Oct 28 (Reuters) - Honeywell Aerospace on Wednesday lifted the bottom of its free cash flow forecast for the second half of 2026 and declared a dividend, as the company counts a longer backlog and sees improvement among some struggling suppliers.
The manufacturer of aircraft engines, parts and defense systems 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.
In August, the newly spun-off Honeywell Aerospace 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, Honeywell Aerospace 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.
Arizona-based Honeywell Aerospace said pro forma standalone adjusted earnings per share for full-year 2026 would grow to $7.85 to $8.00 a share, from an earlier forecast of $7.60 to $7.90 a share.
Honeywell Aero 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 and a 13% year-on-year rise in net income to $737 million.
The company debuted on the Nasdaq in June after spinning off from Honeywell in a three-way split.
Honeywell Aerospace's board approved a quarterly cash dividend of $0.40 per share of its common stock payable on December 4, 2026, to shareholders of record as of the close of business on November 13, 2026.
"The board's decision to declare a regular dividend underscores the visibility into our durable free cash flow growth in the years ahead," Currier said.
(Reporting by Allison Lampert and Aatreyee Dasgupta in Bengaluru; Editing by Shailesh Kuber)