Honeywell (HON) Drops 6% On Weak Outlook After Middle East Disruptions Bite

TLDR

• Honeywell’s Q1 net sales of $9.14 billion missed the $9.3 billion analyst estimate — the third straight quarterly miss.
• The Middle East conflict slowed activity in its process automation and technology business, hurting revenue.
• Net income dropped 43.3% to $821 million, though adjusted EPS rose 11% to $2.45, beating estimates.
• Q2 guidance came in below Wall Street forecasts, with EPS expected at $2.35–$2.45 vs. the $2.56 estimate.
• The aerospace spinoff has been moved up to June 29, and Quantinuum filed IPO paperwork.

Honeywell International (HON) stock fell more than 6% in premarket trading Thursday after the company missed first-quarter sales expectations for the third straight quarter, with the Middle East conflict directly cutting into business activity.

Honeywell International Inc., HON

Q1 net sales grew 2.4% year over year to $9.14 billion, falling short of the FactSet consensus of $9.3 billion. The miss was driven in part by Honeywell’s process automation and technology segment, which saw a “slowdown in activity in the Middle East stemming from the conflict.” The company cited supply-chain disruptions and a “challenging geopolitical environment” as key factors.

Net income fell 43.3% to $821 million, weighed down by charges related to debt restructuring and asset impairments tied to businesses held for sale. Free cash flow of $100 million was also down year over year, partially due to delayed collections linked to the conflict.

Earnings Beat, But Outlook Disappoints

On an adjusted basis, earnings per share rose 11% to $2.45, topping the FactSet estimate of $2.32. That marks the seventh straight quarter of beating on the bottom line.

But the forward guidance is where the market reacted. Honeywell expects Q2 EPS in the range of $2.35 to $2.45, well below the Wall Street estimate of $2.56. Q2 sales are projected at $9.4 billion to $9.6 billion, also under the consensus of $9.73 billion.

Full-year guidance was left unchanged, with sales expected between $38.8 billion and $39.8 billion, and adjusted EPS of $10.35 to $10.65.

Defense and space revenue did increase 4% from a year ago, with the company pointing to “escalating geopolitical conflicts” as a driver. But that growth wasn’t enough to offset the drag from other parts of the business.

The premarket drop put the stock on track for its worst post-earnings day since February 3, 2022, when it fell 7.6%.

HON has dropped 9.7% since the start of the Iran conflict through Wednesday. The iShares U.S. Aerospace & Defense ETF (ITA) shed 10.1% in the same period. Year to date, HON is still up 12.8%, compared to a 4.3% gain for the S&P 500.

Spinoff and Asset Sales Move Forward

Honeywell also updated its corporate restructuring timeline. The aerospace spinoff is now expected to close on June 29, pulled forward from a previous third-quarter target.

On Wednesday, Quantinuum, its quantum-computing unit, filed paperwork for an initial public offering.

The company also announced a deal to sell its Warehouse and Workflow Solutions business to American Industrial Partners in an all-cash transaction. That sale, along with the previously announced sale of its Productivity Solutions and Services (PSS) unit, is expected to close in the second half of 2026.

Year to date, HON stock is down 12% from its recent highs.

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