Showing posts with label Honeywell. Show all posts

Monday, October 27, 2025

Here’s a concise, investor-ready readout on Honeywell (HON), with the Solstice spin-off front and center and context on Quantinuum.

CHARLOTTE, N.C., Oct. 28, 2025 /PRNewswire/ -- Honeywell (NASDAQ: HON) today introduced a breakthrough technology that converts agricultural and forestry waste into ready-to-use renewable fuels for hard-to-abate sectors, such as the maritime industry. The technology produces lower-carbon marine fuel, gasoline and sustainable aviation fuel (SAF) from inexpensive and abundant biomass sources like wood chips and crop residues.

Honeywell: Investment/Business Brief (as of Oct 27, 2025)

Setup & Thesis

Honeywell is in the middle of a multi-step breakup designed to unlock value: (1) spin off Solstice Advanced Materials on Oct 30, 2025; (2) separate Aerospace and Automation into two independent companies in 2H26. The company just posted a strong Q3 and raised FY2025 EPS guidance to $10.60–$10.70 even after carving out Solstice’s Nov–Dec contribution. Honeywell+1

Near-term catalyst: Solstice spin-off (ticker: SOLS)

Record date: Oct 17, 2025.
Distribution: expected 12:01 a.m. ET, Oct 30, 2025.
Ratio: 1 Solstice share for every 4 Honeywell shares.
Listing: Nasdaq, ticker SOLS, from Oct 30, 2025.
Status: Board approval finalized Oct 16, 2025; Solstice completed a $1B senior notes offering in preparation. Honeywell International Inc.+3Honeywell+3Honeywell+3

Why it matters: Honeywell is lifting guidance even after removing the late-year Solstice piece, signaling underlying strength (Aerospace/Automation). Street coverage highlights the spin as part of a broader value-unlock program. Barron's+1

“Eventual” Quantinuum separation

Honeywell remains majority owner of Quantinuum (formed 2021 from HQS + Cambridge Quantum). Management and reporting indicate an IPO/window targeted for late-2026 to 2027, market-conditions permitting. Quantinuum raised $300M at a $5B pre-money in 2024 and ~$600M in 2025, lifting the private valuation to ~$10B. Treat as a medium-term (not next-12-months) optionality lever for HON holders. Barron's+3Honeywell+3quantinuum.com+3

Financials snapshot (Q3’25; FY’25 guide)

Q3 sales: $10.4B (+7% y/y); Adj. EPS $2.82; orders +22%; backlog at a high.
FY’25 guide (ex-post-spin Solstice months): sales $40.7–$40.9B; Adj. EPS $10.60–$10.70; FCF $5.2–$5.6B. Honeywell+2Honeywell International Inc.+2

Segment color (Q3): Aerospace up ~15% (commercial aftermarket strength); Industrial Automation softer; Building Automation modest growth. Reuters

Valuation

At ~$215, HON trades at ~20.2× FY’25 adj. EPS midpoint (~$10.65). Market cap is ~$136–$137B; FCF yield ~4% on the mid-guide. (P/E and yield computed from company guide and current price/market cap.) Honeywell International Inc.+1

Balance sheet / share count context

Q3 filings show ~635M basic shares outstanding; cash ~$12.9B at Sep 30. Weighted average diluted shares ~639M in Q3. Stock Titan+1

New business, contracts & partnerships (illustrative 2025 items)

DoD quantum-sensing navigation awards under the TQS program (CRUISE & QUEST). aerospace.honeywell.com+1
LOT Polish Airlines selected Honeywell avionics for 13 Boeing 737 MAX (service from 2026). aerospace.honeywell.com
NXP partnership expanding AI/autonomy compute for Anthem avionics and future autonomous flight stacks. Reuters
Ongoing NASA collaborations (Space Act agreements/CLEEN-II testing) underscore aero/space credibility. NASA+1

Strategic portfolio moves

Honeywell is executing a three-company plan (Solstice now; Aerospace/Automation by 2H26), a path influenced by activist engagement. The company also continues selective M&A (e.g., UK catalyst tech unit from Johnson Matthey). Reuters+2Investopedia+2

