Honeywell Q1 Margins Up 90bps to 23% as Free Cash Flow Halves to $100M
Honeywell’s Q1 free cash flow fell to $100M from $200M last year due to Middle East collection delays and aerospace inventory headwinds, while margins expanded 90 basis points to over 23% on pricing discipline and stranded cost removal. Aerospace orders rose 28% year-over-year, boosting a $19B backlog.
1. Q1 Cash Flow and Margin Performance
Honeywell’s Q1 free cash flow dropped to $100M from $200M a year ago, driven by delayed collections in the Middle East and inventory headwinds in aerospace. The company expanded adjusted margins by 90 basis points to over 23% through pricing discipline, productivity improvements and accelerated stranded cost removal.
2. Middle East Conflict Impact
The ongoing Middle East conflict reduced Q1 revenue by approximately 0.5% and is forecast to trim about 1% in Q2, mainly affecting the Process Automation and Technology segment’s high-margin services and software offerings.
3. Aerospace Segment Strength
The Aerospace segment recorded a 28% year-over-year increase in orders over the past 12 months, lifting its backlog to $19B—a 20% increase—supported by strong demand in engines, power systems and the commercial aftermarket.
4. Portfolio Simplification and Outlook
Honeywell plans to divest its Productivity Solutions & Services and Warehouse & Workflow Solutions businesses in the second half of 2026 to streamline its portfolio. Management projects Q2 organic sales growth of 2%–4% and adjusted EPS of $2.40 at the midpoint.