허니웰 테크놀로지스(HON) 2026년 3분기 실적 발표회: 7% 자체 성장에 가이던스 상향

핵심 요약

• 허니웰 테크놀로지스는 2026년 3분기 자체 매출 기준 7%의 성장을 기록했으며, 3개 부문 모두에서 성장을 달성했습니다. 조정 주당순이익(EPS)은 전년 동기 대비 34% 증가한 2.27달러를 기록했습니다.
• 부문 이익은 23% 증가했으며, 생산성 향상, 가격 인상, 물량 레버리지 효과, 매각 잔류 비용 절감에 힘입어 부문 이익률은 370bp 확대된 21.3%를 기록했습니다.
• 잉여현금흐름(FCF)은 15% 증가한 약 6억 9,000만 달러로, 95%의 전환율을 나타냈습니다. 경영진은 4분기 전환율이 100%를 상회할 것으로 전망하고 있습니다.
• 수주잔고는 매각 부문을 제외하고 7% 증가하며 약 190억 달러에 달했습니다. 단기 순환 주기 수주는 8% 증가했으며, 데이터 센터 수주는 100% 이상 급증했습니다.
• 경영진은 자체 매출 성장률, 조정 EPS, 잉여현금흐름 전반에 걸쳐 2026년 연간 가이던스를 상향 조정했습니다. 회사는 이제 조정 EPS 8.40~8.45달러, 잉여현금흐름 21억 달러를 예상하고 있습니다.
• 회사는 항공우주 부문 분사 후 6개월 시점인 연말까지 남아 있는 모든 잔류 비용을 제거하여 2027년을 향한 비용 구조를 강화할 것으로 기대하고 있습니다.

주요 재무 데이터

사업 및 영업 실적

공정 자동화 및 기술

공정 자동화 및 기술(PA&T) 부문은 8%의 자체 매출 성장을 기록했습니다. LNG 및 석유화학 수주잔고의 매출 전환에 힘입어 프로젝트 매출이 14% 증가했으며, 애프터마켓은 정제 촉매 수요 강세로 성장세로 돌아섰습니다.

PA&T 수주잔고는 전년 동기 대비 10% 이상 증가했습니다. 허니웰 테크놀로지스는 2026년 1분기 이후 북미, 중동, 아프리카, 아시아 전역의 LNG, 정제, 석유화학 및 저탄소 에너지 프로젝트를 아우르며 10억 달러 이상의 공정 기술 수주를 기록했습니다.

경영진은 PA&T 부문이 다년간의 성장 주기에 진입한 것으로 보고 있습니다. 촉매 매출 성장률은 3분기에 두 자릿수를 기록했으며 4분기에는 10%대 중반에 이를 것으로 예상됩니다. 다만, 수익성이 낮은 프로젝트 매출 비중 확대와 존슨 매세 촉매 기술 인수 희석 효과로 인해 부문 이익률은 하락했습니다.

빌딩 자동화

빌딩 자동화 부문은 8%의 자체 성장을 기록하며 8분기 연속 한 자릿수 후반대의 성장세를 이어갔습니다. 화재 및 보안 부문 주도로 제품 매출이 11% 증가했으며, 솔루션 매출은 서비스 강세에 힘입어 4% 성장했습니다.

데이터 센터가 수주가 100% 이상 증가하며 주요 수요 동인으로 유지되었습니다. 경영진은 또한 전력 제어, 에너지 저장장치, 액체 냉각 센서, 선다인(Sundyne) 펌프 분야에서의 기회를 강조했습니다. 데이터 센터 외 분야에서도 주력 빌딩 자동화 사업이 한 자릿수 중반대의 성장률을 나타내고 있다고 밝혔습니다.

물량 레버리지와 가격 인상 효과가 인플레이션 부담을 상쇄하면서 부문 이익률은 30bp 확대된 27%를 기록했습니다.

산업 자동화

산업 자동화 부문의 자체 매출은 4% 증가했습니다. 산업용 계측 및 유틸리티가 견인한 솔루션 부문은 두 자릿수 성장을 기록한 반면, 제품 매출은 센서 및 계측의 강세가 유틸리티 계량기 도입 지연으로 상쇄되어 보합세를 보였습니다.

경영진은 운영 개선이 실적 반등을 뒷받침하고 있다고 밝혔습니다. 적기 납기율이 40% 미만에서 60%로 개선되었고, 미납 수주는 18% 감소했습니다. 3분기 핵심 산업 자동화 수주는 15% 증가했으며, 경영진은 4분기 수주가 한 자릿수 후반대 성장을 기록할 것으로 기대하고 있습니다.

부문 이익률은 350bp 확대되었습니다. 경영진은 산업 자동화 부문이 4분기에 22%의 이익률을 달성할 것으로 예상하며, 2029년 목표인 25%를 계속해서 추진하고 있습니다.

포지(Forge) 및 반복 매출

포지(Forge) 반복 매출은 2026년 10억 달러에 육박할 것으로 예상됩니다. 해당 플랫폼은 서비스 계약, 허니웰 제품과 통합된 애플리케이션, 독립형 SaaS 상품을 통해 판매됩니다.

경영진은 2026년 연간 반복 매출 성장률이 목표치인 15%에 약간 못 미치는 약 12%~13%가 될 것으로 전망합니다. 빌딩 자동화 및 공정 자동화 부문의 신규 포지 상품에는 커넥티드 화재 시스템, 에너지 관리, 예후 예측 보전, 배출가스 모니터링, 공장 인지 등이 포함됩니다.

경영진 가이던스

경영진은 하반기 약 4.5%를 포함해 연간 약 4%의 가격 인상을 예상합니다. 가격 대비 비용 효과는 연간 이익률 확대에 약 10~20bp 기여할 것으로 기대됩니다.

회사는 총부채를 2분기 180억 달러에서 2026년 연말까지 130억 달러 미만으로 줄일 계획이며, 현금 약 30억 달러 및 순부채 약 100억 달러를 유지할 예정입니다. 올해 총차입금 레버리지를 3배 미만으로 낮추는 것이 목표입니다.

2027년의 경우, 경영진은 자체 성장률이 장기 목표치 이상을 기록할 것으로 전망하며 4%~6% 범위의 상단에 근접한 실적을 달성할 자신이 있다고 밝혔습니다. 정식 2027년 가이던스는 2월로 예정되어 있습니다. 경영진은 또한 본사 비용을 약 4억 달러로 예상하며, 촉매 기술 인수 통합이 진행됨에 따라 특히 하반기에 PA&T 이익률이 확대될 것으로 기대하고 있습니다.

