Honeywell International Inc. (NASDAQ: HON) reported a mixed financial picture for the fourth quarter ending 2025, achieving milestone order growth and backlog levels while facing margin contractions and fluctuating cash flows. The company posted adjusted earnings per share of $2.59, slightly exceeding analyst expectations of $2.54. Revenue grew 6% year over year to $9.76 billion, though this modest increase fell short of the $9.85 billion forecast by analysts.
The quarter’s results were buoyed by an 11% year-over-year increase in organic sales, which were driven primarily by growing demand in Honeywell's Aerospace Technologies and Building Automation segments. Further strengthening the company's future revenue pipeline, new orders surged 23% organically, led by double-digit growth within Aerospace Technologies and Energy and Sustainability Solutions. This momentum propelled Honeywell's total backlog to an unprecedented level exceeding $37 billion at the end of 2025.
Adjusted segment profit expanded 23% year over year to $2.3 billion. However, excluding the impact of a significant agreement with Bombardier signed in the final quarter of 2024, the profit gain normalized to 2%. Segment margin experienced a notable 240 basis-point increase to 22.8%, primarily fueled by improved performance in Aerospace Technologies and Building Automation. Conversely, when removing the deal's effect, margins contracted by 70 basis points.
Operational cash flow declined by 38% year over year to $1.24 billion during the quarter, reflecting some operational challenges. In contrast, free cash flow surged 48% year over year, reaching $2.5 billion, indicating stronger cash generation capabilities after accounting for capital expenditures.
Segment Performance Details
The Aerospace Technologies segment delivered stellar results with $4.52 billion in sales, marking a substantial 21% organic increase compared to the previous year. This segment also achieved a considerable 620 basis-point expansion in adjusted segment margin to 26.5%, largely influenced by the Bombardier agreement's lingering effects.
Building Automation recorded $1.97 billion in sales, achieving 8% organic growth year over year. The segment margin improved modestly by 20 basis points to 27.0%, benefitting from successful commercial initiatives and volume leverage.
Industrial Automation posted $2.37 billion in sales, reflecting a modest 1% organic year-over-year increase. However, the segment faced margin pressure with a contraction of 120 basis points to 18.4%, attributed primarily to cost inflation challenges.
Energy and Sustainability Solutions experienced a 7% organic sales decline, recording $892 million in sales during the period. The segment also saw margin reduction of 300 basis points to 23.7%, resulting from unfavorable sales mix notably impacted by decreased catalyst volumes and elevated costs.
Forward-Looking Guidance and Strategic Initiatives
For the full fiscal year 2026, Honeywell projects adjusted earnings per share to range between $10.35 and $10.65, near analysts’ consensus estimate of $10.38. The company anticipates full-year sales to fall between $38.8 billion and $39.8 billion, close to the Street consensus of $39.62 billion.
Looking ahead to the first quarter, Honeywell expects adjusted earnings per share in the band of $2.25 to $2.35, aligning closely with the consensus forecast of $2.34. Revenue for the quarter is projected at $9.1 billion to $9.4 billion, slightly varying from analysts’ $9.29 billion estimate.
Chairman and CEO Vimal Kapur emphasized the strength of the company's record backlog, stating, "We exited 2025 with a record backlog of over $37 billion which positions us well for 2026." He outlined plans for completing the separation of Honeywell’s automation and aerospace business units in the third quarter of 2026. As part of this strategic move, the company has established a new segment structure designed to leverage complementary business models, foster cross-portfolio synergies, and drive long-term profitable growth. Additionally, a leadership team dedicated to Honeywell Aerospace was announced to support this transition.
Resolution of Litigation and Partnership Developments
On January 21, 2026, Honeywell, in conjunction with Flexjet, disclosed a comprehensive settlement resolving all ongoing litigation and associated disputes involving StandardAero and Duncan Aviation. As part of this resolution, the companies agreed to extend their aircraft engine maintenance partnership through 2035. They also expressed intentions to rebuild and strengthen their commercial relationship moving forward, signaling a renewed strategic collaboration in aviation maintenance services.
Market Response
Following the earnings announcement, Honeywell's shares experienced a decline of 1.14% during premarket trading, reaching $214.17. The market reaction reflects a cautious stance despite record backlog levels and solid operational performance in key segments.