Investing.com -- Honeywell International Inc (NASDAQ:HON) said on Thursday that it will spin off its aerospace and automation divisions into separate publicly traded companies, marking the breakup of one of the few remaining US industrial conglomerates. The move comes just months after activist investor Elliott Management took a $5 billion stake in the company.
The news of a breakup was first reported by the Wall Street Journal.
Honeywell shares initially rose on the news, but later reversed those gains after the company issued a disappointing guidance. The stock was down around 4% after the market open at 09:34 ET (14:34 GMT).
Under CEO Vimal Kapur, Honeywell has been actively reshaping its portfolio, divesting businesses outside its core focus on aviation, automation, and energy. Despite these efforts, activist investor Elliott Management, which holds its largest single investment in Honeywell, pushed for a full breakup.
Elliott's involvement followed a period of stock underperformance. By November 11, a day before Elliott disclosed its stake, Honeywell shares had gained 7.7% in 2024, compared to the broader market’s 26.6% rise.
Analysts previously valued Honeywell’s high-margin aerospace technologies (AT) segment at $90 billion to $120 billion, including debt. The business has benefited from airlines extending the use of older aircraft amid a shortage of new jets, driving demand for aftermarket services and parts.
The aerospace unit, Honeywell’s largest revenue contributor, generated about 40% of total revenue in 2024 and serves major clients like Boeing (NYSE:BA), Airbus, and the US government.
Honeywell had indicated in December that a spinoff of its aerospace division was under consideration. The company now plans to complete the separation by the second half of 2026, with the transaction structured as tax-free for shareholders.
According to WSJ, an independent Honeywell aerospace business would become one of the largest publicly traded aerospace suppliers, having recorded $15 billion in revenue in 2024. The automation business generated $18 billion in revenue last year, while the advanced-materials unit reported about $4 billion.
"AT is HON's marquee franchise but has often been cited as a pain point for supply chain delays," Jefferies analysts said in a note.
In its push for a breakup, Elliot cited the success of General Electric’s restructuring.
GE’s decision to split into three stand-alone businesses—focused on aerospace, energy, and healthcare—has significantly boosted its market value, with its aerospace unit alone now worth roughly $215 billion.
Honeywell has pursued acquisitions recently, spending around $10 billion in the past two years on deals, including a $5 billion purchase of a security business and a $2 billion acquisition in aerospace and defense technology.
Separately, Honeywell projected adjusted earnings per share (EPS) between $10.10 and $10.50 for 2025, coming in below analysts' average forecast of $10.91. The company expects full-year 2025 revenue to range between $39.6 billion and $40.6 billion, lower than the consensus estimate of $41.3 billion.
For the fourth quarter, Honeywell reported earnings per share of $2.47, slightly exceeding analysts’ expectations of $2.46. Revenue for the quarter reached $10.1 billion, surpassing the projected $9.97 billion.