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Can Honeywell Technologies Boost Margin Performance Amid Cost Pressures?
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Key Takeaways
Honeywell Technologies' Q2 operating margin fell 50 bps to 12.8% as material and labor costs rose.
Honeywell Technologies became a pure-play automation company after separating Aerospace in June 2026.
HON expects a 20.1-20.5% segment margin in 2026, up 250-290 basis points year over year.
Honeywell Technologies (HON - Free Report) has been dealing with the adverse impacts of high operating costs and expenses. On a consolidated basis, the company’s total cost of sales, comprising the cost of products and services sold, was up 7.2% year over year to $6.07 billion in the second quarter of 2026.
Research and development expenses surged 14.2% year over year to $524 million, while interest and other financial charges increased 10.3% to $363 million in the same period. HON incurred high costs and expenses related to rising direct and indirect material costs and increased labor costs. For standalone Honeywell Technologies, operating margin declined 50 basis points to 12.8% in the second quarter. Escalating expenses, if not controlled, are likely to hurt the company’s bottom line in the quarters ahead.
However, with the separation of the Aerospace business, Honeywell Technologies started operating as a premier pure-play automation company in June 2026. Also, the company completed the divestiture of its warehouse and workflow solutions and productivity solutions and services businesses. These strategic initiatives, along with tailwinds from stranded costs elimination, are expected to support its margin performance and operational efficiency.
For 2026, Honeywell Technologies expects a segment margin of 20.1-20.5%, indicating an increase of 250-290 basis points on a year-over-year basis.
Peer’s Margin performance
Among its major peers, 3M Company (MMM - Free Report) is facing cost pressure. In second-quarter 2026, its total costs increased 4.7% year over year to $3.82 billion, while the metric, as a percentage of total revenues, climbed 120 basis points to reach 58.7%. Research, development and related expenses increased 4.9% year over year to $302 million.
Emerson Electric Co.’s (EMR - Free Report) cost of sales increased 2.7% year over year in the third quarter of fiscal 2026 (ended June 2026). Emerson’s selling, general and administrative expenses increased 6.1% year over year. Despite the increase in costs, Emerson’s adjusted segment EBITA margin improved 140 basis points to 28.5%, as price-cost actions and cost reductions offset inflationary impact.
The Zacks Rundown for HON
Shares of Honeywell Technologies have lost 12.2% in the past month compared with the industry’s decline of 0.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, HON is trading at a forward price-to-earnings ratio of 22.85X, above the industry average of 15.48X. HON carries a Value Score of F.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Honeywell Technologies’ earnings for 2026 and 2027 has declined in the past 60 days.
Image Source: Zacks Investment Research
HON stock currently carries a Zacks Rank #5 (Strong Sell).
View the Zacks #1 Rank List
Image: Bigstock
Can Honeywell Technologies Boost Margin Performance Amid Cost Pressures?
Key Takeaways
Honeywell Technologies (HON - Free Report) has been dealing with the adverse impacts of high operating costs and expenses. On a consolidated basis, the company’s total cost of sales, comprising the cost of products and services sold, was up 7.2% year over year to $6.07 billion in the second quarter of 2026.
Research and development expenses surged 14.2% year over year to $524 million, while interest and other financial charges increased 10.3% to $363 million in the same period. HON incurred high costs and expenses related to rising direct and indirect material costs and increased labor costs. For standalone Honeywell Technologies, operating margin declined 50 basis points to 12.8% in the second quarter. Escalating expenses, if not controlled, are likely to hurt the company’s bottom line in the quarters ahead.
However, with the separation of the Aerospace business, Honeywell Technologies started operating as a premier pure-play automation company in June 2026. Also, the company completed the divestiture of its warehouse and workflow solutions and productivity solutions and services businesses. These strategic initiatives, along with tailwinds from stranded costs elimination, are expected to support its margin performance and operational efficiency.
For 2026, Honeywell Technologies expects a segment margin of 20.1-20.5%, indicating an increase of 250-290 basis points on a year-over-year basis.
Peer’s Margin performance
Among its major peers, 3M Company (MMM - Free Report) is facing cost pressure. In second-quarter 2026, its total costs increased 4.7% year over year to $3.82 billion, while the metric, as a percentage of total revenues, climbed 120 basis points to reach 58.7%. Research, development and related expenses increased 4.9% year over year to $302 million.
Emerson Electric Co.’s (EMR - Free Report) cost of sales increased 2.7% year over year in the third quarter of fiscal 2026 (ended June 2026). Emerson’s selling, general and administrative expenses increased 6.1% year over year. Despite the increase in costs, Emerson’s adjusted segment EBITA margin improved 140 basis points to 28.5%, as price-cost actions and cost reductions offset inflationary impact.
The Zacks Rundown for HON
Shares of Honeywell Technologies have lost 12.2% in the past month compared with the industry’s decline of 0.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, HON is trading at a forward price-to-earnings ratio of 22.85X, above the industry average of 15.48X. HON carries a Value Score of F.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Honeywell Technologies’ earnings for 2026 and 2027 has declined in the past 60 days.
Image Source: Zacks Investment Research
HON stock currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.