Key Takeaways
- Shares of HONA plummeted up to 17% during premarket hours following its inaugural earnings report as an independent entity
- Second-quarter revenue reached $4.52 billion, representing a 5% annual increase but falling short of the $4.6 billion analyst forecast
- Adjusted earnings per share declined 32% to $1.87, significantly below the full-year analyst projection of $8.86
- The company slashed its 2026 organic revenue growth outlook to 4%-5% from a previous estimate of 7%-9%
- Ongoing supply chain constraints are compelling the aerospace manufacturer to focus on OEM deliveries at the expense of its more profitable aftermarket segment
Shares of Honeywell Aerospace (HONA) tumbled as much as 17% in premarket trading Thursday following the release of its inaugural quarterly earnings report since separating from Honeywell Technologies (HON) in June. By mid-morning premarket hours, the stock was changing hands near $177, representing approximately a 13% decline.
The results disappointed on multiple fronts. Second-quarter revenue totaled $4.52 billion, marking a 5% year-over-year increase yet missing the Street’s $4.6 billion consensus. Operating income came in at $1 billion, representing a 7% annual decline versus the $1.1 billion analysts anticipated. Charges related to inventory obsolescence contributed to the underperformance.
Adjusted earnings per share tumbled 32% from the prior-year period to $1.87, falling short of projections.
The more concerning development centered on forward guidance. The aerospace company reduced its 2026 organic revenue growth projection to 4%-5%, a significant drop from the previously communicated 7%-9% range. Full-year operating income is now anticipated to reach approximately $4.4 billion, down from the earlier $4.7 billion estimate and below the $4.6 billion Street consensus.
Management now projects full-year adjusted EPS between $7.60 and $7.90, substantially below the $8.86 analyst consensus figure.
Chief Financial Officer Josh Jepsen explained to Reuters that the revised outlook stems directly from ongoing supply chain challenges. “It’s really resetting the forecast based on what we’re seeing coming through the supply chain,” Jepsen stated.
Persistent Supply Chain Headwinds
The supply chain bottleneck is compelling Honeywell Aerospace to prioritize shipments to major OEMs Boeing and Airbus, which is coming at the expense of its more lucrative aftermarket operations. This strategic shift is becoming increasingly visible in the financial performance.
Melius Research analyst Scott Mikus observed that Honeywell Aerospace delivered 8% growth in commercial aftermarket revenue during the most recent quarter. By comparison, industry competitors reported 23% growth. This performance disparity raises significant concerns.
Mikus further highlighted that the company’s overdue order backlog, currently exceeding $2 billion, continues to expand. He cautioned that airlines are progressively shifting toward repairs and Parts Manufacturer Approval (PMA) alternatives to reduce maintenance expenses, and if Honeywell Aerospace cannot resolve its fulfillment challenges, it faces the prospect of forfeiting future high-margin aftermarket opportunities.
“The acute supply chain issue from last quarter did not improve as much as management had hoped,” Mikus noted in his research commentary.
Valuation Discount Compared to Industry Rivals
Honeywell Aerospace currently commands a valuation of approximately 23 times projected 2026 earnings. By comparison, GE Aerospace trades at 48 times forward earnings, and GE recently increased its full-year outlook following an 18% year-over-year surge in Q2 operating profit.
Vertical Research Partners analyst Rob Stallard suggested the valuation appears attractive but may represent a value trap. He emphasized that the company maintains lower exposure to high-growth aerospace segments such as large commercial engines or defense missiles relative to industry peers.
“While it is good that Honeywell Aerospace recognizes that it has problems, fixing them will not be an overnight affair,” Stallard observed.
Heading into Thursday’s session, HONA had already declined roughly 8% since its June spinoff launch, amplifying the impact of the post-earnings selloff for shareholders who participated in the initial distribution.
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