Honeywell's stock drops as sales miss confirms fears of Middle East shipping disruptions

By Tomi Kilgore

Timing of spinoff of aerospace business moved up to June 29 from previous calls for a third-quarter closing

Honeywell's sales missed expectations for a third straight quarter, as the Middle East conflict resulted in shipping disruptions.

Shares of Honeywell International were diving in early Thursday trading after the aerospace and defense company missed first-quarter sales expectations, as the Middle East conflict led to a slowdown in activity.

The earnings report comes as defense stocks have been hurting since the start of the Iran conflict, amid concerns that increasing demand for munitions will be overshadowed by shipping disruptions to the Middle East, leading to delayed revenue. Honeywell's stock (HON) has dropped 9.7% since the start of the hostilities through Wednesday, while the iShares U.S. Aerospace & Defense ETF ITA has shed 10.1%.

Honeywell's first-quarter report confirmed those worries. The company said defense and space sales increased 4% from a year ago due to escalating geopolitical conflicts. But the company added there were supply-chain disruptions, saying its process automation and technology business "saw an overall slowdown in activity in the Middle East stemming from the conflict," which hurt revenue.

Separately, the company said it now expects the spinoff of its aerospace business is expected to be completed on June 29, compared with previous guidance of the third quarter. And on Wednesday, the company had said its Quantinuum quantum-computing business filed paperwork for an initial public offering.

Net sales for the quarter grew 2.4% from a year ago to $9.14 billion, but that was below the average analyst estimate compiled by FactSet of $9.3 billion, marking the third straight miss.

The stock dropped 6.4% in premarket trading, putting it on track to suffer the biggest one-day postearnings decline since it fell 7.6% on Feb. 3, 2022.

Meanwhile, net income fell 43.3% to $821 million amid charges related to debt restructuring and impairment of assets held for sale. Adjusted earnings per share, which excludes the nonrecurring items, rose 11% to $2.45 to top the FactSet consensus of $2.32, the seventh straight bottom-line beat.

Despite uncertainties stemming from the Middle East conflict and the impacts of rising inflation, the company maintained its full-year guidance ranges for sales of $38.8 billion to $39.8 billion and for adjusted EPS of $10.35 to $10.65.

Despite the weakness since the end of February, Honeywell's stock has still gained 12.8% in 2026 through Wednesday, while the S&P 500 index SPX has tacked on 4.3%.

-Tomi Kilgore

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04-23-26 0802ET