Honeywell International Inc. (HON) Income Statement

The sequential fall from $9.7 billion in Q2 2026 to $5.0 billion in Q3 2026 appears consistent with the removal of the Aerospace segment rather than demand destruction, so the residual automation portfolio should be underwritten against a substantially smaller revenue denominator. Importantly, growth was already decelerating before the portfolio change — 7.9% and 8.1% year-over-year in the first half of 2025 gave way to -6.9% and -6.1% in the first half of 2026 — which suggests underlying organic momentum was weakening independent of the separation.

The divergence between a ~630 basis point gross margin improvement and a roughly 210 basis point operating margin decline indicates that the benefit of the reshaped revenue mix is being eroded below the gross line, most plausibly by fixed corporate and segment overhead that has not contracted proportionally. Against peer benchmarks, the 40.4% gross rate now sits above GE Aerospace (36.8%) and Eaton (37.6%) but below Emerson (52.8%) and ITW (44.1%), suggesting Honeywell's pricing power is respectable for a diversified industrial yet still diluted by its lower-value hardware content; the durability of this gross expansion warrants monitoring across a full post-separation cycle.

The trough appears to have been driven by a combination of negative revenue growth (-6.9%) and SG&A held flat at $1.3 billion, an operating deleverage dynamic that compressed operating income to $886 million even as gross margin held at 38.7%. The subsequent rebound to $1.7 billion of operating income on slightly higher revenue suggests either cost actions took hold or separation-related charges rolled off, and whether that recovery persists once the Aerospace gain is stripped out of trailing comparables is the central question for forward EPS durability.