Gregory Lewis

Thank you, Vimal, and good morning, everyone. I'll begin on slide 5. We navigated through a challenging operational environment in the third quarter, delivering segment margin and adjusted earnings per share above the high end of our guidance range and 10% increased cash flow despite coming in below our sales guidance. The main driver of the sales miss was performance below our prior expectations in Industrial Automation as our revenues were sequentially flat across the portfolio. We were also impacted by some discrete manufacturing disruptions in September, including Hurricane Helane and a separate fire at one of our aerospace technology plants.
All in, this led to third quarter organic sales growth of 3% year over year, with three segments remaining in positive territory and double-digit growth in Defense and Space and commercial aviation original equipment in aerospace. This was the first full quarter of impact from the acquisition of Access Solutions, and we're pleased with the performance of that business in the early days of integration. We also saw approximately one month of impact in Aerospace from the case and Chivatanabi acquisitions. On orders, we grew 2% organically year-over-year with a book-to-bill of 1.1, led by double-digit growth in Energy and Sustainability Solutions and building automation. This order strength drove a 10% year-over-year improvement in backlog to a record $34 billion.
Excluding the impact of M&A, backlog grew 6% year-over-year and 4% sequentially. Although sales came in below our expectations, profit remained resilient as we leveraged our Honeywell Accelerator operating system and cost management capabilities to protect our bottom line. Segment profit grew 6% year-over-year led by double-digit growth in Aerospace. Segment margin remained flat at 23.6%, 30 basis points above the high end of our guidance as expansion in industrial automation, building automation and energy and sustainability solutions was offset by higher corporate costs year-over-year, mainly due to our investment in our digital infrastructure. Earnings per share for the third quarter was $2.16, down 5% year over year and adjusted earnings per share was $2.58, up 8% year over year and above the high end of our guidance range, driven primarily by segment profit growth and lower interest expense due to timing of M&A deal closures.
We took a charge in the quarter as a result of our decision to exit the PPE business in industrial automation. A bridge for adjusted EPS from 3Q '23 to 3Q '24 can be found in the appendix of this presentation. Free cash flow in the quarter was $1.7 billion, up 10% year-over-year due to stronger operational income and higher collections. On capital deployment, we put $3.1 billion to work in the third quarter with $2.1 billion in M&A, $700 million in dividends and $300 million in high-return capital expenditures. As Vimal highlighted, we made significant progress this quarter and are on track to deploy over $14 billion in capital this year, and our work is not yet done, as we continue to leverage our balance sheet into 2025 reshaping the portfolio.
Now let's spend a few minutes on the third quarter performance by business. In aerospace technologies, sales were up 10% organically year over year, the ninth consecutive quarter of double-digit growth. Sales were led by double-digit growth in defense and space, where we continue to unlock volume from our robust backlog through sustained global demand. In commercial aviation, we saw another quarter of double-digit growth in original equipment sales as shipset deliveries increased with particular strength in business and general aviation. Commercial aftermarket saw continued growth as global flight activity continues to rise.
Despite some discrete supply chain disruptions in September that impacted our air transport OE business, output improved 13% in the quarter as we made sequential progress in supply chain the ninth consecutive quarter of double-digit output growth. Segment margin remained flat year over year at 27.7% in the third quarter as commercial excellence and productivity actions were offset by cost inflation and mix pressure within original equipment. Industrial automation sales were flat sequentially, but decreased 5% organically in the quarter, primarily due to lower volumes in warehouse and workflow solutions and short-cycle safety and sensing technologies.
Process solutions sales grew 2% year over year and 1% sequentially in the quarter, driven by strength in our aftermarket services and compressor controls businesses, partially offset by demand softness in smart energy and thermal solutions as well as some delays in our projects business. Sensing and Safety Technologies sales declined year-over-year and sequentially, but the sensing business delivered modest sequential growth for the second consecutive quarter.
In productivity solutions and services, orders and organic sales grew double digits year over year when excluding the impact of the Zebra license and settlement payments that ended in the first quarter of this year. Industrial automation segment margin expanded 60 basis points to 20.3% due to productivity actions and commercial excellence, partly offset by cost inflation and volume leverage. In building automation, sales grew 14% year over year and 11% sequentially, thanks to a full quarter of the Access Solutions acquisition and acceleration in the fire business. Organically, BA sales were up 3%, supported by another quarter of solid performance in building solutions. Solutions grew 8% in the quarter, driven by another double-digit growth performance in projects and sequential growth in services.
Product sales declined slightly year-over-year but saw sequential improvement organically for the second straight quarter, thanks to strength in fire. Building automation orders continue to be a bright spot, led by 25% and year over year growth in building solutions on continued strong demand in data centers, health care and energy. Segment margin expanded 30 basis points to 25.9% and due to the impact of a full quarter from Access Solutions and commercial excellence, partially offset by cost inflation. Energy and sustainability solutions sales grew 1% organically in the third quarter. Advanced materials grew 3% year-on-year due to further improvement in specialty chemicals and materials, particularly in Spectra and continued growth in flooring products.
UOP sales declined 2% as growth in aftermarket services and Catalyst was offset by softness due to project timing. Orders in UOP were up over 50% in the quarter to a record $1 billion with strength in core process technologies and a record of more than $200 million in sustainable technology solutions. This marks the third consecutive quarter with ESS book-to-bill at 1.2. Segment margin expanded 10 basis points to 24.5% due to commercial excellence, net of inflation. Overall, our accelerator playbook continues to serve us well as we once again demonstrated our ability to protect margins even in a lower growth environment. Healthy orders, record backlog and accretive growth rates across the M&A deals we have closed this year give us confidence in our ability to drive improved organic growth in the future.
With that, let's turn to slide 6 and we can talk about our fourth quarter and updated full year outlook. Due to the incrementally more challenging end market backdrop, we are revising our full year sales guidance range while increasing the midpoint of our segment margin guidance. We are narrowing our adjusted EPS guidance to the high end of the prior range due to that margin outlook combined with favorable adjustment to our effective tax rate. While our pace of sales has not degraded, we have not seen the short cycle acceleration, which we anticipated by this point in the year, and it's appropriate to reflect that as well as the energy-related and aero output pushouts in our outlook.
