Why Honeywell Stock Tumbled on Thursday
Key Points
It missed on revenue, but beat on earnings.
Management maintained its existing guidance.
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A bottom-line beat in Honeywell's (NASDAQ: HON) latest reported quarter wasn't enough to land the stock in positive territory on Thursday. The storied industrial company released first-quarter results that included a revenue miss and uninspiring guidance for the current year. With that, investors punished the company, pushing its shares down nearly 3% that trading session.
A company in transition
The quarter saw Honeywell earn $9.1 billion in sales, a figure that bettered the year-ago result by 2%. However, net income under generally accepted accounting principles (GAAP) fell steeply, declining to $795 million from first quarter 2025's nearly $1.47 billion.
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The company, which is two months away from spinning off its aerospace business, had a far different bottom-line dynamic under non-GAAP (adjusted) standards. On a per-share basis, adjusted net profit rose by 11% to $2.45.
On average, analysts tracking Honeywell stock estimated the company would book nearly $9.3 billion in sales but net an adjusted profit of only $2.32 per share.
Three of Honeywell's four reporting divisions delivered sales growth during the quarter. Aerospace, the largest for the moment, saw a nearly 4% year-over-year boost to over $4.3 billion. Building automation improved by 11% to almost $1.9 billion, and process automation and technology gained 5% to slightly over $1.5 billion. The outlier was industrial automation, which fell by 11% to $1.4 billion.
Wary about the split
Despite the imminent departure of aerospace, Honeywell maintained its existing guidance for the entirety of 2026. It's still counting on a sales figure of $38.8 billion to $39.8 billion, which would mean growth of at least 3%. Meanwhile, adjusted net income should range from $10.35 to $10.65, with the lower figure 6% above the 2025 result.
The consensus analyst estimates -- $39.5 billion for sales, adjusted net profit of $10.52 per share -- fall within these ranges.
It seems to me investors are somewhat uneasy about Honeywell's future after the aerospace business is hived off. That, combined with the good-but-not-great quarter drained interest in the stock. I think management will have to give the market more inspiring reasons to invest in one or both.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Honeywell International. The Motley Fool has a disclosure policy.
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