Summary: Honeywell Aerospace on Wednesday scaled back its 2026 organic sales-growth forecast and issued a weaker-than-expected earnings outlook as ongoing supply limitations have constrained its ability to serve robust aftermarket demand. The company said it is prioritizing commercial original equipment manufacturer - OEM - deliveries to plane makers as they accelerate production, redirecting output away from the higher-margin aftermarket business and favoring domestic defense and space projects over international programs, producing a less favorable sales mix for the second half of the year.
Honeywell Aerospace, the independent company that was spun off from Honeywell as part of a three-way split and debuted on the Nasdaq in June, told investors that supply problems are the principal headwind to growth rather than a lack of demand. "Demand continues to be really robust. It’s really a supply challenge," Chief Financial Officer Josh Jepsen said in an interview with Reuters.
The company now expects 2026 organic sales to rise 4% to 5%, down from the 7% to 9% increase projected previously. For the full year it forecast adjusted earnings per share of $7.60 to $7.90, a range below the analysts’ consensus estimate of $8.86 compiled by LSEG.
Management explained that aerospace suppliers typically deliver systems and parts to planemakers at lower margins and recover profitability later through higher-margin spare parts and services in the aftermarket. With planemakers ramping production, Honeywell Aerospace said it is allocating constrained output to meet those OEM commitments to Boeing and Airbus, which in turn shifts sales away from its more lucrative aftermarket activities.
In addition, company officials indicated a deliberate preference for domestic defense and space programs over international contracts. That decision, while addressing certain strategic priorities, results in a less favorable sales mix in the back half of the year because international contracts historically carry different margin profiles.
Chief Executive Officer Jim Currier reiterated the point about end-market strength while acknowledging limits on production growth. "Secular trends across our end-markets remain strong, while supply constraints limited output growth in the quarter," he said.
Operationally, the newly independent aerospace business incurred roughly $100 million of separation-related costs and inventory obsolescence charges tied to the spin-off. Those costs contributed to a 7% year-on-year decline in quarterly core profit.
In the second quarter, adjusted earnings per share fell 32% to $1.87, while sales increased 5% to $4.52 billion. Revenue benefited from higher sales volumes and pricing, but profitability was squeezed by elevated costs and an unfavorable business mix.
Performance varied across segments: quarterly profit in electronic solutions decreased 3%, engines and power systems profit dropped 32%, and control systems registered an 8% increase. By end-market, commercial aftermarket sales rose 8% and defense and space sales increased 3%.
Key points
- Honeywell Aerospace lowered its 2026 organic sales-growth guidance to 4%–5% from 7%–9% and trimmed annual adjusted EPS guidance to $7.60–$7.90, below LSEG analyst estimates of $8.86.
- Supply-chain constraints have forced the company to prioritize OEM deliveries to Boeing and Airbus and to favor domestic defense and space programs, reducing higher-margin aftermarket availability and producing a less favorable sales mix.
- Second-quarter results showed a 32% decline in adjusted EPS to $1.87 on a 5% rise in sales to $4.52 billion; segment results were mixed, with electronic solutions down 3%, engines and power systems down 32%, and control systems up 8%.
Risks and uncertainties
- Persistent supply constraints - If supply bottlenecks persist, the company may continue to underdeliver on higher-margin aftermarket demand, pressuring profitability in aerospace and defense supply chains.
- Unfavorable sales mix - Prioritizing OEM and domestic defense work over international contracts could maintain a lower-margin revenue composition in the back half of the year, affecting aerospace sector earnings.
- Separation-related costs and inventory obsolescence - The roughly $100 million of one-time charges tied to the corporate spin-off have already reduced quarterly core profit and could influence near-term margin recovery.
Taken together, the guidance revision and quarterly results underscore how manufacturing and logistics constraints can shift revenue composition and compress earnings even when demand remains strong. Honeywell Aerospace's financial outlook and segment performance now hinge on its ability to alleviate supply bottlenecks while managing the trade-off between OEM commitments and aftermarket profitability.