Honeywell entered into a partnership with aviation manufacturer Bombardier to provide avionics, propulsion and satellite communications technologies for future aircraft of the Montreal-based company.
Aftermarket offerings and new technologies provide Honeywell potential revenue of as much as $17 billion over the life of the agreement, according to the Charlotte-based company. However, required investments related to the agreement led Honeywell to cut its guidance for the fourth quarter and fiscal year 2024. Honeywell shares fell 2.1% following the news, which was announced after the market closed.
“While the commercial agreement impacts near-term Honeywell financials, the company is confident it will lead to long-term value creation for Honeywell shareowners,” according to a release.
The partnership continues a pattern of Honeywell focusing on bolstering returns around three areas CEO Vimal Kapur describes as “megatrends.”
“Growing our long-term collaborative relationship with Bombardier is directly connected to Honeywell’s focus on compelling megatrends – automation, the future of aviation, and energy transition,” Kapur says in a release.
Honeywell lowered its earnings per share by 47 cents and sales by $0.4 billion. The company sees fourth-quarter adjusted earnings per share in a range of $2.26 to $2.36, down from a prior forecast for adjusted EPS of $2.73 to $2.83. Fourh quarter sales were cut to a range of $9.8 billion to $10 billion, from $10.2 billion to $10.4 billion.
For the full-year, adjusted EPS was expected in a range of $9.68 to $9.78, down from a prior forecast of $10.15 to $10.25. Sales guidance for fiscal year 2024 was cut to a range of $38.2 billion to $38.4 billion from $38.6 billion to $38.8 billion.
The agreement includes research and development centered on Honeywell avionics, selection of more powerful engines and next-generation satellite communications technologies for Bombardier aircraft.
“This new partnership creates unprecedented opportunities for Bombardier,” said CEO Eric Martel. “Honeywell’s differentiated technology is the key reason we decided to collaboratively build a bright future with them.”
The agreement calls for Honeywell and Bombardier to collaborate on Honeywell’s next-generation model HTF7K engine and internet connectivity for travelers.
“Working together, we will generate significant value for Bombardier’s operator base by providing the latest technologies to enable safe and efficient flight,” said Jim Currier, president and CEO of Honeywell Aerospace Technologies.
The deal also resolves a pending lawsuit between the two companies that Bombardier filed in 2016 over jet engine pricing. A Quebec judge in December ordered Honeywell to share records containing engine pricing information with an independent auditor. Honeywell had planned to appeal the ruling to the Supreme Court of Canada, Reuters reported. Details of the settlement are confidential.
Honeywell shares closed Monday at $229.95, down 1.28%. At 6:11 p.m., shares were down 2.11% Honeywell shares have gained 16% in the past year. It has a market capitalization of $149.5 billion.
Bombardier shares gained 0.5% to $97.26. The Canadian company’s stock has nearly doubled over the past year, buoyed by strong demand for its aircraft and record revenue from its aftermarket services business.