Our demand profile remains healthy, with book-to-bill of 1.1 and record backlog, and we're confident in our ability to accelerate growth within our long-term framework in the coming quarters. We now expect full-year sales to be in the range of $38.6 billion to $38.8 billion, representing organic growth of 3% to 4%, down from 5% to 6% previously. The lower guide reflects the lower third quarter results a slower recovery in industrial automation and more tempered expectations in pockets of aerospace and energy markets in the fourth quarter. As a reminder, our guidance includes the impact of all four acquisitions: Access Solutions, Chivatanavi, Case and LNG now all closed. Collectively, they will add approximately $800 million in sales in 2024, consistent with prior communications.
For the fourth quarter, we anticipate sales in the range of $10.2 billion to $10.4 billion, up 2% to 4% organically. Sales should increase sequentially across the portfolio, led by aerospace as we experience additional supply chain unlock as well as continued growth in flight hours and shipset deliveries. Turning to segment margins. Our strong result in the third quarter and our commercial excellence and productivity playbook are supporting our bottom line. As a result, we're narrowing our overall segment margin guidance towards the high end, now expecting to end the year between 23.4% and 23.5%, flat to 10 basis points from 2023.
That said, the dynamics we highlighted last quarter still hold. Delays in short-cycle improvement are leading our long-cycle project and original equipment business to a larger percentage of our mix, driving margin headwinds. In the long term, this provides us an expanded installed base to leverage for high-margin aftermarket projects. We now expect overall segment profit dollars to grow between 5% and 6% for the year. At a segment level, building automation and energy and sustainability solutions will lead the group and margin expansion.
For the fourth quarter, we anticipate overall segment margin in the range of 23.8% to 24.2% and up sequentially but down 20 to 60 basis points year over year as a result of mix within original equipment and aerospace and volume deleverage in industrial automation.
Now let's spend a moment on our outlook by business. Looking ahead for aerospace technologies, we still expect low double-digit growth in 2024 organic sales with double-digit growth in both commercial aviation and defense and space. In the fourth quarter, we expect sales growth of mid- to high single digits with particular strength in commercial aftermarket. As previously noted, segment margin in the third quarter outperformed our expectations on better-than-anticipated mix, but we still see modest year-over-year segment margin contraction as discrete supply chain disruptions from the third quarter are resolved, and we see a corresponding recovery in commercial original evident volumes.
Moving to industrial automation, we're lowering our 2024 outlook for year-over-year organic sales to decline in the high single-digit range as slower-than-expected short-cycle demand recovery alongside project pushouts and process solutions, dampened our outlook for full year organic growth. For the fourth quarter, we expect sales down low single digits with modest growth in projects and aftermarket services, offset primarily by softness in sensing and safety technologies and smart energy. Margins will be down overall this year for industrial automation, but up when excluding the impact of the license and settlement payments that ended in the first quarter.
In building automation, we still expect full year organic growth in the low single-digit range led by continued strength in Building Solutions and high-growth regions, particularly in India and Saudi Arabia. Fourth quarter sales will be up year-over-year and flat to up sequentially as we see volume improvement led by fire products.
Margins should hit their high point for the year in the fourth quarter as improvement in fire and the impact of excess solutions support positive mix. For energy and sustainability solutions, the organic growth outlook for the year is still low single digits with typical strong sequential improvement in the fourth quarter driven by catalyst shipment seasonality. We're still expecting full-year margin expansion with the fourth quarter at the highest margin rate due to favorable business mix associated with catalyst reloads. We will also see a lift from the first quarter of sales and our newly acquired LNG business.
Moving to other key guided metrics. Net below the line is now expected to be between negative $650 million and negative $700 million for the full year. For the fourth quarter, net below the line is expected to be between negative $250 million and negative $300 million. We now expect pension income to be approximately $600 million for 2024, up $50 million from our prior guide due to a onetime item that was pushed out from the fourth quarter into 2025. This guidance includes repositioning spend between $150 million and $190 million for the year and between $60 million and $100 million for the fourth quarter as we invest in high-return projects to support future growth and productivity. We expect the adjusted effective tax rate to be around 20% for the full year and 17% for the fourth quarter.
The reduction in expected tax rate is a result of favorable adjustments to income tax contingencies and taxable income mix. We anticipate average share count to be around 655 million shares for the full year and around 653 million shares for the fourth quarter and we maintain balance sheet capacity to deploy additional capital to achieve the highest shareholder returns. We now expect that the year-over-year impact to 2024 adjusted EPS from the four acquisitions closed this year will be approximately neutral, a bit better than we communicated last quarter. Slight delays to the closing of the case in LNG deals reduced some of the interest expense and planned integration costs in 2024. And as we get our arms around the business, we're refining our near-term expectations.
We continue to expect 1% to 2% EPS accretion in 2025 from these deals. A summary of the 2024 M&A impact on our financials is included in the appendix of this presentation. As a result of all these inputs, we expect full-year adjusted earnings per share to be in the upper half of our prior range, now between $10.15 an to $10.25, up 7% to 8% year on year. We expect fourth quarter adjusted earnings per share between $2.73 and $2.83, up 1% to 5% year on year. On cash, we're reducing our guidance and now expect free cash flow in the range of $5.1 billion to $5.4 billion, down 4% to up 2% and excluding the impact of prior year settlements.
Lower progress in inventory, mainly in aerospace and slowing payment cycles in certain high-growth regions, has impacted our performance and our expectations. We continue to work multiyear unwind of working capital, and we will fund high-return CapEx projects focused on creating uniquely innovative technologies for the company. Overall, while we remain cautious on the macroeconomic environment in the short term, our acquisitions are progressing in line with our expectations. Our backlog remains at record highs, and we are driving expansion of our installed base. Our rigorous operating principles give us confidence in our ability to execute on our long-term growth algorithm.
Now let me turn it back to Vimal on slide 7 for some closing thoughts.

