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
-
Why Digitizing Your Tax Records Can Simplify Your Filing in 2025Tax Records If you can, switching from paper to e-filing your taxes can have many benefits.
-
What Stock Pros Expect to See in 2025The jury's out on the 2025 stocks forecast: will investors enjoy higher interest rates that dampen the market, or another year of double-digit returns?
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
What Are Passive Income Strategies and How Can I Use Them in 2025?An extended period of rising prices has everyone looking for a little more cash to make ends meet.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
Stock Market Today: Stocks Jump Ahead of Trump InaugurationThe Dow and S&P 500 scored their biggest weekly gains since the early November election.
-
SLB Stock Jumps on Earnings, Dividend Hike and Buyback NewsSLB stock is soaring Friday after the energy firm reported strong fourth-quarter earnings and unveiled several shareholder-friendly initiatives.
-
Why J.B. Hunt Stock Is Sinking After EarningsJ.B. Hunt stock is notably lower Friday after the logistics company fell short of fourth-quarter earnings expectations. Here's what you need to know.
