HONA changes
Pick any two versions below to diff them.
- Price
- $157.94 → $154.15(−2.4%)
- Discount category
- Far below intrinsic value → Deep below intrinsic value
- Next earnings
- Oct 28, 2026 → Jan 28, 2027
- Next earnings is estimate
- No → Yes
- Thesis
- Most of the discount opened on a single day, August 6, 2026. The evening before, Honeywell Aerospace cut its first full-year guidance as an independent company. It blamed a shortage of castings, forgings, and other mechanical parts from a small group of suppliers. The stock fell 23% on August 6. A securities class action lawsuit filed weeks later argues management understated how bad the shortage was. The company also carries about $16 billion of debt from its own removed: spin-off and pays no dividend yet. added: spin-off. That leaves little financial room for a further setback. The gap can close if the supply shortage eases as management now expects. That would let more aftermarket parts, Honeywell's highest-margin business, reach customers. Orders for the twelve months to removed: June added: September 2026 grew removed: 8%, added: 9%, and the backlog was removed: $18.2 added: $19.3 billion at the end of removed: June, added: the third quarter, up removed: 9%. added: 12%. So the case rests on supply catching up with demand, not on demand itself. Large order wins, like the July 2026 IndiGo avionics deal for 810 aircraft, need to show up in revenue rather than stay stuck in the backlog. Management reaffirmed its 2030 targets in September 2026, but investors have no multi-year standalone track record to check them against yet. removed: Honeywell Aerospace will report added: The third-quarter removed: 2026 results on added: report of October 28, removed: 2026, after added: 2026 showed only 2% organic sales growth, but the removed: market closes. That added: company kept its 2026 sales guidance, raised its EPS and second-half free cash flow guidance, and declared a first dividend. Management saw encouraging signs from its slowest suppliers. The full-year report, expected in late January 2027, gives the first 2027 guidance and is the next removed: chance to show supply is improving. added: test. If the shortage eases and the pending class action does not produce a large judgment, the discount could start to close over the next three to five quarters, not before 2027.
- Risks
- A shortage of mechanical parts, such as castings and forgings, from a small number of suppliers forced Honeywell Aerospace to cut its full-year 2026 organic sales growth guidance from 7%-9% to 4%-5%, and cut adjusted EBIT guidance by about $300 million, in its very first quarter as a public company. In September 2026, the CEO said the company reacted too late to the supplier problems. Honeywell Aerospace issued about $16 billion of senior notes to fund its own spin-off from Honeywell removed: Technologies, and pays no added: Technologies. In October 2026 it also started a dividend removed: yet. added: of $0.40 per share each quarter. This debt load removed: leaves added: and the new cash payouts leave less room to absorb a further supply chain delay or a slowdown in aircraft or defense demand. The company has removed: no earnings history added: only two quarterly reports as an independent removed: business before its added: business, from August removed: 2026 debut report. added: and October 2026. Investors cannot yet check management's guidance and cost estimates against a multi-year standalone track record. The parts shortage cut shipments of international defense products, which have high margins, in the second removed: quarter added: and third quarters of 2026. Commercial aftermarket removed: sales still grew 8%. added: growth slowed to 2% in the third quarter, from 8% in the second quarter. If supply stays short, the company cannot ship its full aftermarket and defense backlog, and margins stay under pressure. Revenue depends on aircraft production rates at Boeing and Airbus, airline flight activity, and US and allied defense budgets, none of which Honeywell Aerospace controls. A slowdown in any of these would slow growth further on top of the current supply problem. A securities class action (Green v. Honeywell Aerospace, Inc., filed in the District of Arizona) alleges the company misled investors about supplier concentration risk and did not disclose a DOJ cybersecurity investigation before its August 2026 guidance cut. The case is at an early stage, with a lead-plaintiff deadline of November 23, 2026, but an adverse outcome could add legal costs and management distraction on top of the supply-chain problem. The 10-Q for the quarter that ended June 27, 2026 shows $828 million of environmental liabilities. The company says the final cost could be two to three times the amount it recorded.
