Honeywell Benefits From Business Strength Amid Headwinds

Honeywell International Inc. HON is experiencing solid momentum in its commercial aviation aftermarket business, driven by healthy demand in the air transport market. In the second quarter of 2025, organic sales from its commercial aviation aftermarket increased 7% year over year.

Robust U.S. and international defense spending volumes and sustained demand from the current geopolitical climate have also been driving its defense and space business. In the first and second quarters of the year, organic sales from its defense and space business surged 10% and 13%, respectively, on a year-over-year basis.

In the quarters ahead, it expects the Aerospace Technologies segment to benefit from strong demand in commercial aviation, growth in air transport flight hours, higher shipset deliveries and strong defense spend volumes. For 2025, organic sales in the Aerospace Technologies segment are likely to be up in the high single digits, driven by continued momentum in both commercial aviation and defense and space businesses.

Honeywell has been strengthening its business through acquisitions. In June 2025, the company completed the acquisition of Sundyne. The inclusion of Sundyne’s advanced products with Honeywell Forge technology will boost its Energy and Sustainability Solutions (ESS) business. In October 2024, the company closed the acquisition of Civitanavi Systems S.p.A. for about €200 million ($217 million) to boost its portfolio of aerospace navigation solutions. With the buyout, Honeywell expects to strengthen its foothold in the European Union.

Also, in September 2024, Honeywell acquired CAES Systems Holdings LLC (“CAES”) from private equity firm Advent. The transaction will augment its defense technology offerings across various domains, including land, sea, air and space. Acquisitions had a contribution of 3% to the company’s sales in the second quarter.

HON also remains focused on rewarding its shareholders through dividend payouts and share repurchases. In the first six months of 2025, it paid out dividends of $1.48 billion and repurchased shares worth $3.6 billion. In September 2025, it hiked its quarterly dividend by approximately 5% to $1.19 per share (annually: $4.76).

Few Near-Term Headwinds

Despite the positives, Honeywell has been grappling with persistent weakness in the Industrial Automation segment. Softness in the productivity solutions and services business, owing to a decrease in license and settlement payments, remains concerning for the segment. Weakness in the warehouse and workflow solutions and sensing and safety technologies businesses, due to a lower demand environment, has also been affecting the segment's performance. In second-quarter 2025, the segment’s sales declined 5% on a year-over-year basis.

Honeywell has been dealing with the adverse impacts of the high cost of sales and operating expenses. In the first six months of 2025, the company’s cost of sales was up 8.1% year over year. Selling, general and administrative expenses increased 4.7% year over year. In 2024, its cost of sales rose 3.7% year over year to $23.8 billion, while selling, general and administrative expenses increased 6.6% to $5.5 billion. In the second quarter, the company’s operating income margin fell 30 basis points to 20.4%.

HON, which belongs to the Zacks Diversified Operations industry, faces stiff competition from several peers including 3M Company MMM, RTX Corporation RTX and GE Aerospace GE.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research