we are being requested for that. There are a few facilities which got hit during this conflict, so there is no real activity in those sites. After that phase is over—it typically takes eight to twelve weeks for plant startups—we expect refurbishment of some of the facilities which have been impacted. In the ones where Honeywell International Inc. equipment is there, specifically in Process Technology, we have some known issues; we are already working with the customer, and that can show us incremental demand in the second half of the year as things become more normalized.

Finally, as oil prices remain elevated to now $100 or above, it generally suggests that the supply-side disruption will not end so soon, because the normalization is going to take likely much longer, which then bodes well for the overall spreads for our customers. That should support more demand for services and catalysts in the times ahead. So all in, the best way to put it forward is that near-term headwinds are already reflected in our numbers, and long term the trends suggest a favorable outcome for Honeywell International Inc. and more broadly for the process industry.

Deane Michael Dray: That is really helpful. And just as a follow-up on that last point, on the impact of $100 oil to UOP in particular, there were pushouts of catalyst reloads, but you also said that the spreads remain favorable. So what is the impact on you all near term, and then as we see some normalization?

Vimal Kapur: As I just mentioned, we remain very convicted that we will have Process Automation and Technology second-half growth at high single digits. That is driven by two facts. One is our backlog is very strong due to the three successive quarters of order booking, and then the first quarter was also looking very robust at this point. Second, we do expect catalyst demand favored by favorable spreads. So all things being equal, we remain very confident of the second-half performance for the Process Automation and Technology business through the combination of backlog and catalyst demand coming ahead.

Mike Stepniak: I would just add that the margins will improve as well in the second half for the business, given better mix, more volume leverage, and strong pricing.

Deane Michael Dray: Thank you.

Operator: Thank you. Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please proceed with your question.

Nicole Sheree DeBlase: Yeah, thanks. Good morning, guys. I am sorry to beat a dead horse on this Aerospace issue, but I just have one more follow-up on this. When we look across the three subsegments of commercial aftermarket, commercial OE, and defense and space, which were impacted by the issue in the first quarter, and how should we think about the path to improvement within those three pieces into the second quarter?

Jim Courier: Hi, Nicole. This is Jim. It actually impacted all three end-market segments. When I talk about specific line items within our Engines and Power Systems business, it was both commercial and again very acute. It impacted commercial and it also impacted defense engine line items. Some of that—being that the supply base is the same for commercial and defense and that same supply base is supporting aftermarket and R&O repairs as well—meant those same items were affected from an R&O standpoint in terms of being able to deliver into the aftermarket both from a defense standpoint as well as on the commercial side. Again, it was highly acute and highly specific in the Engines and Power Systems business.

The mechanicals also affected us slightly as well in our Control Systems business.

Nicole Sheree DeBlase: Got it. Okay. So the improvement into the second quarter should be kind of broad-based across those three pieces.

Jim Courier: That is precisely correct.

Nicole Sheree DeBlase: Okay, understood. Thanks. And then, just on the order trends—curious what you saw in the 7% organic orders growth, if you were to parse that out across your shorter-cycle and longer-cycle businesses, and any interesting trends throughout the quarter? Thank you.

Vimal Kapur: Overall orders grew 7%. Orders growth was led by Industrial Automation, up 10%, which is a combination of both long and short cycle. Building Automation also had a strong quarter with 9% orders growth. Process Automation and Technology was up 3%, and Aerospace was up 6%. So I would say across the board, it is broad-based strength in orders. On the short cycle, specifically for Automation, Building Automation performance remains exceptionally strong. As you have seen, this is the fifth or sixth successive quarter we are printing high-single-digit growth. Not only does demand remain robust, but we continue to perform well through our new product introductions and perform better than the market. Industrial Automation demand is also shaping up well.

Initially, at the start of the year, we had expressed concern on short-cycle demand in China and Europe. That certainly is recovering, which is very positive for us. We also see short-cycle demand in the U.S. That is where the Industrial Automation business has some pockets where we have to do more recovery, but we are trending in a very right direction. As you have observed in the Industrial Automation results, I do expect that business to start performing more like low single-digit growth once we take out the two businesses which were held for sale out of our revenue forecast.

I am just saying the RemainCo business is trending very nicely toward low single-digit growth for the second half of the year. On the process market, it is being clouded by the war and the disruptions, and it is just hard to separate the reality of the demand versus the disruption caused by the oil prices, supply shortages, and ability to do shipments. It is hard to separate the facts versus reality and provide an absolute comment there.

Mike Stepniak: Understood. I would just add that we are expecting short cycle to accelerate in the second quarter. It will be mid- to high-single-digit growth. So we feel good about short cycle right now.

