Honeywell Aerospace Inc

Second quarter organic sales increased 5% year over year to $4.5 billion. Adjusted EBIT was $1 billion, down 2% year over year, and adjusted EPS was $1.78, down from the prior period; management said the EBIT decline reflected unfavorable mix and an approximately $50 million inventory obsolescence charge, and excluding that charge adjusted EBIT would have grown 3%. Orders increased 8% year over year for a book-to-bill of 1.1. By end market, Commercial OE sales rose 6%, commercial aftermarket rose 8%, and Defense and Space sales rose 3%. For 2026, management now expects organic sales growth of 4% to 5%, pro forma stand-alone adjusted EBIT of $4.35 billion to $4.45 billion, and pro forma stand-alone EPS of $7.60 to $7.90. Second-half free cash flow expectations remain $1 billion to $1.5 billion, and capital expenditures are expected to be approximately $650 million.

Jim Currier emphasized that the company is now singularly focused as a standalone aerospace business and said management is taking an aerospace-specific operating-system approach to improve execution, supplier visibility, and factory throughput. He repeatedly framed the quarter’s miss as a supply-chain execution problem rather than a demand problem, noting that 98% of suppliers are performing well and the remaining 2% are highly constrained but disproportionately important. His tone was candid and urgent about underestimating the time needed to fix the bottlenecks, while still confident that the company can unlock pent-up demand and reaccelerate in 2027 and beyond.

Josh Jepsen walked through the numbers and the revised outlook, highlighting 5% organic sales growth to $4.5 billion, adjusted EBIT of $1 billion, and adjusted EPS of $1.78. He said the 2026 guide was reset because output ramped more slowly than expected, especially in June, and because the company is prioritizing achievable guidance without assuming dramatic near-term supply-chain improvement. He cited a $50 million inventory obsolescence charge, mix pressure from more OE and domestic defense versus aftermarket and international defense, unchanged second-half free cash flow of $1 billion to $1.5 billion, and expected capex of about $650 million. He also pointed to 4x more investment this year in multisourcing and insourcing versus last year and said these investments should support stronger output and margins later.

Analysts focused on why the supply-chain improvement story slipped so much versus the June outlook and what specifically changed in the mechanical supply base. Management said nothing structural changed; rather, June output was weaker than expected and the company reset guidance to a prudent baseline while accelerating supplier tooling, multisourcing, and insourcing investments. Questions also probed whether the issues were hurting airline demand or causing customers to shift to DERs/PMAs; management said no, aftermarket demand remains strong and there is no sign of a demand shortfall. Several analysts asked about delinquencies, penalties, and the inventory write-down; management said penalties are possible in theory but customer relationships and transparency have limited that risk, and the inventory obsolescence was largely in Engine and Power Systems and is not expected to recur quarter to quarter.