Key watch items (next 3–6 months)

Oct 30, 2025: Solstice distribution/listing (SOLS). Track “when-issued”/regular-way trading dynamics and index implications. Honeywell
Post-spin guide updates: any revisions to Honeywell’s 2025–26 outlook ex-Solstice. Honeywell International Inc.
Quantinuum milestones: funding, roadmap (100 logical-qubit target by 2027) and any formal IPO steps. quantinuum.com+1

Risks

Aerospace cycle or aftermarket cooling; Automation growth/margin pressure; execution risk around multi-step separations; macro/FX; and timing/valuation risk around any Quantinuum transaction. Reuters

Bottom line

Near-term: Solstice spin is concrete and imminent; HON has demonstrated core earnings resilience even after adjusting for the carve-out. Honeywell+1
Medium-term: Two-way upside—operational focus from the 2026 Aerospace/Automation split and optionality from a potential Quantinuum listing in 2026–27. Reuters+1

Here’s a sum-of-the-parts table and valuation snapshot comparing Honeywell pre-spin, post-spin (core), and Solstice Advanced Materials (SOLS), including basic metrics and rationale:

🧮 Sum-of-the-Parts View (as of October 27 2025)

Segment / Company	FY 2025E Sales ($ B)	FY 2025E Adj EBIT Margin	FY 2025E EPS / EBIT ($ B)	EV/EBIT × Assumption	Implied EV ($ B)	Comments
Honeywell (core post-Solstice)	38.0 – 39.0	22 %	8.4 – 8.6	16×	135 – 138	Aerospace & Automation focus; strong backlog; mid-cycle margins
Solstice Advanced Materials (SOLS)	2.8 – 3.0	17 %	0.5 – 0.55	12×	6 – 7	Specialty materials, refrigerants, semiconductor cooling, sustainable chem
Quantinuum (Honeywell stake ~ 54 %)	—	—	—	10× revenue (est. ~ $1 B valuation slice)	10 – 12	Private; ~$10 B enterprise value per late-2025 round
Net cash & other adj.	—	—	—	—	+3	Pro forma net cash after spin-prep debt issues

→ Sum-of-Parts EV ≈ $154–160 B
At a current equity market cap of ~$137 B, the implied upside range is +12–17 % if the market re-rates Honeywell and Solstice in line with peers post-spin.

🧭 “What You Get” per 100 Honeywell shares (post-distribution)

Component	Share ratio	Implied value*	Notes
Honeywell (core)	100 shares retained	~$21,500	Ongoing Aerospace + Automation focus
Solstice (SOLS)	25 shares received (1 : 4 ratio)	~$1,200 – 1,400	Independent Nasdaq listing Oct 30
Total package value	—	~$22,700 – $23,000	Equivalent to ~ 10–13 % uplift if Solstice holds fair value range

*Assumes HON $215, SOLS initial $45–55.

🧩 How this Reshapes Honeywell

Category	Pre-Spin	Post-Spin
Business Mix	45 % Aerospace, 25 % Automation, 20 % Materials, 10 % Others	~55 % Aerospace, 40 % Automation, 5 % Other
Revenue Diversification	Broader industrial footprint	Narrower, higher-margin cyclicals
EPS Mix	Includes volatile materials cycle	More stable defense/aerospace + automation
Capital Allocation	Mixed	Sharper focus; potential buybacks or Quantinuum growth funding

🧠 Key Takeaways

Solstice listing (Oct 30) is immediate, clean, and tax-free, unlocking ~$6–7 B in stand-alone equity value.
Honeywell core remains a diversified industrial tech play at ~20× FY 2025 EPS with above-peer margin resilience.
Quantinuum remains a powerful hidden call option—IPO talk for 2026-27 with valuations rising toward $10 B+.
Sum-of-parts math suggests current price undervalues the combined pieces by ~12–17 %.
Dividend: 2.0–2.2 % yield post-spin; expected continuity of Honeywell’s dividend track record.