Vimal Kapur

Thank you, Greg. Why we experience some headwinds in the quarter, we are confident in our ability to weather the macroeconomic backdrop with operation rigour you expect from Honeywell. We delivered segment margins and adjusted earnings per share above our guidance range in 3Q. We have adjusted our outlook to reflect the realities as we now see them in this macro. We continue to make steady progress towards our portfolio optimization as we close out the year.
As we look ahead towards 2025, our robust backlog further benefit from accretive growth rates to come from our acquisition and our leading position in attractive end markets provide us with a constructive outlook despite the ongoing economic and geopolitical uncertainty. While we think volume growth could remain subdued by muted short cycle growth early in the year, we expect to see organic growth across all 4 businesses next year.
We plan to return to margin expansion again in 2025 as a combination of volume leverage and productivity actions across the portfolio should offset modest mix headwind in Aerospace from OEM activity and integration of case. We look forward to providing more detailed guidance of 2025 during next quarter's earnings call as the backdrop becomes clearer and our portfolio shaping impact solidified. I remain excited about the future of Honeywell and believe our portfolio shaping efforts are enabling us to drive innovation and solve some of the world's most challenging problems.
With that, Sean, let's open up for questions.

Sean Meakim

Thank you, Vimal. Vimal and Greg are now available to answer your questions. (Event Instructions) Operator, please open the line for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Julian Mitchell, Barclays.

Julian Mitchell

Maybe I just wanted to start off with a sense maybe flesh out a little bit more. Any thoughts around sort of next year. I realize we'll get more color in Q4 results. But in the past, you've often given sort of more detailed preliminary thoughts for the out year in October. So just wondered, for example, on the cost side of things.
The top line is running light of expectations but you took down your repositioning expectations for the year. I wondered if there might be a case given the macro backdrop to sort of accelerate things like cost-cutting measures, maybe do more repositioning to make sure you can get margins up in 2025. So maybe flesh out some thoughts around the margin expansion from here.

