Key Takeaways:
Honeywell Aerospace shares plunged 21% after the newly spun-off company cut its 2026 sales and profit outlook on persistent supply-chain bottlenecks.
"The issue is clearly a supply issue and not a demand issue," Chief Executive Jim Currier said on the company's first earnings call since the June 29 separation from Honeywell Technologies.
Q2 sales rose 5% to $4.5 billion, with adjusted EBIT falling 7% to $995 million and net income dropping 70% to $256 million. The company cut full-year organic growth guidance to 4%-5% from 7%-9% and lowered pro forma standalone adjusted EBIT to $4.35 billion-$4.45 billion from $4.65 billion-$4.75 billion, introducing pro forma standalone adjusted EPS guidance of $7.60-$7.90.
The selloff, the steepest in the S&P 500, leaves the stock trading near its 52-week low of $192.03. Management reiterated its 2030 targets and said output should accelerate in 2027 as supplier investments take hold.
Currier said a handful of constrained suppliers, roughly 2% of the supply base, are limiting output, with castings, forgings, complex machining and bearings the biggest pressure points. The company took a $50 million inventory obsolescence charge in the quarter and is allocating limited supply to lower-margin original equipment and domestic defense work, weighing on profit.
Commercial aftermarket sales rose 8% to $2.0 billion, commercial original equipment gained 6% to $0.7 billion, and defense and space grew 3% to $1.8 billion. Backlog rose 9% to $18.2 billion, with trailing 12-month orders up 8% and a book-to-bill of 1.1.
Chief Financial Officer Josh Jepsen said the company is investing four times more this year in multi-sourcing and in-sourcing, with supplier tooling spend doubling from 2025 to 2027, about 70% of it going to castings. He said the recovery is coming more gradually than expected but should deliver a material benefit in 2027.
Year to date, Honeywell Aerospace has secured $15 billion in new wins by estimated lifetime value, including IndiGo's selection of its avionics and auxiliary power units for 810 Airbus A320neo family aircraft, the largest selectable-equipment win in company history. Aeromexico also adopted its SURF-A runway safety upgrade across more than 100 Boeing 737 aircraft.
The guidance cut shows management expects supply constraints to persist through the second half, with third-quarter output growth expected to match the roughly 4% pace of the second quarter. Investors will watch the company's next earnings call for signs that supplier investments are translating into faster output and margin recovery.
This article is for informational purposes only and does not constitute investment advice.
