Honeywell margin outlook raises to 22 percent

Honeywell International management raised its fiscal 2026 organic sales growth forecast to 3% to 4% on the second-quarter earnings call, up from a previous range of 2% to 3%. The company also expects to exit the year with a segment margin above 22%, according to management statements made during the same call.

The valuation picture for the stock has shifted following the separation of its largest unit. Honeywell Aerospace, which accounted for 46.8% of fiscal 2025 revenue, was spun off on June 29, 2026. That segment had grown 13.3% in fiscal 2025. The remaining company is now focused primarily on automation, a transition marked by the sale of the Productivity Solutions and Services business to Brady Corporation in August 2026. Management described that sale as the final step toward becoming a pure-play automation company. The company also completed the purchase of Johnson Matthey’s Catalyst Technologies business on July 17, 2026.

Financial results for the twelve months ending June 2026 show revenue growth of 5.4%, compared with an average of 0.12% over the prior three periods. However, operating margin fell to 16.6% in that period, down from 18.7% in the year prior and below the 18.1% three-period average. Net income for the twelve-month period reached $8.21 billion, exceeding the $5.99 billion in operating income. A significant portion of that net income arrived in fiscal Q2 2026, when it totaled $5.68 billion, compared with $1.57 billion in the same quarter a year earlier.

Investors evaluating the stock must account for distortions in trailing metrics. Honeywell trades at 8.1 times earnings, compared with 22.7 for the median S&P 500 company. On an operating cash flow basis, the multiple is 13.0 times, against 15.0 for the index. These figures are affected by the recent spin-off; the current share price reflects the smaller post-spin entity, while trailing cash flow data still includes contributions from the divested aerospace unit. This mismatch can make the multiple appear lower than it is for the continuing business.

Using management’s adjusted measure, segment margin improved by 100 basis points to 19% in fiscal Q2 2026. Management stated that cost removal is running ahead of plan. The next major milestone for assessing whether margins are widening as projected is the fiscal Q3 2026 report, expected on or around October 22, 2026.