Vimal Kapur

Thanks, Julian. Let me start and then hand over to Greg here. Look, I know my predecessors provided guidance on 2025. But given the current uncertainty in the environment across what we experienced the wars, the upcoming elections in the U.S. and multiple factor.
We only found [thought] prudent that we do it in January when more facts are known. But there are a few comments I'll make. First, there are three important backdrops, which we all should consider for 2025. Number one, our backlog is up 6%, 10% with all the acquisitions. I do believe we have a better quality portfolio.
And number three, our cost position is very robust. We have seen that in our margin expansion across all 4 segments. And that's driven by both productivity and our cost control actions. So those are carrying forward for 2025. What we're also executing is what's in our control, which is driving growth action through new products, but also continue to drive productivity actions to maintain the higher quality P&L.
Now with that backdrop, what as we mentioned in our comments is we do expect all four segments to have organic growth in 2025. Now the specific ranges, we'll share that in January when we have the earnings call. But at this point, we feel confident on that fact. We also feel that we also believe we will be back to margin expansion in 2025 based upon the actions we already have taken. So I would say the setup is positive. There are uncertainty. On the cost position, you're absolutely right; we are very watchful on that, and we have demonstrated that in Q3.
I'm going to pass on to Greg to explain some of the repositioning numbers, what we have reflected on and provide specific commentary on that.

Gregory Lewis

Yes. Yes. So Julian, the takedown in the repo guidance is really just the Q3 number being on the low end of the range. So if you look at our guidance for the fourth quarter of $60 million to $100 million, that's roughly the same as what we had implied. And so the takedown from [150 to 225] to now [150 to 190] is really just the third quarter being on the low end.
We have a very robust productivity and repositioning pipeline, that process, as you know we (inaudible) for years. And to Vimal's point, we're not sitting here in October, thinking the world is coming crashing down -- so it's not like we need to ramp up dramatically a major reduction in census to address that, in which case then maybe you would see a much bigger near-term repo change. But we're going to always be watchful. So I wouldn't read too much into the repo guidance coming down other than just having did in the low end we've given ourselves plenty of flexibility in the fourth quarter to take appropriate productivity actions, and we'll do so.

Julian Mitchell

That's very helpful. And then just a very quick follow-up around as we're thinking about sort of portfolio movements and so forth, you announced Advanced Materials spin, you've got PPE and assets held for sale. Just wondered sort of to what extent, Vimal, the changes in the sort of organic backdrop on top line and what's happening with margins? Do they have an effect on increasing the urgency of portfolio measures or you think about them as sort of somewhat to independent tracks.

Vimal Kapur

I would say the portfolio actions are driven by two factors. First is the fit in the Honeywell portfolio. building Honeywell into three simplified megatrends, which I committed exactly a year back. So see if you see our actions on both advanced materials and PPE, that reflects that commitment. I would say the PPE business, in particular, is going to help Honeywell accelerate organic growth and more margin expansion.
Advanced material business is more neutral on (inaudible) basis. Going ahead, the portfolio actions are never completed. I would say that we're going to constantly look at now, given we have completed this phase, what else we could add or subtract to improve the quality of portfolio of funny well. What I'm really proud of, Julian, is all the four acquisitions we have made, they are in the high-growth end verticals. They are in defense. They are in LNG. They are in access solution, which are high demand markets. and that certainly is improving the growth profile of Honeywell apart from the fact the actions we are taking on the core portfolio.

Operator

Steve Tusa, JPMorgan.

Stephen Tusa

So sorry, I just missed the first part of the call. Can you just talk about any kind of trajectory on -- in the kind of '25 and some of the puts and takes? I know you guys had talked to being within the range on organic a few weeks ago, but also just whether the margins can be a kind of a trend line year? Any updated thoughts on kind of the '25 look?

Gregory Lewis

Sure, Steve, maybe I'll start. As we talked about even when we saw each other in Europe, we still expect all four businesses are going to grow next year, and we're going to be coming out of the year with while a lower exit rate than we had planned, it's still going to be a positive exit rate. And so when we think about the setup for next year, again, way too early for guidance, we'll do that in January.
We do expect all four businesses to grow, and we expect margin expansion broadly across the portfolio, with aero probably being the one that's going to remain, I would say, around its current level organically with -- that's the one area where it will get headline pressure from the acquisitions, though all those acquisitions and particularly in the arrows, instance, they're going to be very strong growth rates. So very healthy segment profit growth overall.

Stephen Tusa

Okay. Great. And then just on the cash flow cut, is that just an earnings cut? Or is there something else going on in working capital like that?

