Building Climate Solutions (BCS) segment revenue rose 5%, with an 8% benefit from product mix and pricing offsetting volume declines.
Factory productivity improvements helped mitigate inflationary pressures in BCS.
Free cash flow remains on track for full year guidance of $650 million to $800 million.
Home Comfort Solutions (HCS) segment revenue increased 3% driven by favorable product mix and pricing up 12%, despite volume declines due to destocking and R-454B canister shortages.
Operating cash flow was $87 million and adjusted earnings per share were $7.82.
Quarterly dividend increased approximately 15% in May.
Revenue grew 3% in Q2 with segment margin reaching a record 23.6%, up 170 basis points.
Year-to-date share repurchases totaled $300 million with an additional $1 billion authorized.
Data Center Market Expansion and Product Innovation
Gates has significantly increased its involvement in the data center cooling market, with program involvement and revenue from this segment growing rapidly from a small base.
The company introduced new products such as the universal quick disconnect fitting and scaled up its electric pump portfolio to meet higher flow requirements.
Negotiations are underway with a major hyperscaler for 2026 supply, indicating a strategic focus on high-growth data center opportunities.
The momentum in product development and commercial coverage in data centers is expected to lead to a revenue inflection over the next few years.
Management sees the liquid cooling market expansion as a key secular growth opportunity, with potential revenues exceeding $150 million in the near term.
The company is actively building relationships with infrastructure providers and engineering firms, aiming for additional design wins.
Honeywell is in the final stage of its portfolio review, announcing intentions to pursue strategic alternatives for its Productivity Solutions and Services (PSS) and Warehouse and Workflow Solutions businesses.
The company is on track to spin off into three independent companies, with the Advanced Materials spin expected in Q4 2025 and Aerospace spin planned for the second half of 2026.
Management emphasized the focus on simplifying and optimizing the portfolio to maximize long-term value and strategic clarity.
Strategic Focus on Modular Solutions and Geographic Expansion
Company emphasizes its core strategy of being a modular solutions provider, with ongoing efforts to expand into new metro areas lacking rental fleets or sales presence.
Added new sales representatives in several markets ahead of schedule, aiming to increase geographic coverage and market penetration.
Investments in fleet and capabilities for larger, complex modular projects to meet rising customer demand.
Dafinchi
