Honeywell Aerospace lands in Wall Street's 'penalty box' after gloomy guidance triggers 23% stock selloff

By Claudia Assis

Newly minted Honeywell Aerospace stuns Wall Street only weeks into its life as a standalone company

Old-fashioned execution risk and supply-chain hiccups are dogging the newly minted Honeywell Aerospace.

Honeywell Aerospace shares dropped 23% on Thursday after the company squandered its first chance to impress investors, instead offering Wall Street a worrying outlook only a few weeks into operating as a standalone company.

The stock (HONA) ended the day as the worst performer in the S&P 500 index SPX and in the Nasdaq 100 NDX.

Honeywell (HON) spun off Honeywell Aerospace in late June under pressure from activist investors. The separation was meant to signal a new era for both entities, with the former parent company free to concentrate on automation and other trends and the aerospace division becoming a pure-play company.

It also followed a trend among industrial companies, after separations at General Electric (GE) and other legacy U.S. conglomerates.

Old-fashioned execution risk, however, seems to have cast a shadow over the new company. Honeywell Aerospace surprised Wall Street by cutting its outlook late Wednesday, saying its mechanical-parts supply chain had been slower to improve.

That was not a great start, Robert Stallard at Vertical Research Partners said in a note.

"While it is good that Honeywell Aerospace recognizes that it has problems, fixing them will not be an overnight affair," he said.

The company has a diversified revenue mix but relatively less exposure than other companies to attractive aerospace and defense subsectors such as large commercial engines or missiles, Stallard added.

"Put together, we see Honeywell's growth continuing to lag its peers. While the valuation is relatively inexpensive, we fear that this could be a value trap," he said.

Ken Herbert at RBC Capital highlighted the stock's valuation as a point in favor of the newly minted company. In addition, demand for its products remains robust, he said.

The cut in outlook, however, spooked investors, Herbert said, and puts Honeywell Aerospace "squarely in the penalty box." The stock also lacks catalysts in the second half of the year, he added.

Honeywell late Wednesday guided for 2026 revenue growth between 4% and 5%, compared with previous guidance for between 7% and 9%.

The company also left open the possibility that its earnings before interest and taxation would not grow at all this year, cutting growth expectations for EBIT to flat to 3% year-over-year growth, from a previous expectation of 7% to 10% growth.

Second-quarter earnings were a miss, with the company reporting adjusted earnings of $1.87 a share on revenue of $4.52 billion. The FactSet consensus for EPS was $2.12 on sales of $4.61 billion.

-Claudia Assis

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08-06-26 1641ET