Honeywell International Inc. has announced significant changes to its corporate structure, aiming to create three standalone companies focusing on aerospace, automation, and advanced materials. This strategic restructuring, planned for completion by 2026, is expected to unlock substantial shareholder value, mimicking the success of similar breakups in the aerospace sector, such as those by GE and RTX. However, alongside this announcement, Honeywell reported a mixed financial outlook that has left investors with varying sentiments.
The company's recent financial results revealed that adjusted earnings per share (EPS) fell 8% to $2.47, surpassing the consensus forecast of $2.32. Despite this beat, Honeywell's stock experienced a 5.5% decline after investors reacted to its disappointing 2025 guidance. Jim Cramer highlighted that current stock prices represent a good buying opportunity, suggesting optimism about Honeywell’s long-term prospects, despite its current challenges.
Honeywell's segment margins are projected to improve by 60 to 100 basis points from the previous year, though excluding Bombardier, margins are anticipated to fluctuate between a decrease of 10 basis points and an increase of 30 basis points. The company is forecasting EPS in the range of $10.10 to $10.50 for the upcoming period, which falls short of the FactSet consensus estimate of $10.92. This conservative outlook includes the assumption that the sale of its personal protective equipment business will close by midyear.
Last year, Honeywell had to revise its numbers downward after predicting a recovery in its short-cycle business that did not materialize. In alignment with its restructuring strategy, Honeywell plans to spin off its advanced materials segment by late 2025 or early 2026. Additionally, it intends to separate its aerospace and automation divisions in the latter half of 2026. This strategic pivot reflects the company's commitment to focusing on specialized sectors where it can leverage its expertise and market presence.
Revenue for Honeywell increased by 6.9% year-over-year in the fourth quarter, reaching $10.1 billion and exceeding the LSEG compiled consensus estimate of $9.8 billion. This revenue growth demonstrates the company's resilience amid challenging market conditions and supports its decision to pursue a breakup strategy.
The CNBC Investing Club noted that Honeywell's breakup and 2025 forecast unfolded precisely as anticipated. The separation into three entities is designed to streamline operations and foster innovation within each division, ultimately driving growth and shareholder returns. The company's forecast carefully avoids any assumptions related to tariffs, ensuring a more stable outlook amidst potential geopolitical uncertainties.