Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 23, 2026 · Beat 5 of last 7 quarters
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Honeywell's strong orders and backlog growth, particularly in Process Automation & Technology (up 24% organically) and Building Automation (up 13%), underscore accelerating demand for automation and energy infrastructure tied to AI-driven data center buildout and LNG expansion. The company's sold-out LNG capacity for three years and growing data center vertical (now 5% of Building Automation) signal sustained investment in power and cooling infrastructure. This bodes well for suppliers to Honeywell's automation and sensing product lines.
Honeywell Technologies delivered strong Q2 results, with organic sales up 4%, orders up 16%, and segment margin expanding 100 bps to 19.0%. Building Automation grew 9% organically, while Industrial Automation grew 4% (core up 2%), and PA&T declined 1% but was ahead of expectations. Adjusted EPS of $1.95 beat consensus by $0.15, driven by higher segment profit and lower interest expense. The company closed the Johnson Matthey Catalyst Technologies acquisition on July 17 and completed the Aerospace spin-off on June 29, with PSS and WWS divestitures expected to close by early August. Free cash flow improved to ~$0.5 billion in the quarter, and the company deployed $1 billion in capital via dividends and capex.
Management raised full-year 2026 guidance across all key metrics. Organic sales growth outlook increased to 3%–4% (from 2%–3%), with second-half growth expected at 4%–6%. Segment margin expansion guidance raised to 250–290 bps (from 225–265 bps), and adjusted EPS midpoint raised to $8.20 (from $8.10), up ~27% YoY. The company expects a sharp growth inflection in Process Automation & Technology in the second half, driven by backlog conversion and higher catalyst volumes, with PA&T growth accelerating to high single digits. Industrial Automation is expected to grow low single digits for the full year, with continued short-cycle strength. Management also expects to close the PSS and WWS divestitures by early August, about two months ahead of plan, and remains confident in achieving its 3-year targets of ~$12 adjusted EPS and >90% FCF conversion over the next 3-plus years.
“Orders grew 16% organically with broad-based demand across all segments, resulting in 9% increase in ending backlog. Notably, short-cycle orders grew double digit across all segments.”
on Orders and backlog strength
“We continue to expect a sharp growth inflection in Process Automation and Technology and continued momentum in Industrial Automation in the second half of 2026.”
on Second-half growth outlook
“We are sold out LNG for the next 3 years.”
on LNG capacity
Since it is so topical, I'd like to circle back on the Middle East impacts. I mean you still had double-digit orders. So you still have got momentum there. Just I'm interested about the idea that you've got some collection issues. Is there any risk of like force majeure here and any kind of disruptions like that?
Vimal explained that the Middle East situation has normalized after initial disruptions in March-April, with modest collection issues that are not material. He noted 50% orders growth in Q2 driven by big deals in Process Technology, and Mike added that Middle East revenue is expected to be high single digits for the year with orders up about 40%.
So Mike, it's obviously good news to see the guidance increasing. You did indicate that in June that there was scope for upside. But I'm curious if there's anything you saw in June, July to give you more confidence? Just any color in terms of how we exited 2Q entered 3Q on your markets? And then within that discussion, maybe just touch on IA. It sounds like the upside came outside the U.S. So I'd be curious if you're seeing any momentum in the U.S.
Mike said that orders were strong across the board, with every business printing double-digit short-cycle orders in Q2, giving confidence in Q3 and Q4. For IA, growth is broad-based including China, Europe, and the U.S. is recovering nicely due to onshoring. He also noted there is 'more room' to beat the raised guidance.
Just coming back to Johnson Matthey, Vimal, maybe 2 questions. One, as you looked at that business over time, has it sales been relatively synchronous with what goes on at UOP? In other words, I'm wondering if this is more of the same kind of quarter-to-quarter volatility or there's sort of differences in timing and what they do versus what you do that possibly tick some of this quarterly volatility out of your catalyst sales.
Vimal explained that JM's licensing technologies are complementary to UOP, serving different end markets like hydrogen, methanol, and ammonia, so comparisons are not one-to-one. On the catalyst side, trends are convergent. He also discussed revenue synergies from combining offerings, noting the deal was valued at 13x EBITDA based on cost synergies only, with significant sales synergy potential.