Disclosure: Obviously, we are long Honeywell (HON) HON) main business segments and their recent contribution to revenue and profit, based on the latest available public disclosures:

🚀 Main Segments & Approximate Sizes

Honeywell reports four primary segments (prior to the full spin-off of its Advanced Materials unit). The segments and their approximate revenue/margin profiles are:

Segment	Description	Latest Info
Aerospace Technologies	Commercial aftermarket & OEM avionics, business/general aviation, defense & space	In 2024, this segment generated approx. $15 billion in revenue (about 40 % of the company) per news commentary. Financial Times+2Reuters+2
Automation (Industrial Automation / Building Automation / Productivity & Workflow Solutions)	Factory/plant automation, warehouse & workflow, sensing & safety, building products/solutions	According to commentary, the “automation business” was ~$18 billion in annual revenue. Financial Times+1
Advanced Materials (to be spun-off as Solstice)	Specialty chemicals/materials, refrigerants, semiconductor cooling, protective fibers etc.	2024 commentary suggested approx. $4 billion in revenue for this unit. Financial Times
Energy & Sustainability Solutions (ESS) / Other segments	Includes UOP (refining catalysts & equipment), building solutions, energy systems	The 4Q 2024 results show growth of ~1% organically in this segment. Honeywell International Inc.+1

📊 More Detailed Figures & Trends

In Q3 2025, Honeywell reported total sales of $10.4 billion (+7 % y/y) and orders up 22 %. Investors+1
For Q2 2025, segment profit was ~$2.4 billion and sales grew ~8 % y/y. Honeywell International Inc.+1
From the 2024 Annual Report and related materials: sales increased ~5% for full-year 2024. Honeywell International Inc.+1

✅ What this means

The Aerospace segment is clearly the largest individual unit, with ~40% of total revenue.
Automation is broadly defined but also a major contributor (~35-45% range depending on how sub-segments are aggregated).
The Advanced Materials (Solstice) segment (to be spun off) is smaller in scale yet strategically meaningful.
Margins and profit contribution vary significantly: Aerospace tends to command higher aftermarket/defense margins; Automation is more cyclical and exposed to industrial demand; Materials is more commodity and cycle-sensitive.

📊 Q3 2025 Segment Results (three‐months ended Sept 30)

From Honeywell’s 10-Q and earnings release: Stock Titan+2Honeywell+2

Segment	Net Sales (USD M)	Growth y/y	Notes
Aerospace Technologies	4,511	+12% organic Honeywell International Inc.+1	Strong aftermarket & defense.
Industrial Automation	2,274	Flat to +1% organic Honeywell+1	Some softness.
Building Automation	1,878	Up (from ~1,745M prior) Stock Titan	Moderate growth.
Energy & Sustainability Solutions (ESS)	1,742	Up from ~1,563M prior year Stock Titan	Smaller mix.
Total Net Sales	10,408	+7% (reported) Honeywell International Inc.+1

Margin / Profitability indicators

Aerospace segment margin in Q3: ~26.1% (down 1.6 pts year over year) Honeywell
Industrial Automation margin: ~18.8% (down ~1.5 pts y/y) Honeywell
Full-year (guide) overall segment margin expected ~22.9%–23.0% (up ~0.3-0.4 pts) Honeywell
Operating cash flow for first nine months: $5,204 M vs $3,816 M prior year. Stock Titan
Cash & equivalents at Sep 30: $12,930 M. Stock Titan

✅ Key Takeaways

The Aerospace segment is currently the strongest performer in growth and margin.
Industrial Automation, though large, is under pressure: very weak growth + margin decline. That is a risk area.
Building Automation & ESS are middling but play supportive roles in Honeywell’s portfolio.
The high cash flow and strong balance sheet (over $12.9 B cash) give Honeywell flexibility for portfolio actions (spin-offs, M&A, dividends).

Monday, September 22, 2025

Placing Honeywell (HON) on our watch list. Here is an overview of current information available!

Below is a structured investment/business report for Honeywell (HON) covering their recent financials, stock & valuation, outlook over the next 2-4 years (especially considering DoD / Aerospace tailwinds and their Solstice & Quantinuum spin-offs), plus bull / base / bear cases. We're placing HON on our watch list!

