We're raising our Honeywell Technologies price target, reflecting post-spinoff optimism
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Honeywell Technologies shares rallied Thursday, bucking a broader market selloff after the industrial automation company delivered a strong quarter and raised guidance. Revenue in the second quarter ended June 30 rose 4.3% year over year to $9.72 billion, exceeding the LSEG-compiled consensus estimate of $9.5 billion. Honeywell Technologies (HON) numbers still include results from Honeywell Aerospace (HONA), which was spun off into a separate publicly traded company at the end of the quarter. Excluding HONA, which missed on revenue, the HON top line looks ever better. Adjusted earnings per share (EPS) fell 4.2% from the year-ago period to $4.52, below the LSEG estimate of $4.27. Excluding HONA, which was a drag on profits, the HON bottom line also looks a lot better. That's why the Street is looking past the miss, instead taking it out on HONA shares. HON YTD mountain Honeywell Technologies (HON) YTD Bottom line This was a strong quarter for Honeywell Technologies and its final quarter including the results of the now spun-off aerospace division. Wall Street rewarded HON, sending the Club stock more than 5% on the print. The quarter is a perfect example of the type of stock we want in this market, as outlined in Jim Cramer's latest column. Honeywell Technologies, as its name implies, is tech-related, an important factor for longer-term growth. But it can trade outside of the up-and-downs of artificial intelligence headlines and benefit from broader economic strength. Honeywell Technologies creates hardware and software that automate the complex operations in buildings, factories, and supply chains. While focusing most of our analysis on the remaining HON businesses, the misses on Honeywell Aerospace sales and segment profits were why HONA shares dropped about 6% on Thursday. We never like to see results below estimates. But in the case of HONA, we are sticking with the position as we continue to think that supply chain improvements will result in margin expansion and EPS growth. Honeywell Aerospace is set to release earnings on Aug. 5. Since we got a preview in the HON report of what's to come from HONA, that conference will be even more important than usual for investors like us to get the lay of the land going forward. Why we own it Honeywell Technologies (HON) creates hardware and software that automate the complex operations in buildings, factories, and supply chains. It completed the catalyst we had been waiting for — the spin-off of Honeywell Aerospace (HONA) into a separate publicly traded company. Competitors: Emerson , Rockwell Automation Most recent buy : June 23, 2026 Initiated: July 5, 2020 Outside of aerospace, the HON results were superb. Both sales and segment profits outpaced estimates in the three remaining automation segments. Total orders increased 16% organically, with double-digit short-cycle order growth realized in the automation segments. Short-cycle businesses tend to be higher margin but also more cyclical due to compressed lead times from order to delivery. HON's book-to-bill in the quarter came in above 1.1, meaning only slightly more orders coming in than going out. That drove 9% backlog growth and an organic growth outlook of 4% to 6% for the back half of the year. While the Process Automation segment margin came up a bit short, it was more than offset by margin expansion in Industrial Automation and Building Automation. Overall non-aerospace segment margin and profit came in above expectations. Even better, management raised its outlook for the full year. The sales guidance, in dollar terms, was lowered to reflect an accelerated divestiture timeline for two businesses — Productivity Solutions & Services and Warehouse & Workflow Solutions. However, guidance on operational metrics, such as organic growth and segment margin, and EPS was raised. The team also previously provided three-year financial targets for the streamlined Honeywell Technologies, including 4% to 6% organic growth, roughly 24% segment margin with about 60 basis points of average annual expansion to get us there, 10% annual adjusted earnings growth to a level of roughly $12 per share, and free cash flow of over $3 billion with a 90%-plus conversion ratio. On the call, CEO Vimal Kapur said that all those projections reflect the status quo in the Iran war. "No improvement from the current tension, but also no significant escalation in the war or further disruption to the supply chain. This is, of course, a very fluid situation, but our teams in the region have done a tremendous job to minimize the impact to our business while ensuring our employees are safe, and we're able to continue to support our customers." Given the results, near-term outlook and longer-term targets, we're reiterating our buy-equivalent 1 rating on HON shares but raising our price target to $275 per share from $250. Segment commentary Building Automation: Sales increased more than 9.6% year-over-year, or 9% organically, to $2 billion in the second quarter. Organic sales are revenue from existing operations and remove the impact of foreign exchange fluctuations. On the call, CFO Michael Stepniak said, "Building automation continues to execute well, leading to a mid-single-digit-plus organic growth outlook, supported by incredibly strong orders. Growth in the second quarter, particularly in our focus verticals including healthcare, hospitality, and data centers." Process Automation: Sales rose 4%, but dropped 1% organically, to $1.68 billion, with the team blaming a decline in aftermarket sales as the quarter lapped a period of strength in the prior year. Against that, however, the segment benefited from growth in LNG. Stepniak said, "Consistent with our messaging at the Investor Day, we expect a sharp inflection in growth in process automation technology beginning in the third quarter, led by process technology and driven by backlog conversion and much stronger catalyst shipments on profitability." He added, "We expect process automation technology growth to accelerate to high-single-digits in the second half, as global energy projects resume backlog, conversion ramps and catalyst shipment volumes increase significantly." Industrial Automation: Sales fell 4.8%, but increased 4% on an organic basis, to $1.5 billion. Stepniak said, "Industrial automation growth will continue in the second half, driven by resilient short cycle demand for industrial measurement and sensing." Management also cited as positives both "pricing and productivity actions," meaning the company managed to raise prices while reducing costs. Guidance In addition to rosier full-year guidance, excluding aerospace, management provided outlooks for the current (third) quarter and the final (fourth) quarter. Third quarter Sales are expected to be $4.9 to $5 billion versus the $5.25 billion LSEG estimate. Adjusted EPS of $2.05 to $2.20 is expected versus the $2.06 LSEG estimate. Organic growth of 4% to 6% is expected versus the 5.1% FactSet estimate. Segment margin of 20% to 20.7% is expected versus the 18.3% FactSet estimate. Fourth quarter Sales are expected to be $5 to $5.1 billion versus the $5.24 billion LSEG estimate. Adjusted EPS of $2.28 to $2.43 is expected versus the $2.27 LSEG estimate. Organic growth of 4% to 6% is expected versus the 5.1% FactSet estimate. Segment margin of 22% to 22.7% is expected versus the 20.2% FactSet estimate. (Jim Cramer's Charitable Trust is long HON, HONA. See here for a full list of the stocks.) 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