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SEC filingHoneywell's Q1 2026 revenue grew 2% YoY to $9.14B, but net income from continuing operations fell 39% to $795M due to $502M in non-recurring charges.
Honeywell's first quarter of 2026 reflected moderate top-line growth but significant earnings pressure from non-recurring charges. Net sales increased 2% year-over-year to $9.14 billion, driven by favorable pricing (+4%) and foreign currency translation (+2%), partially offset by lower sales volumes (-2%) and the divestiture of the personal protective equipment (PPE) business (-3%). Gross profit rose 2% to $3.54 billion, with gross margin down slightly 10 basis points to 38.7%. Segment profit grew 6% to $2.13 billion, with margins expanding 90 basis points to 23.3% as productivity gains and pricing more than offset inflation.
However, net income from continuing operations declined sharply to $795 million from $1.30 billion in the prior year, a 39% drop. The decline was driven by $263 million in impairment on assets held for sale (Productivity Solutions and Warehouse/Workflow Solutions), $239 million loss on debt extinguishment from tender offers and redemptions, and $314 million in divestiture-related costs (including the aerospace separation). Diluted EPS from continuing operations fell to $1.29 from $1.97.
Total assets increased slightly to $74.0 billion from $73.7 billion at year-end 2025. Cash and short-term investments declined to $12.4 billion from $12.9 billion, while total borrowings rose to $36.7 billion from $34.6 billion, reflecting pre-separation funding activities. The company issued $16.0 billion in Aerospace senior notes and drew $6.0 billion on a term loan, subsequently repaying the latter with exchange notes. Current maturities of long-term debt rose to $3.1 billion from $1.5 billion. The current ratio weakened to 1.38 from 1.30. Shareholders' equity decreased to $13.6 billion from $13.9 billion, driven by share repurchases and dividends.
Operating cash flow from continuing operations was a use of $650 million, compared to a source of $378 million in the prior year. The deterioration was primarily due to a $375 million Flexjet litigation settlement payment and $463 million in cash interest payments. Working capital was a net use of $939 million (vs -$703 million prior), reflecting increases in receivables and inventories. Capital expenditures were $223 million (2.4% of sales). Free cash flow was negative $873 million. Financing activities provided $267 million, driven by $15.8 billion in pre-separation funding, partially offset by $12.6 billion in long-term debt repayments and $1.0 billion in share repurchases.
Management highlighted ongoing macroeconomic and geopolitical risks, including trade policy uncertainty, tariffs, and supply chain disruptions, which could impact future results. The company is executing a portfolio transformation: the aerospace spin-off is on track for completion in the third quarter of 2026 (June 29, 2026), and agreements to sell the Productivity Solutions and Services and Warehouse and Workflow Solutions businesses were reached in April 2026, expected to close in the second half. Additionally, the acquisition of Johnson Matthey's Catalyst Technologies business for £1.325 billion is anticipated to close in Q3 2026. Mitigation strategies for raw material inflation and supply chain risks include dual-sourcing and pricing actions.
Backlog increased 15% to $38.3 billion, driven by Aerospace Technologies ($18.8B) and Building Automation ($9.3B). The company realigned its segments in Q1 2026, forming a new Process Automation and Technology segment and recasting prior period figures. Restructuring charges totaled $50 million gross, with $37 million in cash spending. The effective tax rate declined to 10.3% from 22.2%, primarily due to a favorable change in estimate on the spin-off tax. Non-recurring items totaled approximately $502 million after-tax (impairment, debt extinguishment, divestiture costs, and restructuring). The company repurchased 4.3 million shares for $1.0 billion and paid dividends of $1.19 per share, a 5.3% increase year-over-year.