Why Honeywell's stock has dropped even as the Iran conflict has boosted munitions demand

By Tomi Kilgore

Defense contractor says production increased after a meeting with President Trump, but revenue could be delayed as Middle East shipment is disrupted

Honeywell's stock fell after the defense contractor said some revenue that was expected in the first quarter could be delayed until May because of shipping disruptions in the Middle East.

Shares of Honeywell fell Tuesday after the defense contractor said that demand has gotten a nice boost from the Iran conflict but also warned that some revenue that had been expected this month could be delayed because of disruptions in shipping to the Middle East.

Speaking at the Bank of America Global Industrials Conference in London, CEO Vimal Kapur noted that Honeywell (HON) has a "major presence" in the Middle East and derives a high-single-digit percentage of its total revenue from the region.

Since the conflict began, only 5% of the company's sites in the Middle East have been closed or partially closed, Kapur said, so there hasn't been much impact on how the company services its customers there. He said the one thing that has changed in the past couple of weeks is how the company ships products to the region, but he believes that will be a short-term problem.

"If I can't physically send things, it can have a transitionary impact," Kapur said, according to a FactSet transcript.

The stock slumped 1.7% in recent morning trading toward a six-week low. It got a bump up to a record close of $248.04 on March 2, the first trading day after the start of the conflict, but has fallen 7% since then.

Kapur said Honeywell isn't losing orders because of the conflict, so the full-year revenue outlook isn't impacted, but because of shipping delays, revenue expected for the first quarter may not actually get booked until the second quarter.

"So there's definitely a disruption there," Kapur said. That could cause some revenue that was due in March to show up in April or May, he added.

But overall, Kapur was pretty upbeat about the company's aerospace and defense business.

He noted that within the past couple of weeks, Jim Currier, the CEO of Honeywell's aerospace technologies business, met with President Donald Trump. There has been a "ramp up" in defense production since through the backfilling of ammunition being used, which the company is serving through its navigation systems "in a big way."

He added that about 25% of Honeywell's defense business, which makes up about 40% of its overall aerospace technologies business, comes from international customers. And demand from those customers, which is heavily weighted toward Europe, Japan, Korea and Australia, is growing at an "extremely high rate."

-Tomi Kilgore

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03-17-26 1125ET