Honeywell International stock climbs on possible spinoff

• Honeywell stock gains on announcement of likely spinoff of aerospace unit.
• HON stock ramps up over 4% on Monday.
• The announcement follows a deal with Bombardier earlier this month that was expected to dent earnings.
• Hedge fund Elliot Management praises the announcement.

Honeywell International (HON) stock has climbed 4.4% on Monday afternoon after Wall Street warms to a possible spinoff of the industrial heavyweight’s aeronautics division could streamline the capital intensive company’s balance sheet.

The Dow Jones Industrial Average (DJIA), which houses Honeywell as one of its 30 index constituents, sank lower on continued weakness by UnitedHealth Group (UNH), one of its largest holdings. This was the opposite direction of the NASDAQ Composite, which rallied 1.3% at the time of writing.

Honeywell stock news

Honeywell’s Chairman and CEO, Vimal Kapur, released a statement on Monday saying that the aerospace unit is being sized up for a possible separation from the main company’s other two divisions: Automation and Energy Transition. The CEO said to expect further news on this front at the company's next earnings release, currently slated for February 6 next year.

"Following the portfolio enhancements announced earlier this year, Honeywell is now well-positioned for significant transformational alternatives, and we are continuing our deeper, more granular exploration of their feasibility and possible timing," Kapur said. "Honeywell's Board of Directors remains committed to maximizing shareholder value creation, and any decision will be evaluated against that goal."

Honeywell announced in early December that a new partnership with Canadian aviation firm Bombardier would require extensive capex. This deal would lead to a 17% reduction in projected per share earnings in the fourth quarter, a detail that led HON stock to sell off on December 3.

What Kapur did not mention is that much of the pressure for a spinoff likely stems from Elliott Investment Management, the activist hedge fund run by Paul Singer that announced a $5 billion stake in Honeywell in November. It was known immediately that Elliot was seeking to force a split of the automation and aerospace assets.

In late November, Honeywell had already announced the sale of its Personal Protective Equipment unit to a private equity firm for more than $1.3 billion in cash.

Elliott partners Marc Steinberg and Jesse Cohn released a statement praising the new vision of Honeywell’s C suite.

“We believe the portfolio transformation Vimal and his team are leading represents the right course for Honeywell, and we look forward to the upcoming completion of the review and to supporting Honeywell as it implements the necessary steps to realize its full value,” reads the statement from the hedge fund.

In October, Honeywell had announced a separate spinoff to shareholders of its Advanced Materials unit. The company expects the spinoff will be completed by late 2025 or early 2026.

HON daily stock chart