리스크 및 관전 포인트

• 인플레이션은 3분기에도 높은 수준을 유지했으며 경영진은 일부 완화를 예상하고 있으나 최소 2027년 상반기까지는 높은 상태를 유지할 것으로 전망됩니다.
• PA&T 이익률은 프로젝트 비중 증가 및 촉매 기술 인수 관련 희석 효과로 인해 단기적인 압력에 직면해 있습니다.
• 4분기 수주 비교는 2025년 3분기와 4분기에 기록된 약 7억 달러 규모의 대형 저탄소 에너지 및 LNG 수주의 영향을 받습니다.
• 고객사가 새로운 가스 및 수도 계량기 기술을 테스트하는 동안 유틸리티 계량기 도입이 지연되었습니다. 경영진은 테스트에 6~9개월이 소요될 수 있다고 설명했습니다.
• 높은 정유공장 가동률로 인해 일부 펌프 교체 및 촉매 재생을 포함하여 공장 가동 중단이 필요한 일시 정비 작업이 지연되고 있습니다. 경영진은 이를 수요 소실이 아닌 이월된 수요로 정의했습니다.
• 프로젝트 매출은 인식 시점이 마일스톤 타임라인에 따라 달라지므로 분기별로 변동할 수 있습니다.

애널리스트 Q&A 주요 내용

• 4분기 수주: 경영진은 10월 첫 3주간의 수주 실적이 예상치 수준이거나 그 이상을 기록 중이라고 밝혔습니다. 전년도 대형 LNG 수주 건을 제외하면 4분기 수주가 한 자릿수 후반대 성장을 나타낼 것이라고 계속 확신하고 있습니다.
• 산업 자동화 회복: 경영진은 이 사업부가 2027년 한 자릿수 초반 성장률에서 한 자릿수 중반 성장률로 나아갈 것으로 예상합니다. 납기 실적 개선, 미납 수주 감소, 신제품 채택 등을 이유로 들었습니다.
• PA&T 이익률: 경영진은 4분기 이익률이 21.5% 수준에 도달하고 2027년 상반기에도 비슷한 수준을 유지할 것으로 예상합니다. 촉매 믹스 강화, 프로젝트 믹스 압력 완화, 인수 시너지 효과 등이 2027년 후반 이익률 확대를 뒷받침할 것으로 예상됩니다.
• 비용 생산성: 회사는 가치 공학, 공급망 효율화, AI 도입을 추진하는 한편 슬림화된 본사 구조와 공유 서비스 체계로 전환하고 있습니다. 경영진은 또한 촉매 기술 인수에 따른 비용 시너지가 당초 전망치를 상회하고 있다고 밝혔습니다.
• 자본 배분: 부채 감축이 단기적 최우선 과제로 유지되고 있습니다. 경영진은 M&A가 선택 사항이라고 설명하며 센싱 및 계측, 고성장 수직 시장, 소규모 첨단 기술 인수가 잠재적 관심 영역이라고 언급했습니다.
• 데이터 센터: 허니웰 테크놀로지스는 적용 범위가 빌딩 자동화를 넘어 공정 자동화, 에너지 저장장치, 제어, 센싱, 액체 냉각 분야로 확장됨에 따라 2027년에도 견조한 성장을 이어갈 것으로 기대하고 있습니다.

실적 발표 컨퍼런스 콜 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Thank you for standing by, and welcome to the Honeywell Technologies Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded.

I would now like to hand the call over to Mark Macaluso, Senior Vice President of Investor Relations. Please go ahead, sir.

Mark Macaluso

Thank you. Good morning, and welcome to Honeywell Technologies Third Quarter 2026 Earnings Conference Call. Joining me today are Honeywell Technologies' Chairman and Chief Executive Officer, Vimal Kapur and Senior Vice President and Chief Financial Officer, Michal Stepniak.

This webcast and the presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website. From time to time, most new information on the Investor Relations website that may be of interest or material to our investors. Our discussion today includes forward-looking statements that are based on our best view of the world and of our businesses as we see them today and are subject to certain risks and uncertainties, including those described in our recent SEC filings.

This morning, we will review our financial results for the third quarter of 2026 and discuss our updated 2026 guidance. And as always, we'll leave time for your questions at the end. With that, it's my pleasure to turn it over to Vimal who will begin on Slide 3.

Vimal Kapur

Thank you, Mark, and good morning, everyone. Our first quarter as a standalone pure-play automation company was a clear demonstration of the value creation strategy we laid out during Investor Day in June, with broad-based organic growth, strong margin expansion and higher free cash flow conversion, and I'm very pleased with the results our teams delivered. This quarter showed the breadth and quality of new Honeywell Technologies portfolio with strong results across all segments. We delivered 7% organic sales growth above the high end of the targets we unveiled at Investor Day in June.

Demand across the portfolio was broad-based, which drove short-cycle orders growth of 8%, excluding our divestitures led by industrial and building automation. Additionally, the growth inflection we expected in Process Automation and Technology is occurring with the business growing 8% organically in third quarter. As I will talk more about shortly, we believe PA&T is beginning a multiyear growth inflection, fueled by a robust project backlog and continued capital investment in energy sector, especially in Africa, Middle East and U.S.

On profitability, we expanded margins by 370 basis points to over 21% and through strategic pricing, productivity actions and the continued reduction in the stranded cost. Importantly, with accelerated progress this quarter, we now expect to eliminate all remaining stranded costs by end just 6 months after the aerospace spin-off demonstrating our strong execution capabilities.

Together, this combination of profitable growth and the fixed cost productivity drove adjusted EPS of $2.27, up 34% year-over-year. To round out the story, the cash conversion accelerated to 95% for the quarter, and we expect to be above 100% conversion in the fourth quarter. As a result of our strong execution this quarter and momentum heading into fourth quarter, we are raising our full year 2026 guide across all metrics. The growth inflection is in P&T and the turnaround in industrial automation are well underway, compounded by 8 straight quarters of outperformance in building automation.

Mike will talk more about our stronger outlook for Q4 and the full year in a few minutes. Our transformation into a pure-play automation company is complete. As our third quarter results have demonstrated, we have strong position in growing end markets, differentiated offerings and clear competitive advantage in higher growth verticals like LNG and data centers. We are instrumenting the business to outperform both in 2027 and over the long term, with strong short-cycle demand, a backlog of nearly $19 billion and momentum across the portfolio. This gives me and the leadership team great confidence in delivering of our 2029 targets.