Nicole Sheree DeBlase: Thanks, Mike.

Operator: Thank you. Our next question comes from the line of Andrew Obin with Bank of America. Please proceed with your question.

Andrew Burris Obin: Hi, guys. Good morning. Just a question on Building Automation. Clearly, it has been one of the best businesses for you for a while. At the same time, some of your competitors seem to be waking up a little bit. How do you view the competitive environment in this market in areas like fire? And how sustainable is your lead? Clearly on software, your presentation was fantastic, so I understand why you feel confident, but maybe just expand on what we are seeing in Building Automation and how the competitive environment is developing, given that some of your competitors are waking up. Thank you.

Vimal Kapur: I would say that we remain in our guide more conservative, because we always guide Automation at mid-single-digit plus, and we are performing high single. As I had mentioned during our earlier earnings calls, we do not want to always assume we will keep taking share, but we have been constantly doing that, which is good news for Honeywell International Inc. Competition-wise, our business model is to sell product through channels. We actually compete with large multinationals on a very limited basis because the projects business in Building Automation is just about 15% of the overall segment.

So on a headline basis, with some of the peers which are publicly reported companies, our overlap with them from a portfolio perspective is not very large. Our competition is mid-sized companies, which vary by region. We have a set of companies that compete in fire and BMS and security in the U.S. We have a different set of people we compete with in Europe, and a different set in China. That is the benefit in this business—we are benefiting from fragmentation of the market. We are growing on the strength of our new products and our common supply chain, and we believe that our organic growth engine and new product innovation engine, including Forge, is working extremely well.

The quarters are shaping quite well ahead. The near-term demand remains strong. We expect that the trend you have observed for the last four to five quarters should remain intact in the times ahead.

Andrew Burris Obin: Thank you. And with the divestiture of the warehouse automation and handheld devices, the sensors business is becoming much more core and front and center. Could you parse out what you are seeing there, and what are the trends in key verticals? Thank you.

Vimal Kapur: Clearly, now Automation is positioned as a sensing and measurement business. I am really pleased that we have a very clear strategy in the business. Our position is in three broad end markets: sensing in Aerospace, medical devices, and industrial equipment—that is position one; position two is our metering business in utilities; and position three is gas detection across all environments, be it oil and gas, semiconductor, or broader industrial. The end markets are strong in each of these areas. Our job is to benefit from these fragmented Industrial Automation markets in sensing and measurement and build a better position as we did in Building Automation over the last three to five years. That is the task ahead of us.

Our strategy is working. Our performance is improving every quarter progressively. I do expect the second half to get slightly better, and we remain very optimistic on the performance for 2027.

Operator: Thank you. Our next question comes from the line of Andy Kaplowitz with Citigroup. Please proceed with your question.

Andrew Alec Kaplowitz: Hey, good morning, everyone. Can you give a little more color into the improvement you saw, particularly in Industrial Automation margin in the first quarter? The margin improvement was impressive. I know you have talked about a bigger focus on productivity and lean ahead of separation in that segment, P&AT, but a bigger fixed cost takeout in Industrial Automation. Maybe update us on what you have been doing, and how much improved pricing versus cost is helping as well?

Mike Stepniak: This is Mike. I will start and Vimal can add some color. I think Industrial Automation is going to be a margin expansion driver for us for the next year or so. With the separation of the POS businesses, we saw a lot of opportunities to simplify the business from a cost standpoint, and the team got after that cost quite early. You will continue to see the benefits as we go through the year. Also, pricing for us has improved. The team has done an outstanding job in terms of understanding the inflation, working with customers to manage it, and improving pricing. That is the second piece.

Finally, NPI—the team has been on NPI for the last eighteen months, and we are starting to see those NPIs hitting the market, helping us recover share where we lost share. All around, a really good story on Industrial Automation, and it will continue to be a source of strength for us this year and next year.

Vimal Kapur: The only thing I will add is that the pricing story is very strong in Industrial Automation, but also more broad-based across Honeywell International Inc. We signaled pricing between 3% to 4%, and it is trending toward the upper end—more toward 4% versus 3%. Based on how inflation is shaping up, I expect that trend to persist, which is going to help us continue to expand margins as we have guided. Overall performance—I have nothing more to add to what Mike said.

Andrew Alec Kaplowitz: And then, Vimal, maybe it is a little early for this question, but focusing on some of your customer conversations as the Middle East conflict has played out here, and given your relatively big exposure now to LNG, do you sense a need for more energy security now or maybe more local-for-local investments? So maybe you have a more robust LNG cycle—what are your conversations like around that?