Gregory Lewis

Yes. The two big items there is, as you know, the biggest pile of inventory we have is in aerospace, and that's been the hardest nut for us to crack so far. And particularly given all the dynamics that you're seeing in the industry over even the last 90 days, we just don't see the ramp down that we have been trying to drive there specifically. We've made nice progress in both IA and BA on inventory reduction, but not in Aero. And then the other part of that, I would just say is in our high-growth regions, we're seeing payment cycle slow.
And I think, again, that's a little bit of reaction to oil prices and a little bit of the disruption happening around the Middle East. And so those two things are really what we're reflecting in the guide on cash. We do expect, again, as we go into next year, we're going to still work an acceleration on working capital reduction effort and hopefully, the environment will participate in a way that's going to be more conducive to that. We're going to continue to do our work as we've done on the digitization of our working capital, particularly inventory and planning side to try to unlock that balance.

Operator

Nigel Coe, Wolfe Research.

Nigel Coe

Just on the aero performance. Maybe just touch on the Boeing strike and how you dial that into your sort of 4Q outlook. And then within the performance in commercial aftermarket, the plus 8%, can you dissect that between ATR and BizJet, I'm assuming BizJets going to be a bit more challenged there. Any help there would be helpful.

Vimal Kapur

Yes. Let me start here, and I'll pass on to Greg. I would say the Boeing circumstances are obviously very challenging. We all saw the results of the strike or yesterday night, which is unfortunate. I would say from a annual perspective, we have been working very closely with Boeing to make sure that we have a coordinated way of dealing with our shipments with the Boeing.
The net punchline of that is, thankfully, there is no impact of that into our revenue in Q4. We are adjusting some shipments into aftermarket of Boeing's customers and so on. And we really have to already start thinking about 2025 based upon how things are shaping up. But for Q4, there's no specific impact into our numbers. Maybe, Greg, do you want to answer the second part.

Gregory Lewis

Yes. So on the commercial aftermarket side, as you saw us report high single-digit growth overall. And as your side sensors are telling you it's double digits in APR and it's single digits in BGA. And again, I don't think that should be a surprise to anyone as the international market continues to expand on flight hours as it has throughout the course of the year. We're still outgrowing in DGA, the flight hours growth given all of the nice work the team has done on their RMU portfolio. So that continues to be a positive for us in terms of trying to do the decoupled growth approach that we've been so successful at over the years.

Nigel Coe

Great. That's helpful. And just a quick one on the portfolio. the PPE, no surprise there, but mixed size -- the revs and margin for PV this year. And then I guess the only other thing on the agenda right now is Quantinium. Are we still hoping to monetize that next year?

Gregory Lewis

Yes. So the PPE revs are about $1.1 billion. We're not going to get into the margin profile, you can probably get close with some of the information you learned over time. And then --

Vimal Kapur

Yes. Nigel, as we have said, we absolutely want to monetize Honeywell investment at the right time. The key focus area for us is continue to make progress on the technical milestone because that will feed into a commercial customer acquisition, which will feed into IPO in that order. And we are making nice progress on the technical front. Earlier in the year, we worked with Microsoft to prove the are rates in quantum computing, which is a big milestone, and we did prove one of the highest fidelity computing platform.
They also made some announcement on the capability relative to logical cubics in Q3. So we are making progress on expected lines on the technical front, which is very, very positive factor to know. That will now feed into the next step to acquire customers. the strategy of monetizing quantinuum hasn't changed. The timing will be dependent upon as we make progress in the actions we have highlighted earlier.

Operator

Scott Davis, Melius Research.

Scott Davis

Welcome Mike to the call. Guys, you made this announcement with Forge and Gemini AI. I mean what's the deliverable here? I can conceptually see what you're doing, but what do you kind of envision as the out the other side, the real kind of killer app for customers.

Vimal Kapur

I can give you two minutes version, while I also have a two-hour version of this. The short answer is that as we are connecting more and more of our customer assets into our Forge platform for the last, I would say, about two to three years. The obvious next question for us is what are we going to do with that data as we keep expanding our customer base through. So we're looking ahead and looking to look at the AI model, the Vertex AI capability, which Google has provide us some unique capabilities which will create a new applications on top of that data. So it's consistent with the strategy Scott I have always highlighted, monetized installed base.
So monetize installed base by connecting the installed base and then having more capability through partnerships like this. At the same time, we do expect some of our edge devices our products, which connected with the building or the process unit or with the warehouse, things like scanner, think of gas detection devices, embed AI at the chip level and have the Google Nano AI program embedded into that. It makes those products more capable. We expect to launch first half one of them in early 2025. So this is not a long-term dream.
This is imminently happening shortly. So all in all, this is continue to build upon our commitment of organic growth focus through new innovation, and we are partnering with companies like Google to expand our horizons here. And I'm very excited about it. I do expect this is going to help us support our organic growth profile in the years ahead.

