Honeywell International Inc. (HON) wrapped up 2025 with a bit of a mixed bag on Thursday, delivering earnings that topped expectations while revenue fell short. But the real story here might be what's coming next.

The Numbers Game

The industrial conglomerate posted adjusted earnings of $2.59 per share for the fourth quarter, comfortably beating analyst estimates of $2.54. Revenue climbed 6% year over year to $9.76 billion, though that missed the $9.85 billion that Wall Street was expecting.

Here's where it gets interesting: organic sales jumped 11% year over year, powered by strong demand in aerospace and building automation. And orders? They surged 23% organically, fueled by double-digit growth in both Aerospace Technologies and Energy and Sustainability Solutions. That massive order influx pushed the company's backlog north of $37 billion—a record.

Adjusted segment profit rose 23% year over year to $2.3 billion, though that figure looks considerably less impressive when you strip out the impact of a Bombardier agreement from Q4 2024—just 2% growth on that basis. Still, the adjusted segment margin expanded by 240 basis points to 22.8%, helped along by strength in aerospace and building automation. Take away the Bombardier deal, though, and margins actually contracted 70 basis points.

Cash flow told two different stories: operating cash flow dropped 38% year over year to $1.24 billion, while free cash flow jumped 48% to $2.5 billion in the quarter.

Segment Scorecard

Nearly every business unit showed growth, but aerospace stole the spotlight. Aerospace Technologies generated $4.52 billion in sales, up 21% organically year over year. The adjusted segment margin expanded a whopping 620 basis points to 26.5%, largely due to the comparison against the prior year's Bombardier agreement.

Building Automation posted $1.97 billion in sales with 8% organic growth, and the segment margin ticked up 20 basis points to 27.0% thanks to commercial excellence and volume leverage.

Industrial Automation brought in $2.37 billion in sales, up just 1% organically. Margins contracted 120 basis points to 18.4% as cost inflation took a bite.

Energy and Sustainability Solutions was the weak link, recording $892 million in sales—down 7% organically. Segment margin fell 300 basis points to 23.7%, hurt by unfavorable mix from declining catalyst volumes and cost inflation.

Looking Ahead

For fiscal 2026, Honeywell expects adjusted EPS of $10.35 to $10.65, slightly below the analyst consensus of $10.38. Revenue is projected at $38.8 billion to $39.8 billion, compared to the street view of $39.62 billion.

First quarter guidance calls for adjusted EPS of $2.25 to $2.35 versus expectations of $2.34, with revenue of $9.1 billion to $9.4 billion against a consensus of $9.29 billion.

Chairman and CEO Vimal Kapur emphasized the significance of that record backlog: "We exited 2025 with a record backlog of over $37 billion which positions us well for 2026. Building on this momentum, we now expect the separation of our automation and aerospace businesses to be completed in the third quarter of 2026. In preparation, this quarter we established our go-forward segment structure for Honeywell, built on complementary business models that will drive cross-portfolio synergies and accelerate profitable growth over the long term, and announced the leadership team for Honeywell Aerospace."

Flexjet Settlement

In separate news, Honeywell and Flexjet announced on January 21, 2026 that they've reached a comprehensive agreement to resolve their ongoing litigation and related disputes involving StandardAero and Duncan Aviation. As part of the deal, the companies extended their aircraft engine maintenance partnership through 2035 and plan to rebuild their commercial relationship going forward.

Stock Movement: Honeywell shares declined 1.14% to $214.17 in premarket trading on Thursday.