- Balance sheet
- Cash: removed: $1.1B added: $1.6B Debt: $16.0B Net debt: removed: $14.9B added: $14.4B Undrawn credit line: $4.0B Last debt due: 2066 Ratings: S&P BBB+ (positive outlook), Fitch A- (stable outlook), Moody's A3 (stable outlook) Honeywell Aerospace started life with debt that it did not use for its own business. On March 16, 2026, it issued $16.0 billion of senior notes in nine series. It gave Honeywell $15.1 billion for the spin-off: $9.1 billion in cash and $6.0 billion of the notes. added: Debt is the face value of the notes. The balance sheet at September 26, 2026 shows long-term debt of $15.85 billion, net of issue costs. Total equity was negative added: $2.49 billion at September 26, 2026, from negative $5.6 billion at June removed: 27, 2026. This added: 27. Pension assets of $3.04 billion now on the balance sheet explain most of that change. The negative equity comes from removed: that added: the payment to the former parent, not from losses, so it is not a sign of distress by itself. The fixed-rate notes have an average coupon of about 5.0%, and $0.5 billion floats with SOFR. Only $1.25 billion is due before 2029. removed: Net debt of $14.9 added: Cash was $1.56 billion added: at September 26, 2026, so net debt was about $14.4 billion. That is about removed: 3.4 added: 3.3 times the guided 2026 adjusted EBIT of removed: $4.35 added: $4.375 to removed: $4.45 added: $4.425 billion. Two undrawn credit lines, $1.0 billion for 364 days and $3.0 billion for five years, back a $4.0 billion commercial paper program. The company also pays Honeywell $1.125 billion over five years, in monthly payments of $18.75 million, for the right to use the Honeywell name. This works like extra removed: debt. Interest added: debt, and it cost added: $54 million in the third quarter. Net interest expense was removed: $200 added: $187 million in the removed: second quarter, and guided second-half free added: third quarter. Free cash flow removed: is $1.0 added: was $500 million in the quarter, and the company guides $1.2 to removed: $1.5 billion. added: $1.4 billion for the second half. The board approved a $3.5 billion buyback on July 23, 2026, and removed: the company expects to pay a added: first dividend removed: in line with its peers. added: of $0.40 per share on October 28, 2026, about $127 million each quarter for 317.0 million shares. Both compete with debt reduction until earnings recover from the parts shortage. As of removed: Jun 27, added: Sep 26, 2026.
- Checkpoints
- Oct 28, 2026: Q3 2026 earnings: parts supply and aftermarket shipments. removed: Pending. added: Passed. Watch: Better supplier output, guidance held at 4% to 5% organic growth and H2 free cash flow of $1.0 to $1.5 billion pass; a second guidance cut fails. added: Outcome: The company kept its organic growth guidance, raised its EPS and second-half free cash flow guidance, and saw encouraging signs from its slowest suppliers. Nov 23, 2026: Securities class action lead-plaintiff deadline. Pending. Watch: A slow, routine case with no new disclosures passes; new facts about the DOJ cybersecurity matter or supplier problems fail. removed: Feb added: Jan 28, 2027 (estimate): Full-year 2026 results and first 2027 guidance. Pending. Watch: 2027 guidance with higher aftermarket sales, margin recovery and a plan for debt reduction removed: or a dividend passes; flat earnings and no deleveraging path fail.