Honeywell (HON) Report

Honeywell International Inc (HON)

Open208.66

Volume672.7K

Day Low207.33

Day High209.22

Year Low179.36

Year High242.77

Executive Summary

Honeywell is in the midst of a major portfolio transformation: spinning off its advanced materials business (Solstice), planning separations of its Aerospace and Automation segments, while keeping majority ownership of Quantinuum in quantum computing. With rising U.S. defense spending (DoD) and growing demand in aerospace and space, there are tailwinds. But there are also meaningful execution risks, margin pressures, valuation challenges, and macro uncertainties. Over a 2-4 year horizon, there is potential upside, but also downside if things don’t go well.

Recent Financials & Key Metrics

Here are the most relevant recent financials and operational metrics:

Metric	Value / Trend
Q2 2025 Revenue	~$10.4 billion, up ~8% year-over-year. MLQ+1
Organic Sales Growth	~5% YoY. Honeywell International Inc.+1
Operating Income & Segment Profit	Up ~7-8% in Q2 in those corresponding segments. Segment margin ~22.9%. Honeywell International Inc.+1
Margins	Operating margin slightly compressed (~30 basis points) to ~20.4%. Segment margins roughly stable with small contractions in some parts, but guidance expects modest margin expansion year over year. Honeywell International Inc.+2Honeywell+2
Free Cash Flow / Operating Cash Flow (FCF / OCF)	Full-year guidance: OCF ~$6.7-$7.1B; FCF ~$5.4-$5.8B. In Q2, free cash flow down relative to same period last year. MLQ+3Honeywell+3Honeywell International Inc.+3
Guidance for 2025	Sales: $40.8-$41.3B. Organic growth ~4-5%. Adjusted EPS $10.45-$10.65. Segment margin expected to be ~23.0-23.2% and expand modestly. Honeywell+1
Spin-off & Portfolio Restructuring Plan	Advanced Materials (Solstice) spin-off in Q4 2025; full separations of Aerospace and Automation businesses planned, with full structure in place by the second half of 2026. Quantinuum remains majority owned. Honeywell+1

Industry / Macro Drivers

These are the external tailwinds and headwinds that are likely to affect Honeywell over the next few years, particularly in DoD/Aerospace:

Rising Defense Spending

Global defense budgets have been growing (~8-9% in 2024). PwC+1 The U.S. DoD is increasing procurement, R&D, especially in next-gen tech, missiles/munitions, unmanned systems, space. Deloitte+1 The U.S. FYDP (Future Years Defense Program) projects DoD budget to climb to ~$866B (inflation adjusted) by 2029. Congressional Budget Office
Aerospace / Flight Aftermarket Recovery

Commercial aviation is recovering, spare parts / aftermarket demand improving; backlog of orders growing in many aerospace firms. This helps Honeywell’s aerospace units. Honeywell International Inc.+1
Growth in Advanced Materials / Environmental Regulation
Climate, refrigerant regulation, semiconductor fabrications etc. are pushing for new materials / specialty chemicals. Solstice (advanced materials) is well-positioned for that.
Quantum Computing / New Tech Exposure via Quantinuum

Though early stage, Quantinuum gives exposure to what might be a large growth domain in coming years; could deliver outsized returns if commercial adoption accelerates.
Risks from Inflation, Supply Chains, Regulatory / Environmental Costs
Input cost inflation, energy, transport, labor remain risks. Regulations (e.g. around refrigerants, safety, environmental compliance) could raise costs and reduce margins.
Macro Uncertainty
Interest rates, geopolitical risk (wars, trade wars), recession potential, etc., could slow demand in industrials / aerospace. Also foreign demand and export policy matter.

Outlook (2-4 Year)

Given current financials + macro drivers + the spin-off plan, here is what we might reasonably expect over the next 2-4 years for Honeywell, broken into what success might look like, what a base case might deliver, and potential downside.

