Oppenheimer has maintained its Perform rating on Honeywell International (NASDAQ: NASDAQ:HON), focusing on the company's announcement to spin off its Advanced Materials division as a separate public entity by late 2025 or early 2026.
The Advanced Materials business, which accounts for 10% of Honeywell's sales, is expected to generate $3.8 billion in sales with an EBITDA margin of over 25%.
The decision to spin off the Advanced Materials sector aligns with Honeywell's strategy to streamline its portfolio around three core themes: automation, aviation, and energy transition. The spin-off is part of a broader initiative to divest approximately 10% of Honeywell's business portfolio.
Initially, Honeywell considered selling parts of the Advanced Materials division but now sees the retention and spin-off of the full portfolio as a more valuable option.
Exploration and due diligence have led to the conclusion that keeping the Advanced Materials unit intact could lead to greater value creation. Despite the possibility of strategic buyers showing interest before the spin-off, Honeywell has set a high bar for any potential deal due to the structured nature of the tax-free spin-off.
In other recent news, Honeywell International has announced significant developments in its business operations. The company plans to spin off its Advanced Materials business, a move expected to be completed by late 2025 or early 2026. The new entity is projected to generate around $3.8 billion in sales, contributing to Honeywell's strategic focus on automation, the future of aviation, and energy transition.
In line with this, Honeywell has increased its annual cash dividend from $4.32 to $4.52 per share, marking its 15th consecutive dividend increase. TD Cowen maintains a Buy rating for Honeywell, highlighting the company's strategic moves, while Mizuho Securities has also maintained an Outperform rating, suggesting potential for mergers and acquisitions. Alternatively, Morgan Stanley (NYSE:MS) initiated coverage with an Equalweight rating, signaling caution about the company's near-term recovery prospects.
InvestingPro Insights
As Honeywell International (NASDAQ:HON) prepares to spin off its Advanced Materials division, InvestingPro data provides additional context to the company's financial position and market performance. With a substantial market capitalization of $132.1 billion, Honeywell remains a prominent player in the Industrial Conglomerates industry, as highlighted by one of the InvestingPro Tips.
The company's financial health appears robust, with revenue of $37.33 billion over the last twelve months and a gross profit margin of 37.56%. This solid performance is reflected in Honeywell's P/E ratio of 23.36, which suggests investors are willing to pay a premium for the company's earnings. However, an InvestingPro Tip notes that Honeywell is trading at a high P/E ratio relative to its near-term earnings growth, indicating that the market may have already priced in much of the company's growth potential.
Another relevant InvestingPro Tip points out that Honeywell has raised its dividend for 14 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy in the context of the upcoming spin-off, as it suggests the company's ability to maintain shareholder value while undergoing significant restructuring.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide further insights into Honeywell's strategic positioning and financial outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.