Honeywell International (NYSE:HON) couldn't overcome a weak global economic environment and a strong dollar in the third quarter, resulting in a decline in revenue. But growing margins saved the company's bottom line.

Revenue fell 5% last quarter to $9.6 billion, but operating margin improved 2.1% to 18.3%, and net income grew 8.3% to $1.26 billion, or $1.60 per share.  

Doing more with less
Foreign exchange has taken a huge bite out of Honeywell's revenue, as it has for most companies with large international businesses. If we look at just organic sales changes, which strip out foreign currency changes, sales were actually up 1% in the quarter -- not a blockbuster number, but not as bad as the reported 5% decline indicates, either.  

What's impressive about Honeywell's results is the execution on moving the business into higher-value and higher-margin markets. An initiative called HOS Gold and a focus on new products is what management has pointed to for the improvement in margins and profits in a tough revenue environment.

Aerospace led the way with 2% organic growth to $3.82 billion, and segment profit rose 5% to $833 million. The commercial aerospace business continues to be strong, which isn't surprising given the boom in the aviation business internationally.

Automation and Control Solutions saw 3% organic growth to $3.57 billion, and it also had 5% segment profit growth to $614 million. The surprise here was that China's revenue was up double digits at a time when economic growth appears to be slowing.

The black eye for Honeywell was in Performance Materials and Technologies, where organic sales declined 3% to $2.22 billion, although segment profit was up 4% to $4.61 million. Gas processing and equipment deals were the big disappointment there, which, again, isn't surprising given the weak energy markets at the moment.

Cash is king
When a company like Honeywell isn't growing, it's important to see margin expansion as well as strong cash conversion. Net income is an indicator of how the company is doing, but converting that income into cash is key to paying back shareholders through dividend or share buybacks.

In the third quarter, Honeywell's free cash flow of $1.39 billion was 110% of net income, showing that it's converting cash effectively. That also makes its 2.1% dividend yield very safe for the moment.

Guidance falls slightly
What investors may not be happy about today is that full-year revenue guidance was reduced about 4% to $38.7 billion, showing that pressures in the business will continue all year. But the midpoint of earnings estimates was confirmed at $6.10 per share, which should be a slight positive for investors.

Honeywell is a slow and steady company these days, but it certainly isn't a growth machine. And at 16 times 2015 earnings estimates, it's also not an incredible value for investors.

While the quarter was impressive on the bottom line, management is going to have to turn its attention from improving margins to investing in new product growth, and that's more difficult than it may seem. Until it does that, I don't think Honeywell is a great value, even for investors just looking for consistent dividend from a stodgy industrial company.