Honeywell Aerospace CFO Says Supplier Delays Cost About Four Points Of 2026 Growth
Past-due orders kept growth at 4% to 5% instead of more than 8%, the CFO told analysts, as the company stuck with its full-year forecast.
Honeywell Aerospace would be growing more than 8% this year, not the 4% to 5% it forecasts, if suppliers had kept its past-due backlog from building, Chief Financial Officer Josh Jepsen said on the company's third-quarter earnings call Wednesday. Holding that backlog flat "would have been worth about four points of growth," he told analysts, according to the call transcript and results coverage.
Four points lost to the backlog
Jepsen said the past-due backlog grew this year and that, absent that build, growth would have been "eight plus percent." He used the figure to explain why the company is pulling investment forward into its supply base.
Management still held organic growth guidance at 4% to 5%. Jepsen called that prudent as the company tries to build a track record, and said it implies fourth-quarter organic sales modestly below the full-year range.
Third-quarter sales grew 2.4% organically to $4.6 billion, ahead of the company's own expectation of flat to slightly up. Backlog rose 12% from a year earlier to more than $19 billion, and the company raised its second-half free cash flow outlook to $1.2 billion to $1.4 billion.
The supplier fix, one category at a time
CEO Jim Currier said the key to delivering on demand is "the supply chain unlock": insourcing, multisourcing, supplier tooling and capital spending. He said he has personally visited each of the 10 suppliers most essential to delivery, and that only about 70 of more than 3,000 suppliers are on the critical watch list.
Bearings are the most constrained category, Currier said. A second supplier is expected to clear its past dues in early 2027, and a third is investing to come online in the second quarter of 2027.
In complex machining, the workforce at one key supplier grew by over 20% from mid-third quarter to the start of the fourth, producing record weekly shipments beginning in October. Currier also said the company approved insourcing projects covering over $100 million of annual material spend.
2027 ramp and a bigger capital bill
Management expects output growth to build through 2027 as supplier actions take hold. Jepsen said capital spending, about $650 million this year, should step up next year, and flagged mix as a continuing margin headwind as original-equipment and domestic defense customers get priority.
The company also declared its first quarterly dividend, 40 cents per share, payable in December, and announced a $500 million, 300,000-square-foot expansion of its Tempe, Arizona campus, set to open in late 2028. Honeywell Aerospace made the call its first full quarter operating independently, and its market value stood at $53.2 billion in Wednesday trading.
Currier said the company remains committed to its 2030 targets, calling 2026 "somewhat of a transition year."
Sources
- Honeywell Aerospace (HONA) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates — Yahoo Finance
- Honeywell Aerospace Lifts 2026 Second-Half Free Cash Forecast, Declares Dividend — Reuters
- Honeywell Aerospace declares first quarterly cash dividend — Yahoo Finance
- Honeywell Aerospace to Release Q3 Earnings: What's in the Cards? — Yahoo Finance
- Honeywell Aerospace Inc. Non-GAAP EPS of $2.21 beats by $0.35, revenue of $4.6B beats by $20M (HONA:NASDAQ) | Seeking Alpha — seekingalpha.com
