Aerospace and Defense: On the Radar: 7/27/26-7/31/26

Research evidence excerpt

Aerospace and Defense: On the Radar: 7/27/26-7/31/26

nufacturers (i.e. CFM, Pratt, and

Rolls). The airframers would then participate in the high returns of maintaining the

engines as well, and this could help insure better alignment of incentives between the two

groups. Airbus has mooted this proposition before, but interestingly, on its earnings call

last week, Pratt parent RTX spoke favorably about it. Such an arrangement could also

facilitate Rolls’ re-entry into the narrowbody market. With the biggest installed base of

engines and considerable balance sheet strength, it’s less clear to us how readily CFM

(GE/Safran) would embrace this new model.

• HON reported Q2 earnings, including its former Aerospace segment, which became

HONA at the end of the quarter. While the results were not exactly apples-to-apples, the

market still found them disappointing, contributing to HONA underperformance last

week, in our view. Sales for the former Honeywell Aerospace segment were up 5% y/y

vs our estimate for 7%. Surprisingly, Defense sales did not grow despite strong demand

due to supply chain issues. Also, the segment margin rate was down 70 bps y/y and

included an inventory obsolescence charge.

• The administration will not escalate the war with Iran militarily at this time, in part due

to concerns about a shortage of air defense munitions, the New York Times reported. The

fact that the munitions shortage is cutting into US deterrent power should add urgency

to the efforts to ramp production.

• Chinese demands around maintenance and spare parts, including for engines, are

delaying finalization of a 200 aircraft order for Boeing that that the US and China had

agreed to during President Trump’s trip to China in May, according to Politico. China’s