Jim Cramer’s Take on Honeywell Aerospace Inc.’s Recent Earnings Report

Honeywell Aerospace Inc. (NASDAQ:HONA), the aerospace spinoff of former conglomerate Honeywell International, has been making headlines in recent weeks following its second quarter earnings report. The report revealed that the company missed analyst revenue and earnings estimates, and also lowered its full year 2026 organic sales growth forecast to 4% to 5% from an earlier 7% to 9%.

During a morning session, Jim Cramer, a well-known stock market commentator, shared his thoughts on what went wrong with Honeywell Aerospace Inc.’s earnings report. Cramer pointed out that the company’s failure to disclose supply chain problems earlier was an ‘ill-advised’ move, which ultimately led to the missed earnings estimates.

‘Let me talk about Honeywell Aerospace, because we owned Honeywell and we got some of this. And we sold it. And we sold it because, not because the company missed. But I think the company missed because they were hopeful,’ Cramer said. ‘There were multiple opportunities to let shareholders know that there were supply chain problems that would cause them to miss the quarter. They waited, and waited, and waited, and didn’t tell us until they reported. I think that was ill-advised, an ill-advised way to disseminate the information.’

Cramer also emphasized that the problems at Honeywell Aerospace Inc. were ‘systemic’ and ‘really, really bad.’ He noted that the company’s credibility was in question due to the severity of the supply chain issues. However, he added that the company’s management should have been more proactive in disclosing the problems earlier.

‘The problems at Honeywell were actually systemic. They were really, really bad. There were many suppliers, even though it was just a couple of small percent. The cut was so big that the credibility of the company is in question,’ Cramer said. ‘I spoke with management, it’s funny Carl, I spoke with management. There would have been a time…where people would have said, oh my god, this is terrible. It was not dishonesty, it just was new. It was a rookie mistake.’

Cramer also pointed out that Honeywell Aerospace Inc. could have benefited from a preannouncement like IBM. He emphasized that the company’s failure to disclose the supply chain problems earlier had a significant impact on its earnings report.

Honeywell Aerospace Inc.’s Response to the Earnings Report

In response to the earnings report, Honeywell Aerospace Inc.’s CEO, Jim Currier, acknowledged that the company’s supply chain had been unable to ramp according to expectations. However, he added that the company was making progress with initiatives to ‘integrate supplier capacity, factory operations and customer delivery to create predictable growing throughput.’

The company’s CFO, Joshua Jepsen, also emphasized that the investments made by Honeywell Aerospace Inc. to meet the spares market’s capacity would ‘dampen near-term financial performance in the back half.’

Despite the challenges faced by the company, Honeywell Aerospace Inc. reported an $18.5 billion backlog, indicating that long-term demand is still present. Additionally, firms like BMO kept an Outperform rating, hinting that the long-term story of the company remains intact.

Why Honeywell Aerospace Inc. Could Deliver Over the Long Term

Despite the woes faced by Honeywell Aerospace Inc., the company’s aftermarket business grew by 8% to $1.8 billion. Additionally, the company could benefit from the Air Force’s 38% budget increase. However, the company’s woes are weighing more heavily on investors’ minds if the forward P/E ratio is considered.

Honeywell Aerospace Inc. currently trades at a forward P/E of 20.92, which is quite low compared to GE Aerospace’s 46.95 and Howmet’s 55.25. While Insider Monkey acknowledges the risk and potential of HONA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk.