Honeywell – Honeywell, the multinational conglomerate known for its building technologies, aerospace systems, materials, and safety and productivity solutions, reported Q2 CY2025 results on July 24. Honeywell topped revenue expectations, with sales up 8.1% year-over-year, achieving $10.35 billion. The company raised full-year revenue guidance to $40.8 billion.
- Operating Margin: 20.4%, down from 23.2% in the same quarter last year
- Organic Revenue rose 5% year on year, in line with the same quarter last year
- Fully offset tariff costs in three out of four segments with multi-pronged mitigation efforts
Honeywell generated an operating margin profit margin of 20.4%, down 2.8 percentage points year on year. Since Honeywell’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Honeywell does not report geographic results quarterly, so there is no insight into the US market specifically. For the full year 2024, However, Honeywell is a bell weather, and their results are indicative of B2B demand. Distributors are most interested in Honeywell Building Automation and carry Honeywell HVAC and building management, lighting controls, safety and fire systems and other products. To a more limited extent, specialized distributors carry Honeywell Industrial Automation products, including robotics and process control solutions.
During the earnings call, analysts inquired about the impact of tariffs and Honeywell’s multi pronged mitigation strategies. Executives highlighted ongoing R&D investments and their focus on innovation to drive future growth. A key policy is to coordinate closely with suppliers and customers on productivity and pricing initiatives to fully offset the effect of tariffs with a combination of productivity, pricing and alternative sourcing as we balance protecting both margins and demand.
Sector Results
Building Automation (17% of total sales) sales for the second quarter increased 8% organically year over year. Building products grew 9% with strength across fire, security, and building management systems. Building solutions improved 5% led by growth in the Middle East. Orders grew both year over year and sequentially, led by strength in products.
Aerospace Technologies (40% of total sales) sales for the second quarter increased 6% organically from the prior year, driven by continued strength in both defense and space and commercial aftermarket. Defense and space grew 13% year over year, aided by an elevated global demand environment.
Industrial Automation (26% of total sales) sales for the second quarter were flat on an organic basis. Process solutions increased 1% year over year, led by a return to growth in smart energy. Sensing and safety technologies sales increased 4% year over year, driven by a third consecutive quarter of growth in sensing on sustained demand for healthcare sensors. Sales in warehouse and workflow solutions declined 4% year over year due to timing of large project execution. Productivity solutions and services sales decreased 7% year over year, largely as a result of challenging demand in Europe.
Energy and Sustainability Solutions (16.7% of total sales) sales for the second quarter increased 6% organically year over year. UOP grew 16%, driven by strong petrochemical catalyst shipments, higher licensing sales volumes in gas processing, and strong backlog conversion in sustainability projects. Some specialized distributors carry Honeywell ESS products.
Honeywell stated that business demand has remained resilient in most sectors and geographic regions thus far, but that they are well prepared for potential changes ahead in the macro, regulatory and geopolitical environment utilizing a playbook that has served them well over many cycles. The US is leading growth, although there are no regional breakouts provided quarterly.
Honeywell is actively assessing strategic options for its Productivity Solutions and Services and Warehouse and Workflow Solutions businesses to optimize its portfolio and reinforce its transformation into a leading automation company. This may result in divestitures, spinoffs, or other changes, with updates expected as the company advances its restructuring plans through 2026. This is to simplify and focus operations ahead of the planned separation in Honeywell’s structure. We will be watching where these divisions land.
Restructuring
In February, Honeywell announced that its Board of Directors concluded a portfolio review and decided to pursue a separation of its Automation and Aerospace businesses (most recent conglomerate splitting is GE’s reorg in 2023 and 2024 resulting in GE Aerospace, GE HealthCare and GE Vernova). The planned separation, coupled with the previously announced plan to spin advanced materials (now expected in the fourth quarter of 2025), will result in three publicly-listed industry leaders and is intended to be fully completed in the second half of 2026. Latest update on the split:
The industry awaits Honeywell’s restructuring, with the focus for distributors the Honeywell Automation eventually becoming a stand-alone company.
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