Scott Davis

That makes sense. And just Intelligrated, obviously, has been the kind of the gift that keeps on giving. It was great for a while, and then it's been not so great here for a few years. But how do you fix that business? It doesn't seem to be as much value at the customer level, perhaps as we all once thought?
And is it a product innovation issue them? Is it just that the market itself is just too cyclical or perhaps too concentrated with a couple of big customers and maybe they have too much power in the channel. But how do you fix this thing I'll just leave it at that.

Vimal Kapur

Yes, I understand the frustration around Intelligrated, and so are we given the performance. Look, the good news is we saw slight sequential growth in that business in Q3, and we expect that trend to continue in Q4. Speaking differently, the business is definitely at its spot on with a slight turnaround. As I look ahead, I do see business are becoming very concentrated actually on aftermarket. 2025, our aftermarket, maybe actually 60% of the revenue.
It used to be 30% when we acquired it, so it's almost become double. We have rebaseline our cost base, Scott, to nearly $1 billion run rate revenue, which we have today. I think the real constraint here is customer adoption rates. We have talked before, the value proposition is extremely compelling. However, the capital investment required for fixed sortation system is high.
And making that commitment on a long-term basis, you can't decide to automate one warehouse. You have to basically commit to all of them. And that commitment, therefore, tends to be several hundred million or sometimes even in $1 billion. And that really have observed in my two-year watch of this business as a constraint. So I would say we'll continue to run this business as efficiently as we can. The 2025, the business has baseline to a point. It won't be a drag to the Honeywell's numbers anymore. And we will continue to put our actions in place to make it a better business in the years ahead.

Operator

Chris Snyder, Morgan Stanley.

Christopher Snyder

I wanted to ask on the ARO organic growth into Q4, slowing to mid- to high singles. And I think you said earlier that there's no impact from the Boeing strike in that. So I guess, is there any spillover impact from the fire at the facility you saw in Q3? Or does this kind of where you see aero market growing here in Q4.

Vimal Kapur

Look, Chris, aero has been -- it's nine quarters, we have been growing double digits. So one is the elevated level of comps that certainly makes it challenging. But two important facts here to share. In Q3, we had two discrete events, which are transitional in nature. We unfortunately had a fire in one of our plants.
The plant is back up and running, so we lost that revenue. And we also saw last week impact of a Helene because we do have large aero facility in Florida, and we could not ship for last couple of days of the quarter. Moving ahead in Q4, our acceleration is good. I mean, if you see in Q3, our volume growth is 13%. Now it used to be in high teens, it has come to the low teens.
And that's where the volume extension through supply base with elevated levels is really the problem we are revolving for. By no dimension, our outlook has changed. Our outlook for aero for the year is still low double digit, what it was earlier, too, so it's not really changed. We have possibly missed an upside opportunity there. That's how we'll put it.
There was a case here, we would have beaten that low double digit to a better number, but some of the supply chain pushouts have really made it more of a [not] 2025 event. (inaudible) our past dues are now continues to be greater than $2 billion. They have grown further, not a good news from a customer perspective. But at the same time, we're carrying forward that backlog next year, which will help us to have very similar profile of growth in 2025 as we are experiencing in Q4 this year. So remain very positive and optimistic.
I'm also very excited about the case acquisition, which is going to further expand the profile. It's a meaningful business size, $750 million we do expect a high growth rate in defense segment, which is also going to help and shape 2025 number for aero on the top-line growth.

Christopher Snyder

I appreciate that. And then maybe kind of turning over to industrial automation. It's been a couple of years now of pretty steady, meaningful declines. And I understand that a lot of these end markets are challenged, whether it's warehouse or scanners or even safety and sensing. But when you look Honeywell's performance in industrial automation compared to the end markets you serve, do you feel like the company is holding share? Or do you think that the company might be losing share or even maybe even gaining share across these end markets?