Let's now turn to Slide 4 to talk more about the order trends in the business. The key takeaway is that demand remains strong across most of our portfolio. We saw growth across our short-cycle businesses, led by sensing and measurement in Industrial Automation and double-digit growth in building automation product businesses. Orders in data center vertical were up over 100%. In P&T, we saw strong refining catalyst demand consistent with our expectation for a second half recovery. And on a regional basis, we saw strength in India, the Middle East and Africa.

In Process Automation and Technology, we are navigating tough prior year comparison due to the 2 strategic low-carbon energy and LNG awards in third and fourth quarter of 2025, which were a $700 million. From time to time, large awards like this do not always correlate with underlying market demand we are seeing, which is why we have elected to present a normalized view of the demand. Excluding the impact of Q3 award last year, total company orders are up 3% organically. Furthermore, book-to-bill in this quarter was 1.0, which drove ending backlog to nearly $19 billion, up 7%, excluding our divestitures.

In PA&T, specifically, the backlog was up double digits, driven by these large project ports. We continue to believe that the ongoing transition to LNG and renewable as priority fueled increasing pipeline activity from refurbishment and rebuilds in Middle East and the refining buildout in Africa will drive a meaningful energy up cycle over the next several years. Looking ahead to the fourth quarter, we expect orders to grow in the high single-digit range, excluding the large LNG awards shown in the chart on Slide 4. This will be driven by demand in Middle East, India and Asia Pacific in process technology and building automation, continued short-cycle demand in building automation products and sensing and utilities in industrial automation and momentum in our high-growth verticals.

Let us now turn to Slide 5 to discuss the favorable dynamics we are seeing in the global energy value chain, reinforcing our growth outlook for Process Automation and Technology business. On a global basis, we continue to see activity increasing on large energy projects, including over $1 billion in process technology orders since quarter 1 of 2026. And PA&T backlog is over 10% higher than a year ago, supported by win across LNG, refining and petrochemicals and low carbon energy projects. The breadth of these orders is important, too. We are seeing investments across North America, the Middle East, Africa and Asia rather than a single region. LNG remains strong in U.S. and internationally, while refining and petrochemical orders include major projects in Africa, and continued activity across Middle East and Asia. Low carbon energy remains a small part of the business overall, but it's growing at a strong double-digit rate with wins in areas such as sustainable aviation fuel and carbon capture. And we continue to believe that longer term, this will be a growth driver. These orders expand our installed base and create opportunities beyond the initial project win. As these facilities come online and operate at high utilization rate, they will drive future demand for catalyst, automation, digital modernization and life cycle services.

Overall, the strength and global diversity of the orders give us confidence in the outlook for continued growth of PA&T segment as we enter 2027.

In conclusion, we are seeing robust backlog growth and commercial momentum across our business, and we expect 2027 organic growth to be at or above our long-term growth algorithm.

Let me now turn it to Mike to discuss our third quarter results and our 2026 outlook in more detail.

Mike Stepniak

Thank you, Vimal, and good morning. In the third quarter, Honeywell Technologies delivered strong results that surpassed our expectations across most metrics. Sales grew 7% organically with strength across all segments. Process Automation and Technology sales grew 8% organically, led by double-digit growth in projects and a return to growth in aftermarket, led by refining catalyst demand. Project sales grew 14% year-over-year led by strong LNG and petrochemical backlog conversion. The momentum in Building Automation continued with 8% organ growth, our eighth straight quarter of high single-digit growth, evidence that we continue to gain share in the market. This was principally driven by 11% organic growth in products, led by both the Fire and Security businesses, while solutions also grew 4% organically, driven by strength in services.

On a regional basis, we saw double-digit growth in both India and Asia Pacific with continued strength in the Americas. Finally, in Industrial Automation, organic sales were up 4% in the third quarter led by double-digit growth in solutions, principally in industrial measurement and utilities. Product sales were roughly flat, with sensing and industrial measurement demand offset by industry-wide deferrals in meter deployments across the utility segment.

On profitability, segment profit grew 23% and segment margin expanded 370 basis points to 21.3%, driven by productivity accelerated stranded cost elimination as well as strategic pricing actions and volume leverage. This more than offset rising inflation, headwinds from the mix of projects versus aftermarket and the acquisition impact in process automation technology. By segment, in Industrial Automation, price and productivity actions in the core business drove 350 basis points of margin expansion with the business firmly on path to deliver 22% segment margin in the fourth quarter.

In Building Automation, segment margin expanded another 30 basis points to 27%, driven by volume leverage and pricing actions that more than offset rising inflation. And in process automation technology, margin contracted as expected, driven by mix headwinds stemming from higher project growth and dilution related to the acquisition of Johnson Matthey's Catalyst Technologies business.

Adjusted earnings per share was up 34%, driven primarily by 23% segment profit growth and lower interest expense, which more than offset a higher adjusted tax rate in the quarter. Finally, free cash flow was up 15% to roughly $690 million, while our conversion increased to 95% in the quarter. We expect free cash flow conversion to be above 100% in the fourth quarter as we drive working capital improvements, including strong receivable collections.

Let's now move to Slide 7 to discuss the third quarter segment margin and adjusted EPS bridges. Starting with margin, we're delivering stronger incremental margin in our short-cycle businesses, driving roughly 70 basis points of volume leverage. We're also continuing to effectively mitigate high inflation with strategic pricing options, productivity and a reduction in stranded costs. We expect inflation to remain at these levels, at least into the first half of 2027. Our strong market positions, installed base-driven business model and the mission-critical nature of our offerings give us confidence in our ability to successfully navigate this inflationary environment. On adjusted EPS, earnings growth in the third quarter was presently driven by a strong operational performance in all 3 segments, which allowed us to overcome the operating loss from our divestitures. Below segment profit, interest and other expenses declined year-over-year, while our tax rate was slightly higher. We're making good progress against commitments we outlined at the Investor Day in June. Our focus on offsetting inflation, delivering productivity and aggressively elemated stranded costs for transformation is having a meaningful impact. This provides a strong foundation for 2027.

