Honeywell Stock Falls After Earnings Beat. Here’s Why.

Honeywell shares have picked up some momentum. Coming into Thursday trading, they were only up about 6% year to date, but they had gained 21% over the past three months. (Qilai Shen/Bloomberg)

Industrial conglomerate Honeywell delivered a solid beat-and-raise quarter as it prepares to break into three pieces. Investors, however, weren’t impressed.

Honeywell reported adjusted earnings per share of $2.75 from sales of $10.4 billion on Thursday morning. EPS exceeded the top end of the company’s guidance range of $2.70.

Wall Street was looking for EPS of $2.66 from sales of $10.1 billion, according to FactSet. A year ago, in the second quarter of 2024, Honeywell reported EPS of $2.49 from sales of $9.6 billion.

Shares fell 6.2% to $224.48 on Thursday, while the S&P 500 gained 0.1% and the Dow Jones Industrial Average fell 0.7%.

Management felt good about the quarter. “Honeywell delivered outstanding results in the second quarter with both organic growth and adjusted earnings per share exceeding guidance despite the unpredictable macroeconomic backdrop,” said CEO Vimal Kapur in a news release. “With Building Automation leading the way, three out of four segments grew sales at better than 5% in the quarter.”

Building sales grew 8% year over year. Aerospace and energy-related sales were up 6%. Industrial automation sales were flat, with demand in Europe “challenged.”

Overall, quarterly results looked fine. Guidance is ahead of the Street as well. For the full year, Honeywell expects earnings per share to land between, $10.45 and $10.65. The $10.55 midpoint is up 20 cents from prior guidance. Wall Street currently projects EPS of $10.42. The new midpoint implies second-half EPS of about $5.29 per share, a hair better than the $5.26 that analysts currently project.

Jefferies analyst Sheila Kahyaoglu pointed out that the guidance raise was related to a number of factors beyond core operations, including M&A and foreign exchange. That might have disappointed investors.

The starting point might matter too. Coming into Thursday trading, Honeywell stock was up about 6% year to date, trailing the S&P 500 by about two percentage points. Shares, however, have been strong recently, up about 21% over the past three months.

Results come as the company prepares to break apart. In February, Honeywell laid out plans to break apart into three companies—one dedicated to automation, one to aerospace, and another to advanced materials.

The breakup is designed to help unlock value. Honeywell shares trade for about 21 times estimated 2026 earnings. GE Aerospace trades for 39 times estimated 2026 earnings. Rockwell Automation trades for about 31 times.

Making some assumptions about how each part would trade, Honeywell, broken apart, could trade for the equivalent of 30 times 2026 earnings, or about $330 a share. That’s only rough math to illustrate one reason why investors are optimistic about a Honeywell split.

The materials spin-off should be completed by late 2025. The automation and aerospace separation is slated for late 2026.

Write to Al Root at allen.root@dowjones.com