Honeywell Aerospace lifts second-half cash flow view, tops quarterly estimates

Oct 28 (Reuters) - Honeywell Aerospace HONA.O raised the lower end of its free cash flow forecast for the second half of 2026 on Wednesday and beat estimates for third-quarter profit and revenue, as it counts a longer backlog and sees improvement among some struggling suppliers.

Shares of the aircraft engines, parts and defense ​systems manufacturer rose 5% after the bell.

The Arizona-based company expects free cash flow of $1.2 billion to $1.4 billion in the second half of 2026, compared with its previous forecast of $1 billion to $1.4 billion. Free cash flow is closely watched by investors.

Planemakers ramping up jet production require more parts from an often struggling supply chain, even as airlines face pressure from high fuel prices.

Honeywell Aerospace debuted on the Nasdaq in June after spinning ​off from Honeywell HON.O in a three-way split.

In August, the newly spun-off company lowered its 2026 sales growth forecast and issued a weaker-than-expected earnings outlook as persistent supply-chain hurdles crimped its ability to meet surging ​aftermarket demand.

Management has previously described the current year as a transition period while it invests in suppliers, manufacturing capacity and workforce expansion, to boost production.

On Wednesday, CEO Jim Currier said in a statement that the company is seeing encouraging signs from some suppliers that have been holding production back.

"This progress, combined with ongoing qualification of additional material sources, positions us for higher sales and output growth in 2027 and beyond," he said.

Honeywell Aero also announced the expansion of its manufacturing facilities with a new $500 million, 300,000-square-foot Arizona facility, to meet growing demand across current and next-generation commercial aviation and defense programs. The facility is set to open in late 2028.

The company expects pro forma standalone adjusted earnings per share for full-year 2026 to grow to $7.85 to $8.00 a share, from an earlier forecast of $7.60 to $7.90 a share.

It reiterated its earlier organic sales growth guidance of 4% to 5% for 2026.

For the third quarter, Honeywell Aero reported $500 million in free cash flow compared with analysts' estimates of nearly $428 million, according to data compiled by LSEG.

For the quarter ended September 26, adjusted profit came in at $2.21 per share compared with estimates of $1.86 per share.

Quarterly sales rose 2% to $4.64 billion, ahead of estimates of $4.57 billion.