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
-
Is Home Depot Stock Still a Buy After Its Beat-And-Raise Quarter?Home Depot stock is struggling for direction even after the retailer's strong earnings and full-year outlook, but Wall Street isn't worried. Here's what you need to know.
-
Shopify Earnings Momentum Accelerates Ahead of Holiday Shopping SeasonShopify stock is surging Tuesday after the e-commerce company beat Q3 expectations and gave a rosy outlook for the holiday shopping season. Here's what you need to know.
-
Is Home Depot Stock Still a Buy After Its Beat-And-Raise Quarter?
Home Depot stock is struggling for direction even after the retailer's strong earnings and full-year outlook, but Wall Street isn't worried. Here's what you need to know.
-
Shopify Earnings Momentum Accelerates Ahead of Holiday Shopping Season
Shopify stock is surging Tuesday after the e-commerce company beat Q3 expectations and gave a rosy outlook for the holiday shopping season. Here's what you need to know.
-
How to Plan for Retirement When Only One Spouse WorksWhen you're married but only one spouse works, leaving retirement planning to the working partner puts financial security at risk. A joint effort is vital.
-
Can a Judge Tell a Father to Avoid Risky Triathlons for His Sons?Mom wants Dad to quit participating in triathlons, which are known to have a higher risk of sudden cardiac death, but would a family law judge force him to stop?
-
Stock Market Today: S&P 500 Tops 6K as Election Rally EnduresThe S&P 500 closed just below the 6,000 mark on Monday.
-
Should You Trust Robo-Advisers With Your Retirement?Why use a financial adviser when you can get retirement planning tools online? The simple answer: Tech can't yet replace nuanced advice from a professional.
-
Unpaid Caregivers Soon May Get Help to Save for RetirementTwo proposed bills aim to open new doors to caregivers for contributing to Roth IRAs and making catch-up retirement contributions.
-
What Does the Trump Presidency Mean for the Fed?We take a look at what Donald Trump's potential economic plans could mean for inflation, the Fed and Jerome Powell. Here's what you need to know.