- Recent events
- Oct added: 28, 2026: Honeywell Aerospace reported third-quarter 2026 results. Sales grew 2%, reported and organic, to $4.64 billion. Commercial aftermarket sales grew only 2%, to $2.13 billion, because mechanical parts were short. Adjusted EBIT grew 1% to $1.16 billion, with a net benefit of about $50 million from tariff refunds. Adjusted EPS was $2.21 and free cash flow was $500 million. The backlog grew 12% to $19.3 billion. The company kept 2026 organic sales growth guidance at 4% to 5%. It raised adjusted EPS guidance to $7.85 to $8.00, from $7.60 to $7.90, and second-half free cash flow guidance to $1.2 to $1.4 billion. It narrowed adjusted EBIT guidance to $4.375 to $4.425 billion. Oct 28, 2026: Honeywell Aerospace declared its first quarterly dividend as an independent company, $0.40 per share, payable on December 4, 2026. It also said it will build a $500 million, 300,000 square foot factory in Tempe, Arizona, which opens in late 2028. The factory adds in-house machining of complex parts, an area where its suppliers are short of capacity. Oct 7, 2026: Goldman Sachs started coverage of Honeywell Aerospace with a Neutral rating and a $190 price target. Two days later, TD Cowen cut its target to $170 from $180 and kept a Hold rating. Sep 30, 2026: Law firms announced a securities class action, Green v. Honeywell Aerospace, Inc. (D. Ariz., No. 26-cv-06779), on behalf of investors who bought shares between June 29 and September 1, 2026. It alleges Honeywell Aerospace made false or misleading statements about supplier concentration risk and did not disclose the DOJ cybersecurity investigation before its August 5, 2026 guidance cut. The lead-plaintiff deadline is November 23, 2026. Sep 29, 2026: Honeywell Aerospace confirmed that it will report third-quarter 2026 results on October 28, 2026, after the Nasdaq close, with a call at 5:00 p.m. EDT. Sep 14, 2026: Melius Research downgraded Honeywell Aerospace to Hold from Buy and cut its price target to $190 from $216. Reports said Melius expects slower aftermarket growth next year. Sep 9, 2026: At investor conferences in September, CEO James Currier said the company reacted too late to its supplier problems. He said ten suppliers of metal parts are the main bottlenecks. Sep 4, 2026: S&P Dow Jones Indices said Honeywell Aerospace would leave the S&P 100 on September 21, 2026. The stock stays in the S&P 500. Sep 1, 2026: Director Craig Arnold bought 6,400 Honeywell Aerospace shares at $156.00 each, about $1.0 million, in an open-market purchase. Sep 1, 2026: The US Attorney's Office for the Western District of North Carolina announced that Honeywell Aerospace agreed to pay $2.04 million to settle False Claims Act allegations that it did not meet cybersecurity requirements in US Department of Defense contracts from 2020 to 2023. Aug 19, 2026: Morgan Stanley upgraded Honeywell Aerospace to Overweight from Equal Weight, with a $205 price target. The stock rose about 6% that day. Aug 12, 2026: Honeywell Aerospace completed an exchange offer, swapping about $16 billion of unregistered senior notes issued for the spin-off into registered notes, with 98% or more of each series tendered. Aug 5, 2026: Honeywell Aerospace reported its first quarterly results as an independent public company: Q2 2026 revenue of $4.52 billion, up 5% organically. It cut 2026 organic sales growth guidance to 4% to 5% from 7% to 9%, and adjusted EBIT guidance to $4.35 to $4.45 billion, because of parts shortages. It also disclosed a $3.5 billion share buyback that the board approved on July 23, 2026. The next day, the stock fell to a low of $150.03 and closed 23% lower, at $156.47. Jul 20, 2026: IndiGo chose Honeywell Aerospace avionics and auxiliary power units for 810 Airbus A320neo-family aircraft. The companies did not disclose the value of the deal. Jun 29, 2026: Honeywell Aerospace completed its spin-off from Honeywell Technologies and began trading on Nasdaq as HONA. It also joined the S&P 500 and the S&P 100. Oct 30, 2025: Honeywell completed the spin-off of Solstice Advanced Materials (ticker SOLS), the first of the two spin-offs that separated Honeywell into three independent companies.