CNBC Investing Club cuts Honeywell Aerospace rating after earnings miss

Honeywell Aerospace rating cut: CNBC Investing Club reduced its proprietary rating on the newly independent aircraft-systems maker to 3 after its first results release following the June spin-off brought a lower 2026 outlook. CNBC reported that HONA shares fell 6% in regular trading on August 5 and a further 11% in extended trading after the release.

Honeywell Aerospace, which trades as HONA, separated from former parent Honeywell Technologies, ticker HON, on June 29. The quarterly figures largely cover a period in which Aerospace was still part of the parent group, according to Honeywell Technologies. The subsequent outlook, however, is presented for the standalone company.

Why did CNBC Investing Club cut its Honeywell Aerospace rating?

The portfolio service cited the outlook reset and concerns about management credibility as it lowered its internal rating. CNBC Investing Club said it expected supply-chain disruption after the separation but viewed the reduced targets as a more serious execution setback. Its rating is an opinion and portfolio-service action, rather than a market-wide analyst consensus or an investment recommendation.

Honeywell Aerospace reported second-quarter sales of $4.522 billion, up 5% from a year earlier. Net income fell 70% to $256 million, while adjusted EBIT declined 7% to $995 million. Earnings per share were $0.78, down 71%, and adjusted earnings per share fell 32% to $1.87. The company said adjusted EBIT included about $100 million of separation-related costs and inventory-obsolescence charges.

The company attributed the weaker output to supply constraints, while maintaining that demand across its end markets remained strong. Its August 5 results release reported an $18.154 billion backlog at quarter end, 9% higher than a year earlier, and trailing-12-month orders up 8%. It also said it had secured $15 billion in new wins so far this year, measured by estimated lifetime value.

What changed in Honeywell Aerospace's 2026 outlook?

• Organic sales growth was reduced to 4% to 5%, from 7% to 9%.
• Pro forma standalone adjusted EBIT guidance was reduced to $4.35 billion to $4.45 billion, from $4.65 billion to $4.75 billion.
• The expected year-on-year change in that EBIT measure shifted to flat to 3% growth, from 7% to 10% growth.
• The company initiated pro forma standalone adjusted EPS guidance of $7.60 to $7.90.
• Second-half free-cash-flow guidance was retained at $1.0 billion to $1.5 billion.

Management said it is qualifying more than 50 suppliers and expects to qualify 50 more in the second half. It plans to raise supplier-tooling spending by 20% in the second half from the first, with spending set to double between 2025 and 2027. About 70% of that planned investment is directed to castings. Honeywell Aerospace also plans to increase the number of multi-sourced parts by more than 15% this year.

The figures present a split picture: aftermarket sales rose 8% to $2.026 billion, commercial original-equipment sales increased 6% to $679 million, and defense and space sales grew 3% to $1.817 billion. The company’s task is to translate that order demand into output at the lower level embedded in its revised guidance.

This story draws on original reporting from CNBC.