Key Highlights

  • On Aug 5 the company cut 2026 organic growth guidance to 4%-5% from 7%-9% and pro forma adjusted EBIT to $4.35-$4.45 billion; shares fell about 21% on Aug 6.
  • Backlog rose 9% to $18.2 billion and year-to-date wins totaled $15 billion, but Supply constraints limited output, especially in Engines and Power Systems.
  • Director Craig Arnold bought 6,400 shares at $156 on Sep 1; the stock closed at $167.32 on Sep 22, still well below its pre-earnings level.
  • The stock traded at roughly 23 times expected 2026 Earnings after the drop, well below GE Aerospace, with an average analyst target of $209.50 across 16 analysts.

Honeywell Aerospace (NASDAQ:HONA) is still working its way back from the sharp sell-off that followed its first Quarterly Report as an independent company. On Aug 5, less than six weeks after its June 29 spin-off from Honeywell International, the Phoenix-based supplier cut its 2026 Organic Sales growth outlook to 4% to 5% from 7% to 9% and lowered its profit guidance, citing supply-chain constraints. The shares fell about 21% the next day, closing at $161.21 on Aug 6, down 20.8%.

Since then, the recovery has been partial. The stock closed at $167.32 on Sep 22, still well below the roughly $204 level where it traded before the results. The central reason is that the problem investors punished, a shortage of parts that limits how much the company can ship, is not expected to be fixed quickly. Management has said it aligned second-half guidance to what its supply chain had demonstrated it could deliver, and has pointed to 2027 as the year for improved performance.

There have been some signs of confidence. Director Craig Arnold bought 6,400 shares at $156.00 each, about $998,400 in total, on Sep 1, according to a Form 4 filing. The company has also highlighted a growing Backlog and large contract wins. However, analysts remain divided on how long the operational repair will take.

Inside the August Guidance Reset

In its Aug 5 release, Honeywell Aerospace reported second-quarter sales of $4.52 billion, up 5% on both a reported and organic basis. Adjusted EBIT fell 7% to $995 million, including about $100 million of separation-related costs and inventory obsolescence charges. Adjusted Earnings Per Share were $1.87, compared with $2.75 a year earlier, while GAAP EPS was $0.78, weighed down by $329 million of transaction costs. Revenue trailed Wall Street's expectation of about $4.6 billion and operating profit missed estimates of about $1.1 billion.

The revised full-year outlook calls for pro forma standalone adjusted EBIT of $4.35 billion to $4.45 billion, down from $4.65 billion to $4.75 billion, which implies year-over-year growth of flat to 3% instead of 7% to 10%. The company introduced pro forma standalone adjusted EPS guidance of $7.60 to $7.90 and kept its second-half free Cash Flow range at $1.0 billion to $1.5 billion.

Chief executive Jim Currier said in the release that it was "prudent to align our guidance to our supply chain's demonstrated capabilities." He added that the company remains committed to the 2030 targets it set out at its June 3 Investor Day.

Where the Supply Chain Is Pinching

The weakness was concentrated in Engines and Power Systems, where sales rose just 1% and segment adjusted EBIT dropped 32% to $174 million as unfavorable mix and higher costs outweighed pricing. Electronic Solutions grew sales 8% to $1.77 billion but saw segment profit decline 3%. Control Systems was the bright spot, with sales up 7% and segment profit up 8% to $389 million.

By end market, commercial aftermarket sales rose 8% to $2.03 billion, commercial original equipment rose 6% and defense and space rose 3%. Analyst Scott Mikus of Melius Research noted that aftermarket growth trailed the roughly 23% posted by industry peers and said overdue backlog exceeds $2 billion. He warned that airlines could shift more work to repairs and alternative parts if delivery performance does not improve.

The company said it is qualifying more than 50 new suppliers with 50 more expected in the second half, raising supplier tooling spending by 20% in the second half versus the first, with about 70% aimed at castings, and expanding multi-sourced parts by more than 15% this year.

Demand Is Not the Issue

The order book tells a different story from the income statement. Backlog reached $18.2 billion at quarter-end, up 9% year over year, and trailing 12-month orders rose 8%, led by defense and space. The company said it had secured $15 billion of new wins by estimated lifetime value this year, including IndiGo's selection of its avionics and power systems for 810 Airbus A320neo family aircraft, which it called the largest new-aircraft selectable equipment win in its history.

At a Morgan Stanley (NYSE:MS) industrials conference in mid-September, management said investments and operational changes are easing bottlenecks and that it expects aftermarket and Margin recovery from 2027.

How It Stacks Up Against Aerospace Peers

Honeywell Aerospace joined the S&P 500 on June 29 and was added to the Nasdaq-100 shortly after it began trading. It competes with larger aerospace suppliers such as GE Aerospace (NYSE:GE), RTX (NYSE:RTX) and Safran across engines, avionics and aftermarket services. The stock traded at roughly 23 times expected 2026 earnings after the drop, well below GE Aerospace. Analyst Rob Stallard of Vertical Research Partners cautioned that the discount could prove a "value trap" if growth continues to lag. Evercore ISI (NYSE:EVR) kept an In Line rating and cut its target to $210. Across 16 analysts, the average rating is Buy with a mean target of $209.50.

Risks Clouding the Rebound

  • Execution: A further supply-chain miss would test management's credibility after a guidance cut only weeks after the spin-off.
  • Aftermarket share: Persistent late deliveries could push customers toward repairs and alternative parts, eroding high-margin revenue.
  • Balance sheet: The company carried about $15.8 billion of long-term Debt at June 27 following the separation, and interest charges were $200 million in the quarter.
  • Legal overhang: At least one law firm has announced an investigation on behalf of shareholders following the share drop.
  • Defense timing: International defense volumes were hit by supply limits and the wind-down of a restricted program.

The Path to a Q3 Report and 2027 Recovery

The third-quarter report is the next key test; an estimated date of Nov 5 has been floated, though the company has not yet confirmed it. Investors are likely to focus on whether shipments track the reset guidance, trends in aftermarket growth and overdue backlog, progress on supplier qualification and castings capacity, and second-half free cash flow against the $1.0 billion to $1.5 billion range.

Any early commentary on 2027, which management has described as a year of improved performance, will also be closely watched.