Vimal Kapur

Yes, Chris, we serve multiple end markets there. So I can't give you a very brief and short answer on that. I would say, on the whole, the market drivers are the contributing factors on the performance of the Industrial Automation business. I mean there'll be always exceptions there, but that really drives it. Also bear in mind that this business is extremely global.
And we look at the end market or the lens of US, which we offset here and that's what we observe. But this business has a strong presence in Germany. This business has a strong presence in China And we cannot ignore some of the economic dynamics going in those parts of the world. And when you have material revenue there, it's certainly having its own impact. So I would say that the one liner for that is we are just shaping up with the market.
Looking ahead, I would say, 2025, there are two headwinds we have or '24 are behind us, which makes me believe very, very strongly that Industrial Automation will grow in 2025. The first headwind will be gone is the rebase signing of Intelligrated volumes, business volume -- we had mentioned in one of the earlier calls, it will be around $1 billion. That's where it is shaping up. So we don't have that headwind. We do believe we can sustain that volume looking ahead in 2025.
And we had three-fourths of the royalty from Zebra in our numbers in 2024, which won't appear in 2025. So from a comp perspective, it let me correct that. We have only one quarter of this year. So from a comp perspective, it's a small number. So in 2025, we don't have to deal with that too. So those going away and markets normalizing to a certain degree, even they remain constant, we are still going to grow at a very normalized market today, we do expect a positive performance in that business in 2025.

Operator

Sheila Kahyaoglu, Jefferies.

Sheila Kahyaoglu

Going back to your Aerospace. And Greg, can you tell us what the rate was in Q3? How you think about it in Q4 and deceleration Q3 to Q4. Is that -- that's not a change in the MAX? Is it just the supplier that just popped up?

Sean Meakim

Sorry, Sheila. I think you [booked up] for a second. Would you mind restating the question?

Sheila Kahyaoglu

Sorry about that. So just on the MAX, can you give us an idea where you are on MAX in Q3 versus Q4? And if it is unchanged, what results in the Q3 to Q4 margin deceleration of about 250 bps going to around 25%.

Vimal Kapur

Yes. I will answer the second portion. The margins, Q3 to Q4 is just the drivers of the OE shipments. So some of the discrete manufacturing disruption in what we had in Q3 ended up having directly lower OE volume, which helped us in terms of the mix and that drove the margin in Q3. So as those supply chain disruptions are getting released in Q4, those shipments are going to occur, which again pushes the margins to a different trajectory. So I think that's a fundamental shift there.

Gregory Lewis

I think our comments on the Boeing situation is just that their demand on us has not gone down demonstrably from what it had been previously. There doesn't mean there's not some disruption in our ability to ship in Q3 versus Q4. we definitely had that challenge, but the demand on us has not changed meaningfully from Boeing.

Sean Meakim

The last point I would add is just to say that 3Q is better than we would have thought on the margin given that mix -- and then there's some reversion in fourth quarter. So overall, the full year is really unchanged when we communicated previously. It's just what goes in which quarter.

Sheila Kahyaoglu

Got it. And then hopefully, you could hear me on the commercial aftermarket in Q3, it lagged at 8%. Maybe we just modeled it wrong. But it seems like it was mostly BGA. So when you think about aftermarket being the growth leader in Q4, is that in double digit in ATR, any color there? Or is it BGI picking up again?

Gregory Lewis

In aftermarket. Yes. The aftermarket will be stronger in ATR than BGA. That's going to continue to be that way for some period of time.

Operator

Deane Dray, RBC Capital Markets.

Deane Dray

I think it was just about a year ago that you did the resegmentation. And one of the outcomes was you identified that there was roughly 10% of revenues that would be divested, maybe half of them chunky, others kind of very small below the radar screen. So does PPE -- would that be part of it? And I would trust advanced materials is not part of that 10%. So just what's that pipeline look like?

Vimal Kapur

Yes. So Dean, when I announced it last year this time, it was an initial view of the portfolio, which had less fit relative to the three megatrends. They were portions of advanced materials, which were part of it. But when we did the work, the shareholder value much higher for the whole spin versus the smaller part, which make us this decision of announcing the spin a few weeks back. So that was definitely part of the parameter and a smaller scope but ended up being big.
PPE was part of that scope. So I would say on a broader strategy basis, we are directionally done for the near term, but portfolio work is never complete. We are constantly want to look at what else is a (inaudible) Honeywell now, even though everything fits into either future of aviation, energy transition or automation. Another question I'm asking is relative to the growth rates and margin expansion runway and vertical fit and things of that nature and will constantly make our portfolio active portfolio management as part of our operating system. We have a lot of balance sheet capacity. So we certainly want to use that and embrace that to the benefit of building a better business. So those are some of the comments I will offer you.

Deane Dray

What would be the time frame for other divestitures?

Vimal Kapur

I wouldn't say I won't put a specific time line here. I would say that we want to be a prudent utilization of our balance sheet capability and the events will be more determined by the opportunity set of acquisitions. And similarly, the fit is less. We need to get convicted. We have to do that work and then really start working on some of the possible portfolio actions there. So there's nothing new definitive which we are working on, but you'll never say never because this is a constant activity.

Operator

Joe Ritchie, Goldman Sachs.

