Honeywell Technologies reported third-quarter 2026 results on Thursday, October 22, before the open. This is its first quarter as a standalone company, following the spin-offs - and that is what makes reading this report a task in itself: almost every reported figure says one thing, and the organic figure beside it says another.
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What was reported
| (millions of dollars) | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Sales | 4,994 | 4,929 | +1% |
| Organic growth | +7% | ||
| Operating income | 740 | 413 | +79% |
| Operating margin | 14.8% | 8.4% | +640 bps |
| Segment profit | 1,062 | 866 | +23% |
| Segment margin | 21.3% | 17.6% | +370 bps |
| Earnings per share, continuing operations (dollars) | 2.40 | 2.99 | -20% |
| Adjusted earnings per share (dollars) | 2.27 | 1.70 | +34% |
| Cash flow from operations | 607 | 2,306 | -74% |
| Free cash flow | 688 | 599 | +15% |
Source: Honeywell Technologies' third-quarter 2026 press release, October 22, 2026, filed with the SEC on Form 8-K as Exhibit 99.1. Segment profit, segment margin, organic growth, adjusted earnings per share and free cash flow are non-GAAP measures, as the company defines them.
‼ Two traps in this report, and both come from the same thing - the separation.
The first: 1% versus 7%. Reported sales rose just 1%, and organic growth was 7%. The gap is not creative accounting - it is simply the businesses that are no longer here. Whoever reads the 1% reads a company that stood still; whoever reads the 7% reads the business that remains.
The second, which runs the other way: reported earnings per share are higher than adjusted - $2.40 against $2.27. That is the reverse of the usual shape, in which adjusted is almost always higher. Here it means the excluded items are net positive, so excluding them lowers the figure rather than raising it.
And in those two lines the direction flips: sales look better organically, and earnings look better as reported.
‼ Where the improvement in profit actually came from
This is the line that does not appear in the headlines, and in my view it is the most interesting figure in the report. Segment profit rose by $196 million - from $866 million to $1,062 million. The breakdown of that increase:
| (millions of dollars) | Q3 2026 | Q3 2025 | Contribution to the increase |
|---|---|---|---|
| Building Automation | 546 | 502 | +44 |
| Process Automation and Technology | 412 | 389 | +23 |
| Industrial Automation | 205 | 216 | -11 |
| Corporate and All Other | (101) | (241) | +140 |
| Total segment profit | 1,062 | 866 | +196 |
Source: the reconciliation of segment profit to income before taxes, in the same release.
So $140 million out of $196 million - about 71% of the improvement - came from corporate costs falling from $241 million to $101 million. The three segments together contributed $56 million.
That squares exactly with what the company itself says: it explicitly mentions the elimination of stranded costs related to the prior spin-offs. In other words, a large part of the improvement is a consequence of the separation itself - the removal of a layer of cost - rather than an improvement in the operating business.
That does not make the improvement unreal. A cost that has gone is a cost that has gone. But it does mean this component does not repeat - stranded costs can be eliminated once, not every quarter.
The segments
| Sales | Reported change | Organic growth | Segment margin | Margin change | |
|---|---|---|---|---|---|
| Building Automation | 2,020 | +8% | +8% | 27.0% | +30 bps |
| Process Automation and Technology | 1,859 | +16% | +8% | 22.2% | -210 bps |
| Industrial Automation | 1,115 | -23% | +4% | 18.4% | +350 bps |
Building Automation is the only segment where reported and organic are identical - 8% and 8%. According to the company, building products grew 11%, led by the fire and security businesses, and building solutions grew 4% on continued strength in services.
Process Automation and Technology grew 16% reported but 8% organic - meaning about half the growth was bought. And it is also the only segment where margin eroded, by 210 basis points.
And Industrial Automation is the interesting case: sales fell 23%, organic growth was positive - 4% - and margin rose 350 basis points. That is the pattern of a business that has sold lower-margin operations: sales contract and profitability improves. According to the company, solutions grew 16%, led primarily by industrial measurement and utilities, while products were flat - double-digit growth in sensing largely offset by industry-wide meter deployment deferrals in utilities.
The cash flow, and why it looks bad
Cash flow from operations fell 74% to $607 million. That figure looks alarming until you read the reason: the year-ago quarter included a one-time payment from the Resideo termination agreement. Excluding it, free cash flow actually rose 15% to $688 million, with 95% conversion.
And note that free cash flow ($688 million) is higher than cash flow from operations ($607 million) - which is possible only because the company defines its free cash flow with further adjustments, among them separation-related cost payments and cash flows attributable to Quantinuum. That is a non-GAAP definition, and the company sets it out in the release.
The outlook, raised
| Updated 2026 guidance | |
|---|---|
| Sales | $20.0 - $20.1 billion |
| Segment margin | about 20.5% - at the high end of the previous range |
| Segment margin expansion | about 290 basis points |
| Adjusted earnings per share | $8.40 - $8.45 (+30% to +31%) |
| Cash flow from operations and free cash flow | about $2.1 billion each |
Adjusted earnings per share were raised by $0.23 from the midpoint of the previous range. Chairman and chief executive Vimal Kapur notes in the release that the 7% organic sales growth is above the three-year target set at the company's Investor Day in June, and that adjusted operating income increased at more than three times the rate of sales.
The stock
The report was published before the open, and the investor call was held at 8:30 a.m. Eastern - before the open. So the trading reaction is that same day, October 22.
And it was far less smooth than the close suggests. The stock closed at $218.31, up 1.67% from $214.73. But during the day it fell to $205.20 - 4.44% below the prior close - and from there climbed to the close, almost at the session high ($218.55). That is a move of 6.39% from the low to the close, on volume of 5.3 million shares, 43% above the day before.
On Friday the stock added 1.30%, to $221.15.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
This report is a good exercise in the question of what exactly is being measured when a company has just separated.
Every headline here is true and contradicts the next one at the same time: sales rose 1% and simultaneously 7%; earnings per share rose 34% and simultaneously fell 20%; operating cash flow collapsed 74% and free cash flow rose 15%. None of these figures is wrong, and each one on its own creates an entirely different picture.
And what I take from it, and I think this is the important line: 71% of the improvement in segment profit came from lower corporate costs, not from the segments. That is not improper - but neither is it renewable. A company can remove the layer of cost left behind after a separation once. Once it has been removed, the next improvement has to come from the sales and margins of the businesses themselves, and the three segments together contributed $56 million this quarter.
And the segment I am keeping an eye on is Process Automation and Technology - not because of the 16%, but because of it: reported growth that is double the organic rate means half of it was bought, and margin there fell 210 basis points. That is the combination worth following - growing from the outside and eroding from the inside.
And what the market did tells me something: the stock fell 4.44% during the day and then reversed and closed higher. That looks like a market that read the reported headlines first - 1% sales, earnings per share down 20% - and then the body. But that is my reading of a price move, not a fact.
What I will follow: whether segment margins keep expanding now that corporate costs have already come down; and the gap between reported and organic growth, which should narrow as the spin-offs recede.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