Vimal Kapur: Very, very bullish on LNG cycle, Andy. The two businesses we acquired in the last eighteen months—the liquefaction business from Air Products and Sundyne business—are performing extremely well. The demand continues to remain strong. Not only in the U.S. is more capacity being built to serve known demand, there is additional capacity being asked now for diversification. Think about demand in places like Africa, which was not on the map of LNG business, but they have a lot of gas, so people are considering projects there. We have a lot of inbound requests from that part of the world. Clearly, refurbishment will be required in the Middle East due to the damaged infrastructure, which was not planned demand.

All in, the LNG liquefaction business and our overall Honeywell International Inc. LNG story—in terms of Automation, our software capabilities there, with Sundyne having very specialized equipment for compressors and pumps for LNG—we have a very neat proposition, and it is going to remain a highlight of RemainCo Honeywell International Inc. It will remain for the next few years a high-growth vertical based upon the demand I have seen over the last few months.

Andrew Alec Kaplowitz: Appreciate the color.

Operator: Thank you. Our next question comes from the line of Joe Ritchie with Goldman Sachs.

Joseph Alfred Ritchie: Hey, guys. Good morning. I really like slide four. Obviously, it shows how geographically diversified your project wins have been over the past year. I am curious, as you think about high-single-digit ramp in the Process side of the business, how you are underwriting the potential risk to that second-half implied guide.

Vimal Kapur: Joe, these are very firm projects. Sometimes the demand of these projects can get shifted due to FIDs happening or not, but in this case the LNG backlog is very strong in particular, and some of the new demand which has come from Africa for refining capacity—there is a natural case there to build more fuel infrastructure in Africa because it never had one, and there is a big refinery by Dangote which is one of the largest refineries. Those are very firm demands, which makes us confident on very limited uncertainty in our backlog. That is why, if you see our confidence factor on high-single-digit growth for the overall Process segment, it is very high.

We are not making any assumptions of unknown demand. The linearity supported by our backlog conversion is the basic fact on which we are forecasting this.

Mike Stepniak: And then, Joe, we have been talking about it for almost a year now. We always had that backlog. The backlog improved. Those are all projects which went to FID, meaning they are invested, there is cash behind them, and they are ready to go. Like Vimal said, this is a very solid backlog that is going to start converting in the third quarter.

Joseph Alfred Ritchie: Yeah, that is great to hear. Then maybe just touching on the Building Automation business. I just came back from being at Data Center World the last couple of days, and clearly that is a part of the business that is growing significantly. I am sure we are going to hear more about this in June, but maybe help highlight how you are thinking about the potential for your business specifically as it sells into data centers.

Vimal Kapur: We continue to improve our share of demand in data centers every quarter, progressively. We have done a great job moving into tier-two data center providers. There is a lot of conversation around hyperscalers, but increasingly tier-two providers are becoming very relevant, not only in the U.S. but also in Europe and Asia, and that is where our segment performance is very strong. I expect that we continue to ramp up our volumes in Building Automation in data centers. An interesting development is that we are actively working on liquid cooling in our Sensors business.

If the liquid cooling trend is true, it requires more sophisticated controls compared to traditional HVAC air-based control, and that is where Honeywell International Inc. technology is going to be very relevant. Our sensing business is actively working with other liquid cooling providers which are well known. We are also actively working on power generation for some data centers that are behind the meter. We have seen a trend where behind-the-meter power capacity is being set up, and our traditional Automation capability is very unique in that space. We have always done power plants within a refinery or a paper mill; that is not new for us.

Now the power plant happens within the data center, which is our natural capability. Honeywell International Inc. penetration in data centers continues to improve. We remain bullish on our revenue growth coming from the segment. Not only in Building Automation—in the years ahead, it will also help Industrial Automation, and depending on some of these projects in the U.S., it may also help the Process Automation business.

Joseph Alfred Ritchie: Helpful. Thank you, guys.

Operator: Thank you. Our next question comes from the line of Amit Mehrotra with UBS. Please proceed with your question.

Amit Mehrotra: Thanks. Good morning. I wanted to ask a question on Aero—just the cadence of growth intra-quarter. I think you mentioned it being acute in terms of challenges in January and February, but obviously the full quarter closed out at, I think, 3% to 4% organic growth. That implies maybe the exit rate in March is back to where you expected in the second quarter. I just want to get a sense of that if you can give us a little bit of that intra-quarter cadence.

Jim Courier: This is Jim. A couple of comments around that. The cadence within the quarter—about 50% of the quarter is actually delivered in the third month. Therefore, the momentum that we saw in March and carrying that momentum into April—the point being is that our starting point in the first month is substantially better than what we saw in the first month of the first quarter, i.e., January. As that momentum continues and has laid itself over into April, we expect to see that continued progression throughout the quarter.

