Honeywell International Inc

U.S. stock index futures were little changed on Thursday as investors weighed a potential Strait of Hormuz reopening and renewed AI spending concerns. Paycom Software surged 13.1% after reporting adjusted earnings of $2.78 per share, well above the $2.38 estimate, on revenue of $531.2 million. Data storage companies declined sharply, with Western Digital slumping 14.6% and Sandisk falling 9.2%, as their results failed to meet elevated AI-driven expectations. LegalZoom plunged 23% after cutting its full-year revenue forecast, citing a slowdown in Google Search traffic. Honeywell Aerospace fell 13.1% after slashing its full-year outlook in its first report as an independent company.

Honeywell Aerospace reported second quarter sales of $4.5 billion, up 5% year over year on both a reported and organic basis, and revised its full-year 2026 guidance downward. Net income fell 70% to $256 million, while adjusted EBIT declined 7% to $995 million, including roughly $100 million in separation-related costs and inventory obsolescence charges. The company, which completed its spin-off from Honeywell Technologies on June 29, now expects full-year organic sales growth of 4% to 5%, down from a prior range of 7% to 9%, and pro forma standalone adjusted EBIT of $4.35 billion to $4.45 billion, compared with the earlier $4.65 billion to $4.75 billion. It initiated full-year pro forma standalone adjusted earnings per share guidance of $7.60 to $7.90 and maintained its second-half free cash flow guidance of $1.0 billion to $1.5 billion. Backlog grew 9% to $18.2 billion, and the company highlighted $15 billion in new wins year to date, including a landmark avionics and power systems agreement with IndiGo for 810 Airbus A320neo family aircraft.

Honeywell Aerospace Inc. began trading as an independent public company, offering investors direct exposure to a scaled aerospace supplier with an approximately $18.4 billion backlog. The company’s portfolio spans avionics, propulsion, flight control, and connected aerospace software across commercial aviation, business aviation, defense, and space. The spin-off from Honeywell International allows management to focus capital allocation and product development solely on aerospace and defense, supported by a large installed base that generates recurring aftermarket revenue. However, the stock faces risks from aircraft-cycle volatility, supply-chain constraints, and geopolitical pressures, and currently carries a Zacks Rank #3 (Hold) while trading at 23.1 times forward earnings.

As second-quarter earnings season begins, Seeking Alpha's Quant Rating system identifies 39 large-cap US stocks carrying Sell or Strong Sell ratings, reflecting weaker scores across valuation, growth, profitability, momentum, and earnings estimate revisions. Seven of these companies hold the lowest Strong Sell designation with Quant Ratings below 1.50: Crown Castle, SBA Communications, Honeywell, Strategy, Zoetis, Erie Indemnity, and Tractor Supply. The remaining 32 stocks are rated Sell, including widely followed names such as Coinbase Global, Blackstone, S&P Global, Domino's Pizza, Lennar, Clorox, and Fidelity National Information Services. While some of these companies have delivered positive share-price returns this year, their Quant Ratings suggest investors should watch for potential downside risks as quarterly results and guidance are released.

Morgan Stanley maintained a constructive outlook on the aerospace and defense sector ahead of second-quarter earnings, citing resilient commercial aerospace demand, improving aircraft production, and favorable long-term defense spending trends, while becoming more selective after recent stock volatility and valuation shifts. The brokerage reiterated positive views on commercial aerospace, defense, and space, highlighting durable aftermarket demand driven by sustained fleet utilization, low aircraft retirement rates, constrained maintenance capacity, and continued engine maintenance needs. It also said Boeing's production recovery is gaining momentum, with the 737 MAX running at 47 aircraft per month and further certification milestones expected to support the commercial aerospace outlook. In defense, Morgan Stanley said investors continue to underestimate the likelihood of a roughly $1.1 trillion U.S. fiscal 2027 base defense budget, arguing that supply-chain improvements and expanding missile production capacity should provide further upside for the sector. The firm also expects space companies to benefit from upcoming launch milestones, improving order trends, and NASA's commercial International Space Station procurement. Reflecting changing valuations rather than weakening fundamentals, Morgan Stanley downgraded Loar Holdings and TransDigm to Equal-weight, while cutting CAE and Voyager Technologies to Underweight. At the same time, it named FTAI Aviation as its top commercial aerospace pick, Northrop Grumman as its preferred defense stock, and HawkEye 360 as its top space investment. The brokerage also revised several price targets, lowering targets for companies including Honeywell Aerospace, VSE, Textron, StandardAero, Loar, and TransDigm, while raising targets for Heico, Curtiss-Wright, and Moog. It said the expanding universe of publicly traded aerospace and defense companies has increased investment opportunities but also requires greater selectivity.

Honeywell Technologies reported a 6% year-over-year decline in organic revenue for its Process Automation and Technology segment in the first quarter of 2026. The drop was driven by a 10% fall in aftermarket organic sales due to lower refining catalyst shipments and project delays, along with reduced customer demand in the Middle East amid ongoing geopolitical tensions. The company expects the Middle East conflict to negatively impact segment sales by 1% in the second quarter. Despite the near-term headwinds, orders in the segment's petrochemical and refining verticals grew 11% year over year in the first quarter. Honeywell Technologies became a standalone public company on June 29 following the spin-off of the Aerospace Technologies business from Honeywell International, completing a multi-year restructuring into three independent publicly traded companies.

The Nasdaq Composite rose 0.9% by midday Thursday as semiconductor stocks rallied on Micron Technology's $3 billion U.S. investment announcement. The S&P 500 gained 0.6% and the Dow added 0.3%, held back by a 9.2% drop in Honeywell International following its aerospace spinoff. Micron surged 7.5% after unveiling the investment, part of a broader plan to pour more than $250 billion into domestic chipmaking over the next decade, lifting Advanced Micro Devices by 7.2%, Broadcom by 3.3%, and the iShares Semiconductor ETF by 5.2%. Oil prices reversed sharply after President Trump suggested Iran called to make a deal, with the United States Oil Fund falling 2.7%, though military strikes continued on both sides. Alphabet fell 2.5%, becoming the biggest drag on the Nasdaq and S&P 500 as the hardware rally came at the expense of software and hyperscaler stocks.

Honeywell has completed the spin-off of its Aerospace Technologies business, emerging as a separate public company on June 29 and repositioning itself as a premier pure-play automation company. The move marks the final step in a multi-year restructuring that separates Honeywell into three stand-alone publicly traded companies, aiming to sharpen its focus on industrial automation. Following the spin-off, Honeywell shares have edged down 1.2%, while the company projects 2026 revenues between $19.9 billion and $20.2 billion with organic growth of 2% to 3%. Analysts at Zacks Investment Research rate the stock a Hold, citing near-term headwinds including a 6% organic revenue decline in the Process Automation and Technology segment and rising costs, despite strong momentum in Building Automation and a forward P/E of 10.23 times, a discount to the industry average of 11.73 times.

Honeywell International is expected to report fiscal second-quarter 2026 earnings of $4.83 per share, down 12.2% from $5.50 a year ago, when it announces results before the market opens on Thursday, July 23. The company has beaten Wall Street EPS estimates in each of its last four quarterly reports. For the full year, analysts project EPS of $21.04, a 7.6% increase from $19.56 in fiscal 2025, with further growth to $22.89 expected in fiscal 2027. Honeywell shares have fallen 50.8% over the past 52 weeks, sharply underperforming the S&P 500's 20.7% gain and the Industrial Select Sector SPDR ETF's 23.9% advance. The stock carries a Moderate Buy consensus rating from 25 analysts, with an average price target of $457.27, implying a potential upside of 106.2% from current levels.