Have you ever watched a stock linger in the shadows, undervalued despite solid fundamentals, just waiting for that catalyst to ignite? That’s exactly how I’ve felt about Honeywell for months now. Then came Thursday’s third-quarter results, and suddenly everything clicked into place.
The industrial giant didn’t just meet expectations—they shattered them. Shares rocketed more than 7% in a single session, yet they’re still playing catch-up to their summer highs. In my view, this move feels like the opening act of something much larger.
The Quarter That Changed Everything
Let’s start with the numbers that matter. Revenue climbed to $10.41 billion, easily topping the $10.11 billion analysts anticipated. More impressively, organic sales—that pure measure of business health stripping out currency and acquisition noise—jumped 6%. That’s double what the Street expected.
Adjusted earnings per share? A robust $2.82, blowing past the $2.57 consensus. These aren’t marginal beats. They’re the kind that make you sit up and reconsider your entire thesis on a company.
Organic growth at this level signals genuine operational momentum, not just accounting gymnastics.
Aerospace: From Laggard to Leader
Remember last quarter when aerospace disappointed? Customer destocking had created a temporary air pocket. Management promised it was transitory. Thursday proved they weren’t just whistling in the wind.
Sales in Aerospace Technologies surged 15% to $4.51 billion, with organic growth at 12%. Every subsegment fired on all cylinders:
- Commercial original equipment returned to growth after inventory drawdowns
- Aftermarket demand remained rock-solid
- Defense and space orders grew double-digits
The book-to-bill ratio hit 1.2, meaning orders are pouring in faster than they can ship product. That’s the sound of future revenue locking in today.
Record Backlog Tells the Growth Story
Speaking of future revenue, Honeywell’s backlog reached a staggering $39.1 billion—up 11% organically year-over-year. That’s roughly a full year’s worth of sales already in the pipeline.
Orders across all four segments grew 22% year-over-year. Let that sink in. In a world where many industrial companies struggle with project delays and cautious customer spending, Honeywell is swimming in demand.
| Segment | Order Growth | Book-to-Bill |
| Aerospace Technologies | Double-digit | 1.2 |
| Industrial Automation | Growth in key areas | Part of 1.1 overall |
| Building Automation | Strong momentum | 1.1 |
| Energy & Sustainability | Double-digit ex-M&A | Contributing |
The Spinoff Catalyst Approaching
Next week marks the first step in Honeywell’s transformation. The Solstice Advanced Materials business spins off on October 30, with shareholders receiving one Solstice share for every four Honeywell shares held as of October 17.
This isn’t some minor divestiture. It’s the opening move in a complete restructuring that will create three focused pure-play companies by late 2026. The remaining automation and aerospace businesses will separate, each able to pursue strategies tailored to their specific markets.
I’ve always believed conglomerates trade at discounts because the market struggles to value complexity. Breaking into focused entities should unlock significant shareholder value. Management agrees—this restructuring is designed to let each business operate with greater agility and capital allocation precision.
Segment Deep Dive: Beyond the Headlines
While aerospace stole the show, every segment contributed to the beat.
Industrial Automation saw reported sales decline 9% to $2.27 billion due to portfolio changes, but organic growth turned positive at 1%. Warehouse automation and process solutions drove the improvement, offsetting expected project delays elsewhere.
Building Automation delivered 7.6% reported growth (7% organic), marking its fourth straight quarter of organic expansion. Building products particularly impressed, with volume leverage helping expand margins despite cost pressures.
Energy & Sustainability Solutions grew reported sales 11.5%, though organic declined 2% due to tough comparisons. Orders excluding M&A jumped double-digits, signaling underlying strength.
Perhaps the most encouraging aspect is that order growth occurred across all segments simultaneously. That’s rare in today’s uneven industrial landscape.
Guidance Raise: Not Just Window Dressing
Management raised full-year guidance across key metrics, even after adjusting for the Solstice spinoff:
- Sales: $40.7B to $40.9B (previously $40.1B to $40.6B)
- Organic growth: ~6% (previously 4-5%)
- Adjusted EPS: $10.60 to $10.70 (previously $10.24 to $10.44)
Free cash flow guidance held steady at $5.2B to $5.6B despite trimming operating cash flow expectations. That speaks to disciplined working capital management.
The slight segment margin downgrade to 22.9-23% reflects cost inflation realities, but volume leverage should continue mitigating these pressures as growth accelerates.
Valuation: Room to Run
Despite Thursday’s pop, Honeywell shares remain about 8% below their July peak near $240. Year-to-date, they’re down roughly 2%. In a market where growth commands premium multiples, this feels like an anomaly.
The pending spinoffs create a natural valuation conundrum—how do you price a company in transition? The market’s solution has been to apply a conglomerate discount. As the structure simplifies, that discount should compress.
Consider the sum-of-the-parts potential. Aerospace alone, with its high margins and defense exposure, could command industrial peer multiples. The automation businesses benefit from secular trends in warehouse efficiency and building intelligence.
Risks Worth Watching
No investment thesis is complete without acknowledging risks. Cost inflation remains a headwind, particularly in automation segments. Project timing in process solutions can create quarterly volatility.
Geopolitical tensions could impact defense spending patterns, though Honeywell’s broad exposure helps mitigate single-point risks. Currency fluctuations affect reported numbers, though hedging programs provide some protection.
Most importantly, execution risk accompanies any corporate restructuring. Management must deliver clean separations without disrupting operations. Their track record suggests capability, but complexity always introduces uncertainty.
Why This Feels Different
I’ve covered plenty of industrial turnarounds. What separates Honeywell is the combination of near-term operational momentum and long-term structural catalysts. The aerospace recovery isn’t theoretical—it’s showing up in orders, backlog, and margins.
The spinoff program addresses the conglomerate discount directly. Each resulting company should attract more focused investor bases, potentially expanding multiples. Management’s willingness to raise guidance mid-spin cycle demonstrates confidence.
Looking ahead, the fourth quarter typically benefits from seasonal strength in aftermarket and building products. The record backlog provides visibility into 2026 even before the full separation.
Patient investors willing to navigate the transition period could be handsomely rewarded. The combination of improving fundamentals, structural catalysts, and reasonable valuation creates what looks like a compelling risk/reward setup.
Sometimes the best opportunities hide in plain sight, masked by temporary complexity. Honeywell appears to be emerging from that complexity with stronger underlying businesses than when it entered. The stock’s recent move might not be a head fake—it’s potentially the starting gun for a multi-year re-rating.
In my experience, these transformation stories often play out gradually then suddenly. With operational momentum building and structural changes imminent, Honeywell fits that pattern perfectly. The question isn’t whether more upside exists—it’s how much patience the market will require to realize it.
