Honeywell Aerospace cuts 2026 forecast, shares fall 21%

Honeywell Aerospace shares fell as much as 21% on Thursday, August 6, after the company's first earnings report as a standalone business missed Wall Street estimates and cut its full-year forecast. The Phoenix-based maker of aircraft engines, navigation systems and power units traded at $162.88, down about 20%, or $40.77, in active dealing, according to stockanalysis.com, against a prior close of about $203.64. The results were released Wednesday, August 5, five weeks after the company separated from Honeywell International and began trading on the Nasdaq. Chief Executive Jim Currier attributed the shortfall to supply-chain constraints that limited production during the quarter.

The decline built across two sessions. Shares dropped 10.43% in Wednesday's after-hours trading immediately after the release, according to Benzinga. CNBC reported that the extended-session slide, on top of a 6% fall during Wednesday's regular hours, carried the stock to about $182, a low since it began trading on its own. The selling deepened Thursday. Techtimes reported that shares touched $150.16 in premarket trading before settling closer to $155, then pared losses once regular trading opened. By late morning the stock stood at $162.88, according to stockanalysis.com. The two-day move erased much of the value shareholders received in the spinoff distribution.

Second-quarter revenue of $4.52 billion rose 5% from a year earlier but fell short of the $4.61 billion analysts had projected, according to TipRanks. Adjusted earnings were $1.87 per share, down 32% from $2.75 in the same quarter of 2025 and below the roughly $2.11 that analysts expected, according to data compiled by LSEG cited by CNBC. Adjusted earnings before interest and taxes came to $995 million, down 7% year over year, against the $1.1 billion Wall Street had modeled, according to figures Barron's supplied to Yahoo Finance. The miss reached both the top and bottom lines, and the profit shortfall pointed to a margin problem, not a revenue problem alone.

What the new guidance shows

The steeper reaction came from the forecast. Honeywell Aerospace cut its 2026 organic sales growth guidance to 4% to 5%, down from a prior range of 7% to 9%, according to the earnings release. It reduced adjusted EBIT guidance to $4.35 billion to $4.45 billion from $4.65 billion to $4.75 billion, a cut of roughly $300 million at the midpoint, as reported by Techtimes. The company set its first standalone full-year adjusted earnings guidance at $7.60 to $7.90 per share, about 13% below the $8.86 consensus compiled by LSEG. CNBC said the new EBIT range implies flat to 3% growth, down from a prior view of 7% to 10%.

Management traced the problem to a shortage of precision castings. Reuters reported that supply constraints forced Honeywell Aerospace to prioritize commercial deliveries to Boeing and Airbus, which are raising production, and to divert parts away from its higher-margin aftermarket business. Techtimes said the casting shortage starved that aftermarket line, filling production slots with lower-value original-equipment work. The company also booked about $100 million in separation-related costs and inventory obsolescence charges tied to the June 29 spinoff, according to Reuters, and management cited a $50 million inventory charge among the drivers of the reduced outlook. Those charges contributed to the 7% decline in core profit for the quarter.

The aftermarket matters to aerospace suppliers because spare parts and services carry much higher margins than original-equipment sales, Reuters reported, which is why diverting castings to Boeing and Airbus hit both revenue and profit. Defense and space sales rose 3% as high-single-digit U.S. growth was partly offset by material shortages that limited international deliveries, according to the earnings call summary. Business-aviation flight hours grew at a high-single-digit rate, management said. The company added that conflict in the Middle East and higher fuel prices did not materially affect aftermarket demand in the second quarter.

Supply, not demand

On the earnings call, management said the company works with more than 3,000 suppliers and that 98% are 'performing exceptionally well,' with the remaining 2% causing the bottleneck, according to CNBC. Currier said the company had underestimated how long the supply-chain fixes would take, TipRanks reported. Demand indicators stayed strong. The company reported 8% order growth year over year and about $15 billion in new customer wins measured by lifetime value so far in 2026, including avionics and defense awards from IndiGo, according to the earnings call summary. Management said that order book showed the challenge was output rather than a lack of buyers.

To close the gap, Honeywell Aerospace outlined a capital-heavy repair effort. Chief Financial Officer Jepsen said 70% of increased supplier-tooling investment is going to constrained castings, and that spending on multi-sourcing and in-sourcing would be four times greater in 2026 than the prior year, according to the earnings call summary. Planned supplier-tooling spending is up 20% in the second half versus the first and is expected to double from 2025 to 2027. The company said it is qualifying more than 50 new suppliers, with 50 more expected in the second half, and expanding multi-sourced parts by more than 15% for the year. The largest benefits are expected in 2027.

The spinoff and its debt

Honeywell Aerospace completed its separation from Honeywell International on June 29 and debuted on the Nasdaq as part of a three-way breakup of one of the last major U.S. industrial conglomerates, according to Reuters. The split also spun off Solstice Advanced Materials last October and left the automation operations running under the Honeywell Technologies name, IBTimes reported. Techtimes reported that the separation transferred about $15.8 billion in long-term debt to the new company. Honeywell Aerospace held its first investor day in Phoenix on June 3, where it set out three strategic priorities and long-term targets stretching to 2030, according to its SEC filing. Thursday's report was its first as an independent company.

What analysts expect next

Several firms cut their price targets after the report. RBC Capital analyst Ken Herbert lowered his target to $250 from $300 while keeping an Outperform rating, according to Benzinga. Evercore ISI moved to $210 from $250 with an In Line rating, and UBS analyst Gavin Parsons cut his target to $213 from $231 with a Neutral rating. CNBC's investing team downgraded the stock, calling it a 'shockingly bad earnings debut.' Wolfe Research had framed the quarter as a 'show me' story going in, Techtimes reported. Across 15 analysts, the average rating was Buy and the average 12-month target was $253.17, according to stockanalysis.com, well above the stock's price after the selloff.

For the second half of 2026, we believe it is prudent to align our guidance to our supply chain's demonstrated capabilities at the end of the second quarter.

Analysts read that as an admission that the company had been too optimistic about how quickly the bottlenecks would clear, according to Benzinga. The company said the largest benefits from its corrective actions are expected in 2027, and it did not say when supply would fully recover beyond that, according to the earnings call summary. Management said it remains committed to the 2030 targets set at the June investor day, CNBC reported. For the investors who received shares in the distribution five weeks ago, the two-day decline left the stock well below the average analyst target, with the case for the spinoff now tied to a supply-chain repair set to play out over several quarters.