Honeywell International Inc. (HON) has responded to activist hedge fund Elliott Investment Management’s calls to break up the industrial conglomerate by considering a potential separation from its high-margin aerospace division. The move is part of broader efforts to reshape its large portfolio of businesses.
CEO Vimal Kapur stated that Honeywell is now “well-positioned for significant transformational alternatives” and plans to provide another update with its fourth-quarter earnings release. Elliott Investment Management, which has taken a more than $5 billion position in Honeywell last month, applauded the remarks and expressed support for the portfolio transformation.
The stock price has surged over 3% on Monday, continuing an upward trend for the industrial stock in recent weeks. Despite stagnant revenue growth and lagging share prices, Honeywell’s aerospace division is its crown jewel, and the potential separation could be a solid move for management to focus on this more profitable segment.
Jim Cramer, founder of The Cramer Network and CNBC’s Investing Club with Jim Cramer, expressed his support for the plan, calling it “brilliant” and saying it would lead to multiple expansion over time. He notes that other successful conglomerate spin-offs like GE Aerospace have also achieved success.
Honeywell has already made strides in divesting non-core businesses, including a $1.3 billion sale of its personal protective equipment business last November. The company’s advanced materials business could be worth up to $10 billion as a standalone entity. With the potential separation, Honeywell appears to be taking a more aggressive approach to focus on more profitable segments, which is good news for shareholders like Elliott Investment Management and Jim Cramer’s Charitable Trust.
Source: https://www.cnbc.com/2024/12/16/honeywells-aerospace-spin-off-would-be-an-overdue-jolt-for-the-stock.html