Joseph Ritchie

I may have missed it, but can you please elaborate on the project delays that you're experiencing in both process solutions and -- so what are the root causes? And then how do you see that rectifying going forward?

Vimal Kapur

So Joe, I would say the conversion rates typically we see we end up doing approximately 50% of our revenue in month three of every quarter. And we have a well-proven run rate of conversion of smaller projects, both in process solutions and smaller catalyst shipments. And that's what really didn't occur on the normal run rate in Q3. So that's what we observed for the first time that push outs are happening at this point of time. At the same time, I will also give you another data point, UOP had a historic high in its history order booking in the same quarter, $1 billion.
which are large new projects, people are committed investments for new process technology on new equipment. So those are the dynamics going on. The long-cycle commitment continue to hold. The short cycle pushouts are also occurring at the same time, and we have factored that into our Q4 earnings forecast now that we expect that some of those project pushouts will continue to occur (inaudible) stability. And probably the root cause of that would ascertain that to two factors.
I would say there's a lot of uncertainty in Middle East due to war situation and oil price fluctuations. We all observe there and we all are equally awaiting on outcome of US elections. So I think that uncertainty causes making any moderate investment also a bit of a consideration for our customers. And that's driving the push out. And we do expect as things settle, some of these should come back to the normal case ahead.

Joseph Ritchie

Got it. That's helpful. So mostly, this is basically exogenous factors, not anything internal that's impacting. Okay. And then I guess maybe Yes. And then the second question is just, look, the defense business has been I think double digits now for 4 out of the last 5 quarters and recognize that you're benefiting from the fact that supply chain is normalizing. I guess, how do we think about that into 2025? Is this a business just based on the normalization of the supply chain, it should continue to see this level of growth, call it, high single digits to double-digit type growth into next year?

Vimal Kapur

I do believe that. I think our order books there are strong in defense, and in fact, demand remains very strong. We have demonstrated now for two quarters in a row, our ability to take supply chain actions, specifically to the defense supply chain and we do expect to maintain this momentum in 2025. It will remain the headline for aerospace growth, specifically not only the core business and even always own but with the acquisition of [Kate], which is the entirely service defense segment. Our near-term mix of defense is going to go up and growth rates are going to be at I would say, relatively elevated rate compared to the core aerospace business.

Operator

Andy Kaplowitz, Citigroup.

Andrew Kaplowitz

Vim, I know you've talked about accelerating new products now and evolving the accelerated operating system. How much could that accelerating or maybe the focus on what good looks like across your portfolio help in '25 versus '24? Would you anticipate a material step-up in core growth from your initiatives, even if markets maybe stay a little muted, more muted than expected outside of aero?

Vimal Kapur

Yes. I think short answer is yes, Andy. We have done work, and we really track what I call new product category. So fundamentally, what we have bought our operating system is Think about the product as core products, which we always have and refreshing them because we have to keep share, you can't keep them stale and then adding new product categories, which we don't have today, those SKU numbers don't exist in our ERP system. And those products which are being lodged in '24 or early '25 are going to be a larger number compared to what we had in '24 run rate. So that does give me a confidence that that's going to act as an enabler for us to deliver our growth in 2025. specifics will share when we do the earnings call. But fundamentals do look attractive on that space.

Andrew Kaplowitz

Got it. And then maybe just a little more color on what you're seeing in terms of the landscape by geography. It's interesting to see that buildings products has started to improve. Is that a function of European building products getting any better? And I know you mentioned some macro headwinds in China, obviously. So what are you seeing out there?

Vimal Kapur

I would say in pockets, we -- I mean, if you call specifically on the buildings business, we did observe a good recovery in Europe in our short cycle businesses in building automation. I would say we have crossed the trough in Europe, and we are on a moderate recovery there. We certainly see that. In China, I would say that's not true. Honeywell continues to be in mid- to high single.
We have said that before, we will perform well in China, thanks to our aerospace and energy segment. But our automation businesses are flat to slight contraction. We are not observing any change in trajectory which then get reflected on the performance there. So some pockets of recovery in Europe, not so much in China and headline of our growth, which we mentioned in our prepared remarks also, we do see strong growth in India and Saudi Arabia. Those two countries are become [capless] of our growth. We have a moderate amount of revenue there. So certainly double-digit revenue growth certainly helps on our top line.

Operator

This concludes our question-and-answer session. Mr. Kapur, I'll turn the floor back to you for any final comments.

Vimal Kapur

I want to express my thanks to our shareholders for your support and to the Honeywell future shaper, who will help us to achieve our accelerated growth goals. Our future is bright, and we look forward to updating you on the progress. Thank you for listening, and please stay safe and healthy.

Operator

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