Let's turn to Slide 8 to provide an update on our leverage commitments. As I discussed at the Investor Day, we're committed to reducing our gross leverage to less than 3x this year by lowering our gross debt balance from $18 billion in the second quarter to under $13 billion at the end of 2026. This will be enabled by the acceleration in free cash flow that we expect to continue in the fourth quarter. We expect our year-end cash balance to be approximately $3 billion, resulting in a net debt of around $10 billion. Importantly, the cash generation and continued reduction in our leverage will increase our capital allocation flexibility, including capacity to pursue disciplined M&A.

Let's now turn to Slide 9. As you can see here, we have made considerable progress reducing fixed costs related to the portfolio transformation, and we expect this to continue in 2027. We're implementing a cross-functional shared services model across the company with a simplified and more flexible corporate structure. More importantly, during this time, we continue to invest in our businesses to drive future growth. The progress on stranded cost reduction underscores the pace of execution across the organization and the progress we are making in building a simpler, more focused company. This will position the company for long-term profitable growth, executing stranded cost takeout within 6 months of the aerospace spins demonstrates the strong operational execution capabilities of Honeywell Technologies.

Let's turn to Slide 10 to discuss our revised full year outlook. Today, we're raising our full year organic growth, adjusted earnings per share and free cash flow guidance as well as tightening our margin guidance around the previous high end. We now expect full year organic growth of 4% to 5%, up from 3% to 4% previously, driven by our execution in the third quarter and stronger outlook in the fourth quarter. By business, in the fourth quarter, we expect to see continued strength in building across both products and solutions, high single-digit growth in process automation and technology led by project backlog conversion and higher catalyst volumes and continued sensing and industrial measurement demand in industrial automation.

As a result, we expect to deliver 5% to 6% organic growth. With the performance today, we expect to be at the high end of our full year margin range at 20.5% and at approximately 22% for the fourth quarter. This will continue to be driven by pricing, productivity and volume leverage, overcoming higher inflation and anticipated mix headwinds in process automation technology driven by higher project activity and dilution from the Catalyst Technologies acquisition.

Industrial Automation should be a 22% margin in the fourth quarter, while building automation is expected to expand margins 70 to 90 basis points and process automation technology will end the fourth quarter around 21.5%. We now expect full year adjusted EPS in the range of $8.40 to $8.45 which represents a $0.23 improvement at the midpoint. Notably, the low end of our guidance range is now above our previous high end. This results in full year earnings growth of approximately 30%.

Lastly, our free cash flow guidance is up $100 million to $2.1 billion given the higher income conversion. You can find additional information on our 2026 outlook in the appendix of our presentation, which includes estimates for corporate and below-the-line items. Thank you for your time today. Let me now turn the call back to Vimal to wrap up before the Q&A.

Vimal Kapur

Thank you, Mike. We are proud of our results in the first quarter as a stand-alone company. We surpassed our expectations across most metrics and we see encouraging demand signal in many key end markets. We believe PA&T is at the beginning of a multiyear growth inflection, coinciding with an up cycle in global energy markets. We are also encouraged by the turnaround the team is driving in industrial automation and building automation continues to execute on all fronts. We're also launching new offering on our Forge platform, both in building automation, and process automation technology, creating a robust foundation for our future growth.

With our performance this quarter and backlog of nearly $19 billion, we are confidently raising our 2026 outlook across all metrics setting up for a strong start to 2027. Thank you for joining us today. And Mark, let's now take some questions.

Mark Macaluso

Vimal, Mike and I are now available to answer your questions. [Operator Instructions] Operator, please open the line for Q&A.

Operator

[Operator Instructions]

Our first question comes from the line of Nigel Coe with Wolfe Research.

질의응답

Nigel Coe

So I'm curious, the confidence in 4Q order growth. We're still only one month into the quarter. I'm assuming December is a pretty important month for bookings. I'm just wondering what gives you the confidence that the pipeline converts into orders? And maybe just touch on how you -- what you've seen in October.

Vimal Kapur

Yes. So far, Nigel, the first 3 weeks of October has been trending on and above expectations. So that certainly is a good data point. And we look at our statistical performance against pipeline, our win rates when we forecasted. We also provisioned for some adequate contingency for things which cannot happen as projected. So overall, our confidence to what we are stating on high single-digit orders growth in quarter 4, less of the low carbon energy -- LNG order, I'm sorry, which we booked last year, which was several hundred million dollars. We remain highly confident on that.

Nigel Coe

Okay. Okay. And then Mike, a quick one on stranded costs. Good news that you'll be done by the end of this year. I think that's about 6 months earlier than expected. Does that change your perspective on corporate expense for next year. I think the guide was less than $600 million. How does that look right now?

Mike Stepniak

Right. So it's a little bit early yet, but -- and we'll talk about it in February. But for next year, just like we talked about, I think before, we plan for our corporate cost to be about $400 million. And then we're instrumenting the teams, obviously, to productivity, margin expansion north of 60 bps like we talked about. So I feel we have a really good setup. Like you said, we're ahead and that has implications as far as us having a really good momentum going to next year, and we'll work with that.

Operator

Our next question comes from the line of Julian Mitchell with JPMorgan.

Julian Mitchell

Just wanted to start off with a question on the IA segment. It's had a sort of rocky or uneven time for a few years for various reasons, looks to be very well set today with a large sequential margin increase guided for the fourth quarter. So maybe when we try and look a little bit further out, how confident are you in continued margin expansion at IA in the coming quarters? And given the macro backdrop is a bit choppy, anything concerning you've seen in the order rates of IA, the shorter-cycle pieces?

Vimal Kapur

So overall, Julian, for IA, we remain very confident on continued performance in both top line recovery and margin rate expansion. The reason for that is the basics are improving as we talked about it in Investor Day very rapidly. Our on-time delivery now is it used to be just shy of 40% is now 60%. Our positives are down 18%. Our new product launches are being highly accepted by our channel partners and our OE customers. So those foundation has turned the business from a negative territory to now more low single digit. And we do expect that it will continue to progress and find it pathway to mid-single-digit growth as we lap from 26% to 27%. So we remain very convicted.

Same is true on the margin rate. We expect the year to end at 22%. Primarily, it's a higher-quality business now. And from this baseline, as we continue to execute our pricing action, productivity actions, we remain very confident on the margin expansion and also achieve 25% goal by 2029. So overall, sensing and measurement building a unique segment in industrial automation, that's our pathway and we remain highly convicted. This is a high-quality business as part of our portfolio.

