This morning, we will review our financial results for Q1 of 2026, provide guidance for Q2, and discuss our full year outlook. Orders grew 7% organically on the strength of our Building and Industrial Automation segment, as well as in petrochemical and refining verticals in Process segment. Including the orders growth in Aerospace, we drove backlog to over $38 billion with book-to-bill above 1.1. Sales growth was robust across electronics solutions in Aerospace, fire and aftermarket services in Building Automation, and gas and LNG in Process Automation and Technology, bolstered by our innovation and new product engine.
We expanded margins by 90 basis points to over 23%, driven by pricing discipline, productivity, and accelerated stranded cost removal ahead of the Aerospace spin. All of this drove 11% adjusted earnings growth in the quarter, demonstrating the strength and agility of the Honeywell operating system. Despite the strong start of the year, we are taking a prudent approach to our guidance, given the uncertainty surrounding the conflict in the Middle East. We remain confident in our ability to drive accelerating growth in H2 as our backlog supports a pickup in growth in Process Automation and Technology.
The future is bright as we set both businesses in gear to thrive with the right strategic focus and capital allocation priorities that will drive value for our customer, employees, and shareholders. In March, we successfully raised $20 billion of aerospace spin financing while delivering strong investment grade credit rating of A3, A-, and BBB+ with a positive outlook from Moody's, Fitch, and S&P respectively. Department of Defense to rapidly increase the production of critical defense technology through a $500 million commitment. This agreement demonstrate the criticality of Honeywell Aerospace to national security interests and supports a multi-billion-dollar revenue opportunity.
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth | Q2 2026 | 2%-4% |
| Segment margin | Q2 2026 | 22.2%-22.5% (down 10 to up 20 bps) |
| Adjusted EPS | Q2 2026 | approximately $2.40 at midpoint (~$2.55 on normalized tax) |
| Effective tax rate | Q2 2026 | approximately 21% (higher) |
| Organic sales growth | FY2026 | 3%-6% (maintained) (steady) |
| Segment margin expansion | FY2026 | 20-60 bps (50-90 bps operationally, less 30 bps Quantinuum drag) |
| Effective tax rate | FY2026 | approximately 19% |
| Aerospace organic growth | FY2026 | high single-digit growth (intact) (steady) |
| Process Automation and Technology organic growth | FY2026 | roughly flat for the year (high single-digit H2) |
| Aerospace segment margin | FY2026 | approximately 26% (modestly up) |
| Pricing | FY2026 | above 3%, trending toward 4% (higher) |
| Metric | YoY | Note |
|---|---|---|
| Total organic sales | +2% | Growth led by Building Automation and Aerospace Technologies, partly offset by Process Automation and Technology decline and Middle East disruption. |
| Building Automation sales | +8% organic | Strong demand for new products and momentum across data center and healthcare verticals, with double-digit growth in Middle East and India. |
| Aerospace sales | +3% organic | Commercial demand and global defense needs supported growth, but temporary mechanical supply chain headwinds constrained output. |
| Industrial Automation sales | +1% organic | Solutions grew 7% on robust measurement services and warehouse/workflow strength, offset by a slight product decline in Productivity Solutions and Services. |
| Process Automation and Technology sales | -6% organic | Timing delays in refining catalyst reloads and automation service upgrades, plus Middle East conflict impacts; aftermarket down about 10%. |
| Aerospace segment margin | +20 bps to 26.5% | Pricing, productivity, and favorable electrical-versus-mechanical mix despite lower volume leverage. |
| Adjusted EPS | +11% to $2.45 | Higher segment profit, lower share count, modest FX benefit, and favorable below-the-line items from higher pension income. |
| Free cash flow | down to ~$100M from ~$200M | Higher operational income offset by timing of Middle East collections and aerospace inventory headwinds. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio transformation and Aerospace spin-off | Transformation underway since 2023 | Firm Aerospace spin date of June 29; $20 billion spin financing raised at investment-grade ratings; PSS and Warehouse/Workflow businesses sold, leaving a pure-play automation RemainCo. | Rising |
| Middle East conflict impact | — | Roughly 0.5% revenue hit in Q1 and ~1% in Q2, concentrated in high-margin Process aftermarket; near-term headwinds but expected rebuild and services demand in H2. | Rising |
| Aerospace supply chain constraints | Strong Q4 output growth of 13% | Acute, transitory mechanical supplier shortfalls in January-February hit engines, power systems, and control systems; recovery began in March and carried into April. | Improving |
| Process backlog and H2 ramp | Backlog building over prior year | Over $2 billion in project wins across three quarters and double-digit process technology order growth support a high single-digit PA&T H2 ramp from firm, FID-backed backlog. | Rising |
| Pricing and inflation | 3%-4% pricing | Pricing above 3% and trending toward 4%, expected to offset rising inflation and support continued margin expansion. | Rising |
| Data center demand in Building Automation | Discussed prior quarters | Growing share, especially with tier-two providers, plus emerging opportunities in liquid cooling sensors and behind-the-meter power generation. | Rising |
| LNG cycle | Air Products liquefaction and Sundyne acquisitions | Very bullish on LNG; acquired businesses performing well with strong demand in U.S., Africa, and Middle East, including expansion and refurbishment opportunities. | Rising |