Why Did Honeywell Aerospace Stock Drop on Thursday?
Key Points
Honeywell Aerospace's earnings inched higher in its first quarter as an independent company.
The stock trades at a rich valuation, and needs to grow faster to deserve it.
- 10 stocks we like better than Honeywell Aerospace ›
Honeywell Aerospace (NASDAQ:HONA) shares tumbled 10.5% through 10:30 a.m. ET Thursday despite beating earnings forecasts last night.
Heading into Honeywell's Q3 report, analysts expected the airplane engines and parts manufacturer to earn only $1.86 per share on a bit less than $4.6 billion in sales. In fact, Honeywell earned $2.21 per share on more than $4.6 billion -- and then the stock sold off anyway.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Image source: Getty Images.
Honeywell Aerospace Q3 earnings
So what went wrong with Honeywell Aerospace last night? Well, to be honest, while Honeywell beat expectations, its performance was still a little ho-hum. Sales grew only 2% year over year, and net profit was up just 1%.
Still, CEO Jim Currier pointed out that the results were "above our expectations [for the company's] first quarter as a stand-alone company, increasing sales and adjusted EBIT sequentially and year over year." Honeywell was helped by accelerating rates of commercial aircraft production among its customers, which drove up sales in its commercial original equipment division by 7%.
Problem is, that's Honeywell's smallest division. Commercial aftermarket and defense and space sales are both much bigger businesses, and those grew only 2% and 1%, respectively.
What's next for Honeywell Aerospace stock
Things are looking up for Honeywell Aerospace as it enters its second quarter as an independent company. Honeywell has won more than $20 billion in new contracts this year, enough new business to more than replace its $13.5 billion in year-to-date revenue, giving the company a book-to-bill ratio of about 1.5x.
However, it's only generating free cash flow at an annualized rate of about $2.6 billion. Trading at 20x free cash flow, Honeywell needs to capitalize on its book-to-bill and grow faster to deserve its current premium valuation.
Should you buy stock in Honeywell Aerospace right now?
Before you buy stock in Honeywell Aerospace, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Honeywell Aerospace wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $334,308!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,323,413!*
Now, it’s worth noting Stock Advisor’s total average return is 897% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of October 29, 2026.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Honeywell Aerospace. The Motley Fool has a disclosure policy.
Recommended Articles
