Newly spun-off Honeywell Aerospace cuts 2026 forecast on supply-chain woes
Honeywell Aerospace Faces Supply-Chain Challenges and Lowers Outlook
By Aatreyee Dasgupta and Shivansh Tiwary
Supply Constraints Impacting Business Segments
Aug 5 (Reuters) - Honeywell Aerospace lowered 2026 sales growth forecast and issued a weaker-than-expected earnings outlook on Wednesday, as persistent supply-chain hurdles crimped its ability to meet surging aftermarket demand.
The company said supply constraints are forcing it to prioritize original equipment deliveries to Boeing and Airbus as the planemakers ramp up production, diverting output from its higher-revenue, higher-margin aftermarket business. Its shares tumbled 10% in extended trading.
Shift in Sales Mix and Business Prioritization
It is also favoring domestic defense and space programs over typically higher-margin international contracts, leaving a less favorable sales mix in the back half of the year.
"Demand continues to be really robust. It's really a supply challenge," Chief Financial Officer Josh Jepsen said in an interview with Reuters.
Financial Forecasts and Market Reaction
The aircraft engine, parts and defense systems maker expects 2026 organic sales growth of 4% to 5%, versus a 7% to 9% increase forecast earlier.
It projected annual adjusted earnings per share of $7.60 to $7.90, below analysts' average estimate of $8.86, according to data compiled by LSEG.
Management Commentary on Supply-Chain Fixes
The company had expected supply-chain fixes to boost output more quickly this year, CEO James Currier said on a post-earnings call.
"Our actions thus far just have not been good enough. They have not led to the output inflection that I expected only a few months ago," Currier said.
Initiatives to Address Supply-Chain Issues
To address the supply-chain issues, Honeywell Aerospace is increasing spending on multi-sourcing and in-sourcing initiatives fourfold this year.
Company Background and Recent Performance
The company debuted on the Nasdaq in June after spinning off from Honeywell in a three-way split. It incurred about $100 million of separation-related costs and inventory obsolescence charges.
Its second-quarter adjusted profit per share fell 32% to $1.87, while sales rose 5% to $4.52 billion. Both these missed analysts' expectations.
Segment Performance and Profitability
Though stronger sales volumes and pricing supported revenue growth, profitability came under pressure from higher costs and an unfavorable business mix.
Quarterly profit in its electronic solutions segment fell 3% and engines and power systems dropped 32%, while control systems posted an 8% rise.
(Reporting by Shivansh Tiwary and Aatreyee Dasgupta in Bengaluru; Editing by Shilpi Majumdar)
