MW Honeywell to split into three companies, but stock drops as outlook disappoints

By Barbara Kollmeyer and Tomi Kilgore

CEO says separation should unlock 'significant' shareholder value, but stock falls after a downbeat profit outlook

Shares of Honeywell International Inc. turned lower Thursday, after the multinational conglomerate confirmed a plan to split itself into three independent companies but also provided a disappointing earnings outlook.

Honeywell said it will pursue a full separation of its automation and aerospace technologies businesses, and will continue with its previously announced plan to spin off its advanced-material arm. The separations are expected to be completed in the second half of 2026.

"The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies, and unlock significant value for shareholders and customers," said Chief Executive Vimal Kapur.

Honeywell's stock $(HON)$ initially rose, as much as 6.5% in the premarket, after the Wall Street Journal reported the plan. But at the same time the company confirmed the separation plan, it also reported fourth-quarter results. The stock dropped 2.9% toward a three-month low in recent trading.

Included in the results, the company said it expects 2025 adjusted earnings per share of $10.10 to $10.50, while analysts surveyed by FactSet were expecting $10.92, on average.

The company also guided for 2025 sales of $39.6 billion to $40.6 billion, which was below the FactSet sales consensus of $41.3 billion.

Honeywell's move comes less than a year after the former General Electric completed its split into three companies, and the stocks of all three of GE's new independent business are all trading well above where they were at the time of the separations. GE Aerospace's $(GE)$ stock closed at a record last week, and GE Vernova $(GEV)$, the power and renewable energy company, closed at a record two weeks ago.

Honeywell had announced plans to spin off the advanced-materials business last October. In November, activist investor Elliott Investment Management disclosed a $5 billion stake in the company, urging Honeywell to turn its aerospace and automation businesses into separate companies.

Weeks later, the company said it was looking at spinning off the aerospace unit.

Separately, the company also reported fourth-quarter earnings that beat expectations.

Net income rose to $1.29 billion, or $1.96 a share, from $1.26 billion, or $1.91 a share, in the same period a year ago.

Excluding nonrecurring items, such as pension expenses and acquisition-related costs, adjusted EPS fell to $2.47 from $2.69 but beat the FactSet consensus of $2.32.

Net sales grew 6.9% to $10.09 billion, to top the FactSet consensus of $9.84 billion.

Aerospace technologies sales increased 8.5% to $3.99 billion, building automation sales jumped 19.5% to $1.8 billion and energy and sustainability sales were up 4.3% to $1.73 billion, while industrial automation sales fell 1.2% to $2.57 billion.

Free cash flow decreased by 27% to $1.9 billion, above the FactSet consensus of $1.8 billion. For 2025, the company projects free cash flow of $5.4 billion to $5.8 billion, below the current FactSet consensus of $6.4 billion.

Honeywell's stock has gained 14.8% over the past 12 months through Wednesday, while the Industrial Select Sector SPDR ETF XLI has advanced 18.2% and the S&P 500 index SPX has rallied 22.4%.

-Barbara Kollmeyer -Tomi Kilgore

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February 06, 2025 07:27 ET (12:27 GMT)

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