On Tuesday, Jefferies maintained a Hold rating on Honeywell International (NASDAQ:HON) but raised the price target to $260 from $220. The adjustment follows a series of strategic moves by Honeywell, notably influenced by Elliott Management's $5 billion investment revealed on November 12.
The stock, currently trading at $236 and near its 52-week high of $242.77, has shown strong momentum with an 18.5% return over the past year. According to InvestingPro analysis, the company maintains good financial health with a market capitalization of over $153 billion.
Honeywell's announcement on Monday indicated that an update on the Board of Directors' strategic portfolio review will be provided during their Q4 earnings per share (EPS) report. This update is particularly significant as it includes the potential separation of Honeywell's Aerospace segment, which accounts for 40% of sales and 45% of EBIT.
The Aerospace division's consideration for separation comes as Honeywell seeks to optimize its business structure. The analyst from Jefferies highlighted that a tax-free spin-off is the most probable route for Honeywell, considering the challenges in finding suitable buyers due to the Aerospace segment's operational difficulties.
With total revenue of $37.85 billion in the last twelve months and a strong return on equity of 33%, Honeywell demonstrates robust operational performance despite these challenges. The segment's significant contribution to Honeywell's overall financial performance makes the outcome of this strategic review highly anticipated by investors and market observers.
The strategic actions taken by Honeywell have been invigorated by Elliott Management's substantial investment. Elliott's involvement has a history of prompting companies to pursue aggressive strategies to enhance shareholder value, and Honeywell's recent moves seem to align with such an approach. The potential spin-off of the Aerospace segment is seen as a strategic attempt to streamline the company's operations and potentially unlock value.
Honeywell's upcoming Q4 EPS report is expected to shed more light on the company's strategic intentions and provide further details on the Board of Directors' review outcomes. The market will be watching closely for the implications of these strategic decisions on Honeywell's future performance and structure.
The raised price target by Jefferies reflects an acknowledgment of Honeywell's proactive measures in reassessing its business portfolio. As the company navigates through these strategic considerations, the hold rating indicates a wait-and-see approach until more definitive actions are taken and their results are evident.
InvestingPro subscribers can access 15 additional key insights about Honeywell, including detailed valuation metrics and growth indicators. For comprehensive analysis, check out the Pro Research Report, which provides deep-dive analysis of Honeywell among 1,400+ top US stocks.
In other recent news, Honeywell International Inc (NASDAQ:HON). has been considering the separation of its Aerospace division, a move that has been positively received by Elliott Investment Management, which holds a stake exceeding $5 billion in the company. The potential split is part of a broader portfolio evaluation initiated by Honeywell's CEO, Vimal Kapur.
Additionally, Honeywell has plans to sell its personal protective equipment business to Protective Industrial Products for approximately $1.33 billion and has expanded its portfolio through strategic acquisitions, including Carrier's security business and CAES Systems.
BofA Securities has reiterated its Neutral rating on Honeywell, maintaining a price target of $240.00. RBC Capital also maintained its Sector Perform rating on Honeywell shares, following the announcement of a commercial agreement with Bombardier (OTC:BDRBF). Meanwhile, Honeywell has been consistently paying dividends for 40 consecutive years, indicating a solid financial health.
These recent developments come as Honeywell continues its strategic efforts to enhance shareholder value. The company is expected to provide a formal update on its portfolio review process along with its fourth-quarter 2024 earnings release. However, the completion of the breakup is anticipated to take approximately 18 months from the initial announcement.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.