Honeywell International (HON) stock is the best Dow Jones stock Tuesday after activist investor Elliott Investment Management announced it has built a stake in the industrial conglomerate worth more than $5 billion. The activist investor also said it will push for a breakup of HON.
"The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification," Elliott said in a letter to Honeywell. It believes Honeywell should separate into two standalone companies – Honeywell Aerospace and Honeywell Automation.
"As independent entities, Honeywell Aerospace and Honeywell Automation would benefit from simplified strategies, focused management, improved capital allocation, better operational performance, enhanced oversight, and numerous other benefits now enjoyed by dozens of large businesses that have moved on from the conglomerate structure," Elliott said.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If Honeywell were to do this separation, Elliott believes it could result in potential upside of 51% to 75% in the industrial stock over the next two years.
"Over the past five years in particular, Honeywell's share price has dramatically underperformed both its peers and the broader market," Elliott said. "The unfortunate result is that Honeywell's cumulative total shareholder return has underperformed benchmarks across virtually all time periods over the past ten years."
Is Honeywell stock a buy, sell or hold?
Honeywell has lagged the broad market in 2024, up roughly 11% on a price basis vs the S&P 500's 25% gain. Still, Wall Street remains bullish on the blue chip stock. According to S&P Global Market Intelligence, the consensus recommendation among the 26 covering analysts it tracks is a Buy.
Speaking for the bulls is CFRA Research analyst Jonathan Sakraida, who maintained a Buy rating on HON following news of Elliott's stake.
"CFRA fully supports an accelerated portfolio transformation as HON is well behind other industrial peers in portfolio optimization that has created significant value for shareholders," Sakraida says. These peers include 3M (MMM) and General Electric (GE), now GE Aerospace following its March split, which have seen strong returns following their spinoffs, he adds.
"A leaner operating model built around secular growth tailwinds (e.g., automation, aviation, and clean energy) should command a higher multiple, in our view," Sakraida concludes.
Related Content
-
Stock Market Today: Stocks Chop as Judges Block Then Reinstate TariffsThe Trump administration has asked for and received a stay in a case that seems headed for the Supreme Court.
-
Quiz: What's Warren Buffett's Investment Philosophy?Puzzles Test your knowledge of the Oracle of Omaha's timeless wisdom in our multiple-choice quiz.
-
Stock Market Today: Stocks Chop as Judges Block Then Reinstate Tariffs
The Trump administration has asked for and received a stay in a case that seems headed for the Supreme Court.
-
Opportunity Zones Expert Sees Bright Future in 'Big, Beautiful Bill'New legislation introduces rural "super incentives" and expanded access, though a potential investment freeze could stall billions in community development funding. Here's what every investor needs to know.
-
Sorry, But AI Alone Doesn't Cut It for Financial PlanningArtificial intelligence has its place in retirement planning — but only as a tool. It falls short in several key areas that require a human touch.
-
Five Divorce Settlement Blind Spots: An Expert's Guide to What You Can't Afford to MissEven the best lawyers can miss tax and other financial considerations when drafting complex divorce settlements, so specialist advice is vital from the outset.
-
Stock Market Today: Stocks Struggle Ahead of Nvidia EarningsThe three main indexes closed lower as Wall Street awaited the AI bellwether's quarterly results.
-
Cryptocurrency May be Coming to Your 401(k) with Rules ChangeCrypto may be coming to a 401(k) near you. Financial experts weigh in on whether retirement savers should take the plunge.
-
Preparing for the Worst: Retirement During a RecessionIf you're close to retirement and today's economic uncertainty has your stomach in knots, follow my parents' example. They made it through, and so can you.
-
Is a Robo-Adviser Right for You? The Pros and ConsFor many folks, robo advice can likely be fine. It's inexpensive and easy ... but also a little one-size-fits-all. More complex financial situations may need a human touch.