Julian Mitchell

That's helpful. And then just a quick follow-up on PA&T margin pressure kind of year-on-year in the third quarter that's continuing into the fourth. Should we assume that margins stay under that type of pressure until the Johnson Matthey acquisition anniversaries? Or is there anything in the base business moving around that could help the margin sooner?

Mike Stepniak

Yes. So versus where the team finished the 22.2%, I would say, next quarter, 21.5 million. And then in the first half, I would say probably something similar. But next year, PA&T is going to expand margins. And what's happening there is, one, we have a catalyst mix starting to mix up that volume is going to grow that's going to help the project volume mix is going to abate. And as you know, we obviously are integrating CT. So in the second half, we will be substantively past CT integration. We see a really good margin expansion into the second half of 2027. And I'd just remind you, like we talked about, this is a multiyear cycle in 2028, there is a significant margin pickup again as we counting on catalyst volume. So we have very good visibility to this cycle as we have proven it cycle-over-cycle over multiple decades, and we're extremely confident on the progression of the business in that fashion. .

Operator

Our next question comes from the line of Steve Tusa with Wells Fargo.

Charles Stephen Tusa

Very helpful chart on the segment bridge. Can you just, I think, kind of teasing out core incrementals, putting everything else aside on volume, roughly 40%, is that right? And then can you just discuss that inflation number, the 350 basis points? Like what was that in the first and second quarter? And then what do you expect for that in the fourth?

Mike Stepniak

Sure. So you're exactly right. I think on core, we're about 40% incrementals price to cost in the third quarter was about 30 bps net positive. So that 350 bps that you see on inflation is a little bit higher versus the first half, but also our price is higher. We are averaging about 3.5% price in the first half will average about 4.5% in the second half, 4% for the year. That's going to be on a year basis, maybe 10, 20 bps of, I would say, margin expansion from price cost.

And we see, obviously, inflation elevated. We expect that to continue into year-end and then starting to abate in the first half everything we get from our teams as far as planning for next year, we see inflation coming down a bit. So the price will move with that, but it's still around that 3% to 4%.

Charles Stephen Tusa

Okay. And then just for the fourth quarter, my follow-up is what the margin went to the low end of the range, I guess, for the fourth quarter. Any -- is that really just the price cost timing stepping up a little bit sequentially. Just curious as to that or just conservatism?

Mike Stepniak

No, not at all. Pricing cost is as well. We actually -- we manage price in the third quarter to account for year-end. It's really just mix. So revenue is coming up. And like Vimal said, the products are performing extremely well. We don't see anything changing on products. On the other hand, projects is doing better and CT outlook better and they're dilutive to our overall mix, and that's what's driving our margin to that 400 basis still, I would say at the high end of our guide for the year at 20.5%, it's about 300 bps margin expansion for the year, a really good setup for next year. .

Operator

Our next question comes from the line of Scott Davis with Melius Research.

Scott Davis

Vimal, Mike and Mark, appreciate the shorter comments today, too, to leave more time for Q&A. Guys, you've been seemingly gaining a meaningful amount of share in fire security, it seems for a while now. And that was always a pretty low-growth business, like literally like a 1% to 2% type growth business, but you seem to have made it something a little bit bigger. What -- can you just update us on what you're doing there? And what's kind of changed at the margin, what's driving that growth or at least the sustainability of that growth?

Vimal Kapur

I think the fundamental is our higher cycle of new product introductions, coupled with the mix change of the end markets. So we continue to amplify our new product introduction and maintaining a very high vitality by which we then gain share from a competition. Forge is playing a very important role. Fire business for the first out of the door to build a connected solution by which you can configure our fire panels remotely. We introduced that almost 3 years back. So what it does is, Scott, that while the software content is low, it pulls the core product. And that value proposition is very compelling for our channel partners because they save significant commissioning time, inspection time and improves their P&L.

Also, we have benefiting from data center growth. We have some unique products in fire for data center growth for early detection of fire in a very unique environment because you have a lot of electrical cables, a lot of servers. So that's the unique way we detect fire there. We have differentiated product line. We also introduced some unique new products for detecting fire in batteries as more and more lithium batteries are being used.

On the security side, we're benefiting from very premium position of [indiscernible] they continue to perform and double-digit growth rates across the board. And Honeywell added a lot of value in that business by globalizing it. We talked about that hypothesis when we acquired the business. And we clearly see growth of that business outside the U.S. with a lot of synergies we are bringing in. So all in all, I would say we maintain the momentum in this business, and we see no reason that we won't perform at this level in the foreseeable future.

Scott Davis

So just to follow up on that on Forge, just that answer was complete. But how do you go to market with Forge then? Is this kind of the -- is it getting wrapped in as a standard offering with every install? Or has it come in as kind of a sidecar, if you will, and price separately. I mean how do you guys go to market with it and get value for it? Or is it just more of a tool used to again, to be able to gain share because you've got another kind of...

Vimal Kapur

Very good questions, Scott. There are 3 sales motions for Forge today. So it's our recurring revenue is now coming close to $1 billion in 2026, just shy of that. The first sales motion is Forge has sold along our service contracts. So we make our customers connect to Forge, change the pricing of our service contract because we are able to provide a higher value outcome. So that sales motion 1. Sales motion 2 is, there are unique applications built in to make our existing offering better, like I gave an example of fire panel. So they are now, even though we sell it as a standalone offering, but it goes hand-in-hand with our Forge products. And then the third is a standalone offering of Forge, which we lost, I would say, 18 to 24 months back first in buildings, where we can connect standalone buildings of even competitors apart from Honeywell installed base to get better insight into customers' energy consumption, predictive maintenance, emissions, and we launched a similar offering for process earlier this year.

In that scenario, it's sold as a standalone SaaS software. So all 3 sales motion are in place. And as we talked about at Investor Day, we expect our ARR to grow. Our aspiration is 15%. We want to have high aspirations. This year, probably will be slightly shy of that, more like 12%, 13%. But we'll continue to work our way through to get to closer to 15% every year.

Operator

Our next question comes from the line of Amit Mehrotra with UBS.

Amit Mehrotra

Maybe just starting with process and just understanding sort of the mid- to long-term growth opportunity as these maybe comps normalize. Obviously, great to see high single-digit growth as you expected? I know there's been sort of a management change recently from building to process. I think Forge cognition is maybe part of the growth story. Can you just talk about sort of beyond the first half of '27 and into the second half and beyond what we think the sort of run rate, steady-state growth opportunity is for process?