Even though it is early in the quarter and 50% of the quarter is delivered in the third month, what we are seeing in terms of recovery gives us the confidence in terms of what we expect in year-over-year growth for the second quarter.

Amit Mehrotra: Okay. And then just on the Process Automation side, we noticed the aftermarket was down 10% in the quarter. Projects have been relatively stable. Wondering if you could talk about Process Automation aftermarket trends. I think you said that the Middle East conflict—nothing really embedded in the back half. Correct me if I am wrong, and if you could talk about how that impacts the aftermarket on the process side.

Vimal Kapur: Most of our lost revenue was, as a practical matter, in aftermarket because this is where our ability to ship the product-related service migration projects and a lot of on-site services we provide—which are contractual; you cannot simply go there—got impacted, incrementally by about $50 million in the first quarter. We have forecast about a 1% impact overall. When we started the year, we had indicated being very muted for services and catalysts in Process. Nothing got disrupted with the conflict on the projects side, but the elevated oil price now supports strong demand on the other side of it. We will see how the business performs.

We think the first and second quarters were the bottom, and we should see more sequential improvement in the second half of the year in the business.

Amit Mehrotra: Right. Okay. Makes sense. Thank you very much.

Operator: Thank you. Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your question.

Jeff Sprague: Hey, thanks. Good morning, everyone. Just one question on the portfolio, but I guess multipart. Something wonky in your calendar calling June—I am wondering on the PSS sale if you could give us a little bit of color on whether or not there is tax leakage on Warehouse, I am wondering if you could tell us what the 2025 EBITDA was, and then finally, I think you said Quantinuum would be deconsolidated in the third quarter. I guess that implies you are selling a stake or there is a round that you participate in that will take you below 50%. If you could give us a little color on that also. Thank you.

Vimal Kapur: There were about four questions there. We will try to wrap up here. On the tax leakage part—PSS—

Mike Stepniak: Sure. There will not be any tax leakage related to these two transactions. Obviously, we will have more to share on that as we progress and as we complete the transactions. But by each copy, you will see it in the third quarter.

Vimal Kapur: I think both these transactions—Jeff, I want to look ahead, not back. These are behind us. These businesses are in safe hands with the rightful owners. We have gone through a public auction process and found the best buyers for both of them. That is what we can share.

Mike Stepniak: Jeff, not a great answer for you, but we are subject to rules restricting our ability to share any further details beyond what you have seen in the release from Wednesday.

Jeff Sprague: Okay. Understood. And then on the date—so the 29th is technically the third quarter?

Mike Stepniak: For us, the first day of the third quarter happens to be on June 29. I know—I was equally surprised like you, Jeff. I was confused for a couple of days, but now I have settled.

Jeff Sprague: Okay. Great. I appreciate it, guys. Thanks a lot.

Vimal Kapur: Good luck. Thank you.

Operator: Final question this morning comes from the line of Chris Snyder with Morgan Stanley. Please proceed with your question.

Christopher M. Snyder: Thank you. Is the supply chain disruption that weighed on Aero growth in January and February primarily a function of inability to ship because maybe some of your suppliers are struggling to keep up with the pace of demand, or is it because your Aero customers overbuilt inventory towards the end of last year and they were effectively destocking early in the year? Thank you.

Jim Courier: Hi, Chris. This is Jim. It was absolutely not any destocking that is happening with our customer base. It was purely supplier-centric—the lack of certain critical piece parts from high-criticality suppliers that did not achieve the volume output necessary to allow us to deliver the specific line items within Engines and Power Systems and Control Systems portions of the business.

Christopher M. Snyder: Thank you very much. Appreciate that. And then just a quick follow-up on Aero. Is there any color you could provide on back-half margin expectations—just all the moving parts between the mix shift, obviously some of the commercial OE price negotiations that you talked about, and then maybe lastly any sort of integration tailwinds from CASE—just what should we expect there in the back half? Thank you.

Jim Courier: On an annualized basis, you will see us being modestly up on margin expansion. Quarter to quarter, you do see variability, largely driven by mix across the board and mix within the mix of what we are delivering. But on a full-year basis, we will be modestly up for Aero margins.

Christopher M. Snyder: Thank you. I appreciate that.

Vimal Kapur: As always, I would like to thank all our shareholders, our customers, and all the Honeywell International Inc. future shapers around the world for the strong first quarter results you delivered. We remain confident in our path ahead, and we look forward to sharing more with everyone in the months to come. Thank you for joining us today, and we hope that you have a great rest of your day.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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