Honeywell Aerospace is preparing for significant growth as it nears its separation from parent company Honeywell International later this month. Jim Currier, CEO of Honeywell Aerospace, is forecasting substantial earnings growth for the division, emphasizing its new focus as a standalone entity.
Currier told CNBC at his company's investor day that the new structure provides a "purpose-built management team just solely focused on one strategy, one mission as opposed to disparate missions of a conglomerate." This strategic shift aims to unlock greater value by concentrating exclusively on the commercial aviation and defense industries.
As an independent company, Honeywell Aerospace projects adjusted earnings before interest and taxes for the full year 2026 to range between $4.65 billion and $4.75 billion. Additionally, it expects to generate free cash flow in the second half of 2026 of $1 billion to $1.5 billion. Looking further ahead, the company is targeting annual earnings of at least $6.5 billion and full-year free cash flow of at least $4 billion by 2030.
Currier highlighted that the primary drivers for this anticipated growth are the commercial transport market and the defense and space sectors. "The greatest growth for us is occurring in the commercial transport market and in defense and space," Currier said Wednesday, noting the company's strong positioning with its products and technologies. Honeywell Aerospace also holds "record" backlog orders from major aircraft manufacturers like Airbus and Boeing.
Strategic Rationale for Separation
The decision to separate Honeywell Aerospace stems from Honeywell International's broader strategy to enhance shareholder returns. For decades, the aerospace division operated as a key component of the larger conglomerate, becoming a leading manufacturer and supplier in commercial, business, and defense aviation markets. Its technologies, ranging from flight management systems in cockpits to engine controls and auxiliary power units, are integral to thousands of aircraft. Last year, the business reported profits exceeding $4.2 billion with margins of 24.5%.
However, these strong divisional results were often overshadowed by the overall performance of Honeywell International, which has struggled to match the stock returns seen by the broader market and its competitors in recent years. Since June 2023, Honeywell shares have risen approximately 20%, significantly underperforming the S&P 500's roughly 77% gains over the same period. This underperformance was a primary reason Honeywell decided in 2024 to break its operations into three distinct companies: Solstice Advanced Materials, Honeywell Technologies, and Honeywell Aerospace.
Honeywell CEO Vimal Kapur explained the rationale, stating last month to CNBC, "Essentially, on the other side of the separation… each business is positioned so well for the market it serves." The aim is for each entity to thrive by focusing on its core market.
Converting Skeptics and Addressing Challenges
For investors, Honeywell Aerospace offers a pure-play investment opportunity in the growth trajectories of commercial aviation and the defense industry. This focused approach has yielded positive results for similar spin-offs; GE Aerospace, for instance, saw its stock surge about 125% since becoming a standalone company in April 2024, far surpassing the S&P 500's nearly 45% gain and Honeywell's approximately 20% increase during the same timeframe.
Currier believes Honeywell Aerospace has the team and technologies to capitalize on the expected continued demand for air travel worldwide. The company has set ambitious targets, aiming for organic annual sales growth of 6% to 8% through 2030, alongside annual earnings growth of 9%.
Despite this optimism, Honeywell Aerospace has faced scrutiny regarding recent supply chain issues that impacted its first-quarter performance. The company says these temporary challenges were tied to the war in the Middle East, which weighed on its engines and control systems divisions in January and February. Executives have since stated that problems with some suppliers have been corrected. Nonetheless, analysts will likely push Currier for a greater understanding of the state of the Honeywell Aerospace supply chain. Wolfe Research analyst Nigel Coe noted in a recent report, "Bottom line: This is an opportunity for management to convert a generally skeptical crowd of aerospace specialists."
This spin-off represents a pivotal moment for Honeywell Aerospace, as it seeks to demonstrate its capacity for accelerated growth and independent market leadership, distinct from its conglomerate past.