Vimal Kapur

So we see, Amit, the growth in Process Automation Technology, both on the project side and on the aftermarket in services and catalyst side. The project side, if you see the chart we added into our prepared remarks, we see continued investments in LNG. So our backlog is very strong for LNG. We also see investments in Africa and Middle East and Asia on traditional refining, which is helping us a lot in our backlog.

And finally, we also see activity in low carbon energy projects. Just as a reminder, we have licensed 100 projects so far in stable aviation fuel and only about 20% of those have been built so far. So there's a lot of runway people coming back to us with FIDs which then turn into a significant revenue stream. So project activity remains very robust and very diversified.

Then on the aftermarket side, we expect second half of 2026 catalyst growth to be double digit. It's double digit in Q3. It's going to be actually mid-teens growth in Q4. And given the higher margins, our customers are making on the finished products, we expect that this demand to remain strong in 2027, more normalized year.

And on the automation side, we see strength in our services portfolio, cybersecurity, our Forge offering, we call it plant cognition. So that offering is also getting strong customer reception. So across the board, as Mike laid out, we see this is as a multiyear cycle in which the project strength will provide us a top line growth and we'll maintain our margin with a high mix of catalyst and services and software as we progress.

Amit Mehrotra

Got it. Okay. That's helpful. And maybe just as a follow-up, I know 2027 guidance is forthcoming. But I think, Vimal, you talked about sort of at or above the long-term algorithm, I think, Mike, maybe a couple of months ago, you sort of flowed this idea of 15% EPS growth. If I just sort of compare the 2, I would say, bottom line EPS growth, maybe I would have expected something a little bit higher, just given the margin opportunity, maybe just unpack that a little bit for us. Maybe the IA margins headwind in the first half of next year, maybe that's what's driving it. But just to the extent that you can just sort of still in the color between what you've already commented on '27 between the algorithm versus the 15% EPS growth.

Vimal Kapur

So I would say, Amit, the setup for 2027 is very strong. First for starters, our midpoint of the guide for '26 is up by $0.23. So we are starting at a higher baseline. On the top line, we remain very confident on performing at the upper end of our 4% to 6% guide. Our backlog is very strong. Our short-cycle momentum sustained itself, and we continue to maintain our share or gain share through new products, so that's going to continue.

On the margin rate, we have done a good job to manage inflation through price cost. It's slightly positive. We expect to maintain that. And we have maintained our fixed cost by elimination of stranded costs ahead of time. So when you see the setup here across the board, top line margin expansion and fixed cost, we expect a strong print in 2027. I can't tell you specifics because I'll be giving you guide, which I think we'll have to wait for February when we plan to come back there.

But final comment I'll make is directionally, we are on the road to deliver $12 or better our long-term 2029 guide we set up in Investor Day.

Operator

Our next question comes from the line of Nicole DeBlase with Deutsche Bank.

Nicole DeBlase

If we could just start with the 4Q outlook. I think you're embedding a little bit of a deceleration in organic growth, but backlog is obviously so strong. short-cycle order growth is still strong. Can you maybe talk through the expectations by segment? Like what's driving the modest deceleration that you've embedded for 4Q.

Mike Stepniak

I would say probably this is just more conservatism than anything else. Like we said, I think on the short cycle orders, they're extremely strong on product side, of BA, NIA booked in third quarter, high single digit, double-digit growth. So we feel good about that. And then projects are incrementally better. So I think it's just more mix. And like we said, we'll do for 4% to 5% in the -- for the year and 5% to 6% in the fourth quarter. And as we stand today, we're probably on the higher end of the 5% versus -- so it's incrementally we -- I would say we feel better about the fourth quarter.

Vimal Kapur

I think it's fair to say, Nicole, we don't see any change quarter-on-quarter. I think the revenue mix can be different within a quarter of our projects. But other than that, fundamentals of the business remains very strong quarter-over-quarter.

Nicole DeBlase

Okay. Understood. And then maybe just in referenced some deferrals in utility meter deployments. Can you just give us some more color on what's going on there? And if that's expected to continue into 4Q or into '27, the time line for that kind of rectifying.

Vimal Kapur

I think that's more of an upside opportunity for us in 2027. We've introduced some very new technology, both for gas meters and water meters. Gas meters, unlike electricity meters have not been upgraded at a large scale by utilities over the last decade. So our technology being new is being tested by multiple utilities and each utility done their testing by themselves rather than this being a common testing protocol, which just adds time. So we are in the process of working with our testing of our new gas meters with several utilities. And once they complete that cycle, which could be 6 to 9 months, we expect them to turn into a major rollout '27 onwards for several years.

So actually, the low growth in our metering business is actually already factored in, in '26 and potentially in '27. But looking ahead, it's going to turn into a tailwind when these adoption rates will pick up in the period ahead.

Operator

Our next question comes from the line of Andrew Obin with Bank of America.

Andrew Obin

Just a question a little bit on Process Automation and Technology on the aftermarket services. I think you highlighted some good tailwinds on Catalyst, but if I look at sort of year-over-year comps, I mean, the comps has gotten quite a bit easier versus last quarter. So I would have expected more of a pickup sequentially in organic growth. What are the headwinds that the business is facing because clearly, the catalyst business is accelerating. But what are the headwinds.

Vimal Kapur

Obin, I won't call it headwinds. When you grow at 8% and then you grow subsequent quarter probably at 7%, I may not call it headwinds. I would simply call it the cycle of the projects. I can't control the milestone when they have to be achieved, so they come at a certain timing. So I would say, broadly speaking, the PA&T revenue profile on an organic growth basis and very similar between Q3 and Q4. Q3 was slightly higher versus Q4 but not substantially different. You are talking a narrow range here.

Catalyst demand is very strong in quarter 4, sequentially better than quarter 3. We were double digit, and we're going to go towards mid-teens growth in catalysts, for example, in quarter 3, our refining catalyst growth was up 80%. So we expect to maintain high rates there. Services growth also remains strong in automation, more like low to mid-single digits. So fundamentals are very robust in this business. I think the change you see is just the sequencing of the projects within a quarter.

Andrew Obin

Okay. And just maybe another question on Industrial Automation. On the products, what would it take for the products to start growing faster? Because I think you guys sort of talked about initiatives to get deliveries, on-time delivery improved, so that would sort of lead to a lot of good things happening. What would it take for that growth in that business to inflect materially positive? Or are we waiting for the new product introduction as you alluded in the prior answer.

