Honeywell Aerospace (NASDAQ: HONA) raises EPS outlook and declares first dividend

What happened

Honeywell Aerospace Inc. (NASDAQ: HONA) raised its full-year adjusted earnings-per-share guidance and declared a $0.40 quarterly dividend after its first quarter as a standalone company. Demand is strong, but profit growth is thin and partly tariff-driven.

Full-year pro forma standalone adjusted EPS guidance is now $7.85 to $8.00, up from $7.60 to $7.90. Second-half free cash flow guidance moved to $1.2 billion to $1.4 billion from $1.0 billion to $1.4 billion. Organic sales growth guidance stayed at 4% to 5%.

Third-quarter sales were $4.6 billion, up 2% from a year earlier on a reported and organic basis. Net income rose 13% to $737 million from $654 million. Adjusted EBIT rose 1% to $1.16 billion from $1.15 billion.

Key numbers

Metric	Latest	Change	Source
Net sales, third quarter	$4.64 billion	from $4.53 billion, +2%	SEC 8-K Exhibit 99.1
Net income, third quarter	$737 million	from $654 million, +13%	SEC 8-K Exhibit 99.1
Adjusted EBIT, third quarter	$1.16 billion	from $1.15 billion, +1%	SEC 8-K Exhibit 99.1
Backlog at quarter end	$19.3 billion	from $17.26 billion, +12%	SEC 8-K Exhibit 99.1
Free cash flow, third quarter	$500 million		SEC 8-K Exhibit 99.1
Quarterly dividend per share	$0.40		SEC 8-K Exhibit 99.1

Read more: Honeywell Aerospace (HONA) company research

Backlog, orders and supply limits

Backlog grew to $19.3 billion at quarter end, up 12% from a year earlier. Trailing twelve-month orders rose 9%, led by Defense and Space. The company said it has secured more than $20 billion in new wins this year, measured by estimated lifetime value.

Sales grew more slowly than backlog. Commercial Original Equipment sales rose 7% to $690 million as build rates increased. Commercial Aftermarket sales grew 2% to $2.13 billion. The company said demand was healthy but limited by the supply of mechanical components. Defense and Space sales rose 1% to $1.83 billion.

By OptimistFi's calculation, aftermarket was 45.8% of third-quarter sales, the largest of the three end markets. OptimistFi has argued that HONA is a durable compounder only if its certified engine and parts positions create recurring, high-switching-cost demand. Backlog growing faster than sales fits that view, because the company ties slower sales to supplier constraints.

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Why it matters

Adjusted EBIT includes an approximately $50 million net benefit from tariff refunds under the International Emergency Economic Powers Act. It also includes new costs of being an independent public company. The $10 million year-over-year rise in adjusted EBIT is smaller than that tariff benefit.

The segments diverged. Electronic Solutions adjusted EBIT rose 11% to $564 million, as tariff refunds and pricing more than offset unfavorable mix and higher costs. Engines and Power Systems fell 16% to $250 million from $299 million, as unfavorable mix and higher costs outweighed price and tariff refunds.

Net income grew 13% even though net interest expense was $187 million, against net interest income of $5 million a year earlier. The company's reconciliation shows environmental expense of $19 million versus $258 million, and transaction costs of $18 million versus $143 million.

Diluted EPS was $2.29. Adjusted EPS was $2.21 after removing $0.18 a share of pension income and adding back $0.10 of amortization and transaction costs.

The dividend and the debt behind it

The board declared its first quarterly cash dividend as an independent public company. CEO Jim Currier said the decision reflects visibility into durable free cash flow growth. Third-quarter free cash flow was $500 million: operating cash flow of $668 million less capital spending of $168 million.

The separation left the company with debt. Long-term debt was $15.85 billion on Sept. 26, against $4 million at Dec. 31, 2025. Total equity was a deficit of $2.49 billion. Cash stood at $1.56 billion, up from $213 million at year-end.

What's next

The dividend is payable Dec. 4 to shareholders of record at the close of business Nov. 13. Payment on those dates is the next dated test of the board's free cash flow confidence.

The company is expanding its Tempe, Arizona manufacturing facility by 300,000 square feet, with opening expected in late 2028. Management said supplier progress and qualification of additional material sources position it for higher sales and output growth in 2027.

Sales growth that moves closer to backlog growth would show the supply limits easing. Adjusted EBIT growth inside the guided 1% to 2% for the full year is the profit marker to hold the company to.

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