Honeywell’s second quarter results came in above Wall Street’s revenue and profit expectations, but the market responded negatively, focusing on margin compression and underlying operational challenges. Management highlighted that strong organic sales in Defense and Space, as well as Building Automation, were partially offset by cost inflation and higher research and development spending. CEO Vimal Kapur pointed to “accelerated R&D spend” and near-term inventory headwinds, while CFO Mike Stepniak noted that “tariff-related cost inflation pushed up inventory levels.” The company acknowledged that higher investment in future growth weighed on current margins.
Is now the time to buy HON? Find out in our full research report (it’s free).
Honeywell (HON) Q2 CY2025 Highlights:
- Revenue: $10.35 billion vs analyst estimates of $10.07 billion (8.1% year-on-year growth, 2.8% beat)
- Adjusted EPS: $2.75 vs analyst estimates of $2.66 (3.5% beat)
- Adjusted EBITDA: $2.73 billion vs analyst estimates of $2.55 billion (26.3% margin, 7% beat)
- The company lifted its revenue guidance for the full year to $40.8 billion at the midpoint from $40.05 billion, a 1.9% increase
- Management slightly raised its full-year Adjusted EPS guidance to $10.45 at the midpoint
- Operating Margin: 21.3%, 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
- Market Capitalization: $141 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Honeywell’s Q2 Earnings Call
- Julian Mitchell (Barclays Bank) asked about Aerospace margin sustainability, with CFO Mike Stepniak describing recent margin pressure as “transitionary” and noting that R&D and acquisition costs will normalize over the next year.
- Andrew Obin (Bank of America) questioned the softer outlook for UOP (a process technology unit), with CEO Vimal Kapur explaining that strong catalyst sales in Q2 were pulled forward and that energy project spending is being delayed due to macroeconomic and regulatory factors.
- Nigel Coe (Wolfe Research) inquired about inflationary pressures in Aerospace, to which Stepniak responded that tariff costs are harder to pass through on long-term contracts, resulting in a lag before price increases offset inflation.
- Scott Davis (Melius Research) asked about increased R&D spending ahead of the planned separation, and Kapur emphasized that the investment is “preparing Honeywell for the future” by supporting organic growth.
- Chris Snyder (Morgan Stanley) pressed for details on portfolio actions, with Kapur confirming that the major review is complete and that future moves will focus on verticals with higher growth potential.
Catalysts in Upcoming Quarters
Over the coming quarters, the StockStory team will focus on (1) progress toward the announced separations and clarity on the timing of portfolio divestitures, (2) evidence that recent acquisitions and new product launches are contributing to organic growth in targeted segments, and (3) the effectiveness of Honeywell’s strategies to offset tariff-related cost inflation and margin pressure. Additional updates on energy project timing and the pace of recovery in Aerospace and Building Automation will also be key indicators.
Honeywell currently trades at $220.15, down from $239.48 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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