Vimal Kapur

I think directionally speaking, Andrew, if you observe, we have been turning this business to slow growth. Now we are at low single-digit territory right now. I would also like this to go to mid-single-digit territory. And we expect that to occur in 2027 moving forward. I think the drivers of fundamentals are the same. I talked about improving customer service, better delivery, improved past due rates that's certainly already happening.

New product launches and its penetration is, takes time. I think that's the only variable as some of them gets more penetration we expect to continue to perform better in this segment. So there's no doubt in my mind. I think it's just a timing as we go from low single digit to mid-single digit in this portfolio -- in this business, in '27.

Mike Stepniak

And Andrew, I would just add that the third quarter orders for Industrial Automation core were up 15%. So this is business that's going to the next year probably with the best backlog it has seen in over 5 years. We're quite confident about finishing...

Vimal Kapur

And we expect fourth quarter orders to be up high single digits. So there's a lot of momentum here, it's just the cycling of the business going from one phase to another phase.

Operator

Our next question comes from the line of Andrew Kaplowitz with Citigroup.

Andrew Kaplowitz

Vimal, I think we know your data center business overall is still a relatively small part of Honeywell. But last quarter, I think you mentioned your offerings in power generation. We're beginning to help your process business and data centers in addition to building automation. So we think about that data center, call it, ecosystem and how it might help you in '27 and beyond?

Vimal Kapur

Certainly, we always talked about data center as mid-single-digit business for BA, Building Automation. We are now turning to a point with the change in demand of the customer. We continue to see this can become actually at some point, mid-single digits of Honeywell. So we -- because now we see the demand in process automation. We saw year-to-date orders growth of more than 100%. Based upon the pipeline visibility we have, we expect very high growth in 2027 also. We're mixing up not only the building automation, but even some process automation order for Power Island for controls, for energy storage, that solution is being mixed up.

One interesting thing, which is occurring in addition to this for the last, I would say, 6 months is liquid cooling. As liquid cooling will take more penetration, we expect our spend -- share of spend to further go up. We are working with customers for sensing for liquid cooling from our sensors business. And our Sundyne pumps are a premium solution to circulate those liquid cooling. Those will, as we can imagine, those are going to scale in future, probably it's more post '27. But what I sense is something we started with a very modest content in Building Automation. Now we added Process Automation, and now we are adding even our content from Process Technology and Industrial Automation is truly becoming a pan-Honeywell strategy and we continue to improve our content. Our last comment I'll make is, as we grow as data center growth is happening outside the U.S., in Europe and in Asia, particularly in Korea and India, we expect to continue to do well because of our global presence and global execution capabilities.

Andrew Kaplowitz

That's helpful. And then, I think you or Mike mentioned that you'll get net leverage down under 2.25. And so -- and I think you also mentioned at that point, you could pursue, I think, you said disciplined M&A. So how do you characterize the environment right now? Obviously, it's the new company or the new Honeywell technology. So any sort of re priorities that you have as you move forward here towards the end of the year?

Vimal Kapur

Our highest priority is first to get our leverage ratio 3 or below and continue to work its way down as we get into '27 generate more cash, we want our leverage to further improve. I think from an M&A perspective, it's an optionality. As you know, our 2029, $12 commitment is all organic. So we have no compulsion. We have no need to wake up and think about an M&A to do our, meet our organic earnings commitment.

Having said that, we're looking at options 3 ways, higher priority being industrial automation, how we look at adding more content in measurement and sensing, that's our highest priority. Second area we're looking at it is higher growth verticals how can we add more content to further upgrade our portfolio.

And finally, we never overlook some of the frontier technologies. There are always tuck-ins, which can change the profile of our businesses. And we look at these midsized, small businesses in addition to that. But all said, I think near term, you will see us staying very disciplined on our debt paydown. And we'll work our pipeline for M&A for '27 onwards.

Operator

Our next question comes from the line of Joe O'Dea with Vertical Research Partners.

Unknown Analyst

Can you talk a little bit about the self-help opportunities moving forward, what you're most excited about heading into next year? Not sure if you've perhaps touched on this with Johnson Matthey's Catalyst Technologies. But just on the heels of the speed with which you did the stranded cost takeout kind of thinking about other parts of the organization where you see some of the biggest self-help opportunities.

Mike Stepniak

I would say just quickly maybe 2 or 3, which stand out the malls and that's obviously a focus for us as a company. One is we're moving more into lighter headquarters and more of adoption of shared services across the company, which is obviously will help us continue to focus on productivity, which is value engineering, component, engineering. That's more from a supply chain standpoint and how we think about NPI, that's a significant opportunity for us. .

And finally, we're obviously working through adoption of AI. All of our teams are either already trained or being trained on AI. Everybody has access to the models we're using for the company, and that's really an opportunity for us in terms of managed OEF and it's not as far as reduction have but manage the OEF growth or staying flat on on OEF while we obviously grow mid- to high single, operation.

Vimal Kapur

Two points I'll add to what Mike said on the self-help side. First is on the Catalyst technology business. As we integrate the business, we are seeing higher cost synergies than we had forecasted. So that should certainly help us in our 2027 planning. We're also working on sales synergies, building pipeline, but that you can imagine, that takes time to convert into a real revenue. So we do expect CT business to overdrive from cost synergy standpoint.

Final point, I would say is cross-sell between different parts of Honeywell. I gave an example of data center just in my remarks a couple of minutes before and how something which was centered around just one segment, we are doing it across segment. We are doing that in other verticals, too. For example, in Life Sciences, how we cross-sell between building and process automation or in semiconductor where we have a very strong position in gas detection, how we also accelerate our participation in fire detection, which comes from building automation. So that's also self-help. It's leveraging our sales channels to the fullest potential. And certainly, we are maximizing our efforts on that.

Unknown Analyst

And then on building automation and demand visibility, clearly strength in the data center side of things, but maybe talking about end markets ex data center, obviously, the growth rates over the past couple of years are tougher comps. But what the product innovation pipeline looks like, what that means in terms of the growth visibility you have heading into next year in the nondata center parts of building automation.

Vimal Kapur

I think the Building Automation business, the content of higher growth verticals and in high-growth verticals, we count 3 data centers, health care and hospitality is 20%. 80% of the business come from core or base business, and that's growing at mid-single digits. And that's on the strength of great customer service and new products.

