Company Reports

Honeywell Aerospace is one of the largest aircraft component and systems suppliers. We think its substantial scale gives it negotiating leverage with aircraft manufacturers, as it provides many systems and can selectively bid on critical components. Given their long service life and the need for recurring overhauls, we see some of Honeywell Aerospace’s components as fitting the razor-and-blade business model, with original equipment sales (sometimes at low or no margins) as the razor and recurring service and parts revenue (often at high margins) as the blades.

Honeywell Aerospace is one of the largest aircraft component and systems suppliers. We think its substantial scale gives it negotiating leverage with aircraft manufacturers, as it provides many systems and can selectively bid on critical components. Given their long service life and the need for recurring overhauls, we see some of Honeywell Aerospace’s components as fitting the razor-and-blade business model, with original equipment sales (sometimes at low or no margins) as the razor and recurring service and parts revenue (often at high margins) as the blades.

Second-quarter revenue grew 5.4% to $4.5 billion, held back by a slower-than-anticipated 1.2% increase in engines and power systems, due to lingering supply chain headaches. Segment operating profit of $995 million resulted from nearly three points of margin contraction since the year-ago quarter.

Honeywell Aerospace is one of the largest aircraft component and systems suppliers. We think its substantial scale gives it negotiating leverage with aircraft manufacturers, as it provides many systems and can selectively bid on critical components. Given their long service life and the need for recurring overhauls, we see some of Honeywell Aerospace’s components as fitting the razor-and-blade business model, with original equipment sales (sometimes at low or no margins) as the razor and recurring service and parts revenue (often at high margins) as the blades.

Honeywell Aerospace completed its spinoff from its former parent, Honeywell Technology, on June 29.