To your question on new products, we have several big launches coming up. ahead really right now, we have a new version of our security systems launched, which is cloud-based. That's going to play in the mid-segment. A lot of our new offerings are actually going into the mid-segment as a broader team. A new version of our fire system going into our mid-segment. We're also looking at similar offering and build management system. We are refreshing our EBI platform within newer versions. So across the board, we have learned that as we continue to accelerate our vitality and innovate, we will perform at this level of mid-single-digit plus. And the pipeline is very full. And I'm extremely confident on performance of results by this business.

Operator

Our next question comes from the line of Joe Ritchie with Goldman Sachs.

Joseph Ritchie

I'm going to focus both of my questions on PA&T. So I guess on the project side of the business, with Brent now sitting above $10 million typically that stimulates investments from your customers. I don't know if you can maybe just give us a little bit of background on like what your customer conversations are like today. Whether the pipeline has like materially increased over the past year? I thought that Slide #5 was very helpful, but just any color you can give us on that would be great.

Vimal Kapur

So we -- as we said in the chart, Joe, the VC investment certainly in diversity of fuels and energy security. What I mean by that is Africa was not seen as a destination of investments by defining petrochemicals. So [indiscernible] refinery, if you recall during Investor Day, he was up there and talking about partnership with Honeywell. They're not only expanding their existing refinery by 100%, which is the largest refinery in the world. They are doubling it. They're also putting additional refinery in Kenya. These are all firm projects. If you look at their cash flow, it's billions of dollars in a quarter. So these are high certainty projects. There are additional investments happening in Africa and petrochemical side, too, so we can clearly see that as a trend.

One thing which we highlighted is also low carbon energy projects are finally taking shape from a low base. We had 2 big wins on carbon capture related projects in quarter 3, and we have some robust pipeline for quarter 4 ahead for us. So there are some investments happening. And the driver for that is European Union continues to hold its mandate for SAF option.

And to fulfill that demand is more capacity, which is required. And finally, we do see capacity addition for petrochemicals. Our licensing activity and automation business in petrochemicals continues to remain strong. So when you add it all together, it's less linked to the oil price. It's more linked to the drivers, which are more broader energy securities, the E&C, low carbon fuels or the broader demand of petrochemicals. And that's why we believe it's a multiyear cycle. It's less linked to the price. It's more linked to other drivers. That's why it gives us more conviction.

Joseph Ritchie

Yes, Super helpful, Vimal. And I guess maybe just to ask Andrew's question slightly differently from before. On the refining side of the business, are you seeing any deferrals just given where crack spreads are, refiners may be running out harder a little bit, given profitability looks really, really good right now. So are you seeing like any of that like business may be pushing out into next year? Or has that remained very healthy for you?

Vimal Kapur

I would say what we all read deferrals are higher uptime by U.S. refiner is actually correct which essentially means that some of the activity, which requires a shutdown cannot be performed. We look at our services business, aftermarket business in 2 buckets. A lot of it can be done online. So a lot of our automation offerings do not require a plant shut down. If you want to harden your control system for cybersecurity or you want to migrate to the current version it can be done online. So those businesses get protected even though customers are running at a higher rate. But there are things which you need to replace like a Sundyne pump has to be replaced, you need a shutdown or if you want to refurbish a catalyst.

So to me, there's some demand moving right, but it's not a lost demand, it's moving -- it's kind of pent-up demand, which will eventually show up. But when you look at the global view, the overall services and catalyst demand is very stable. As I mentioned before, we see the catalyst demand to be in teens, high teens in quarter 4. Next year, we see overall catalyst to be very stable, mid-single-digit growth. Services growth remains very stable. So absolutely, this is a trend of high utilization and no shutdowns. But it doesn't change the overall dynamics of the business for us in near term.

Operator

Our next question comes from the line of Varun Govindaraj with Bernstein. .

Varun Govindaraj

So question on DAT. When you're looking at projects and their delivery times, have they been in line with historical norms? I think there's been a concern that we're short labor in North America, and that might lead to some of this just getting stretched. Are you seeing any of that in your numbers? Or is that not really a concern right now?

Vimal Kapur

Not a concern because a large part of our backlog is actually not in North America. LNG backlog is in North America. Everything else is in rest of the world. And in case of LNG, we build our own equipment in our own factory, and we have enough capacity to fulfill all our backlog. So we don't have any concern on that. .

On a broader basis, yes, the construction labor or labor shortages is a trend, but that's not driving any impact on our revenue execution on a visible basis.

Varun Govindaraj

Appreciate it. And then just as a side note. So on Industrial Automation, big sequential jump from 18.4% to 22%. How much of that is coming from the spins of WWS and PSS? And how much of that is more productivity feels at this point, everyone is very confident about the number, but just any color on that split?

Mike Stepniak

Yes. I would say that organically, if you will, the business is probably expanding 150-plus bps just by operational getting better. Rest of it is related to the TRW separation. .

Operator

Our final question this morning comes from the line of Dan DiCicco with BMO Capital Markets.

Daniel DiCicco

On the inflation topic, a 4.5% price in half 2. Just what businesses are you having to push the hardest on price? And then is there anywhere in the portfolio where this might be proven to be a little bit more challenging?

Vimal Kapur

I mean the pricing is I wouldn't say there's a large deviation within the segment. Pricing is a factor of inflation in the segment. And inflation drivers vary from semiconductor to electronics to metals like copper and brass. So I would say that our overall pricing is a narrow range. It doesn't vary from business from 1 for one person and some business is 10, it's not in that wide range. You can have a range from 3.5% to 4.5%. So it's a very narrow range for us. And the pricing attainment doesn't require only the action of pricing, but it requires good customer service, good customer communication, a good pipeline of new product. And I think that comprehensive 360-degree view is what we have really adopted to attain the price and keep the price cost positive.

Operator

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Kapur for final comments.

Vimal Kapur

Thank you. I would like to thank our shareholders, our customers and all Honeywell Technologies Futureshape around the world for the strong third quarter results you delivered. Today, marks another important milestone in our journey as the new Honeywell technologies. Our first quarter as a standalone pure-play automation company demonstrated progress on all 3 elements for our investment case, broad-based organic growth, strong margin expansion and a higher free cash flow conversion. .

PA&T is converting its backlog into organic growth. IA is driving meaningful turnaround and BA continues to deliver. With nearly $19 billion in our backlog and a strong 2026 outlook, we entered the fourth quarter with strong momentum. And increased confidence in our ability to deliver the commitments we outlined at Investor Day. Thank you all for joining us today, and we hope you have a great rest of your day.

Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.