Area	Expectations in 2-4 Years
Revenue Growth	In a good case, overall revenue growth (organic + from parts) of ~5-8% CAGR. Some segments (Aerospace / Defense / Solstice) maybe higher (8-12%). In base case more like 4-6%. Bear case could see growth slump to low single digits or flat in some underperforming units.
Margins	Segment margins likely to improve modestly after spin-offs due to more focused operations, better cost control, scale in high-growth areas. On the other hand, industrial automation margin might lag. Overall margin expansion of 50-150 bps possible in bull/base, contraction of similar magnitude in bear case due to cost pressures.
Free Cash Flow	The FCF base is strong; expect FCF to grow at moderate rate unless costs spiral. Capital deployment (spin-off costs, separations, debt, investments in new tech) will eat into some cash. In bull case, FCF growth plus returns via dividends/share buybacks. In base case, steady but moderate improvement. Bear case sees cash flow squeezed by margin compression / higher costs / weaker demand.
Valuation / Market Recognition	With spin-offs (Solstice, then Aerospace, then Automation), market may assign higher multiples to each focused business vs current conglomerate discount. If markets buy into growth in Solstice and quantum via Quantinuum, could see stock appreciation + value realization. But the timeline is likely 2025-2026 for spins and 2026-2027 for full market recognition.
Role of DoD / Aerospace Contracts	Growth in DoD spending should benefit Honeywell’s Aerospace & Defense / Space segment: more contracts, more backlog, possibly new contracts in unmanned systems, space surveillance, hypersonic defense, etc. Quantum computing may also see government contracts / R&D funding. That helps revenue, backlog, margin stability.

Valuation & Stock Price Considerations

Current stock is trading in the low-$200s (≈ $209 as of latest).
Forward earnings (2025 expected EPS ~$10.45-$10.65) imply P/E in mid-teens to ~20× depending on how conservatively you assume growth & margins.
Some of the upside is embedded, but also likely somewhat priced for spin-offs or expected improvements (though markets often under-estimate execution issues).
There is a “conglomerate discount” component: until the spin-offs are cleanly executed and investors have visibility into each entity’s standalone metrics, some of the theoretical value may not be captured.

Bull / Base / Bear Cases

Here are scenarios over ~2-4 years for Honeywell under different assumptions.

Scenario	Key Assumptions	Key Outcomes / Metrics	Risks & What Can Go Wrong
Bull Case	• DoD / Aerospace demand accelerates (strong government spending, new contracts, favorable export policy, stable macro). • Spin-offs (Solstice, Aerospace, Automation) occur cleanly, on time, with minimal drag and cost. • Quantinuum makes meaningful progress commercially or via government funding; visible path to monetization. • Cost, inflation, supply chain pressures well managed. • Capital allocation strong: share buybacks, dividends, reinvestment in growth areas.	• Revenue CAGR ~7-9%; Aerospace/Defense & Solstice grow fastest (double digit or near). • Margin expansion of +100-200 bps overall; some segments seeing high margin improvement. • Free cash flow growth strong; yield + capital returns meaningful. • Stock price appreciation + spin-off value realization: total return perhaps +30-60% over 2-4 years (including spin-off payouts, share price gains). • Higher multiples rewarded (EV/EBITDA, P/E) for individual entities post-separation.	• Delays or cost overruns in spin-offs; regulatory / tax hurdles. • Weak aerospace commercial demand (e.g. airlines cut orders, macro recession, supply chain bottlenecks). • Margin squeeze from inflation, energy, labor, especially in advanced materials. • Quantum tech (Quantinuum) may not commercialize quickly or may require more capital than expected. • Interest rates stay high; borrowing / financing costs elevated; valuations compressed.
Base Case	• DoD / Aerospace demand grows steadily but not spectacularly. • Spin-offs largely successful but with modest friction; some segments underperform relative to expectations. • Quantinuum contributes but remains somewhat speculative. • Inflation / costs moderate; macro environment stable or mild headwinds.	• Revenue CAGR ~4-6%; some segments higher, others lower. • Margins modest improvement, maybe +50–100 bps; some segments flat or mildly underperform. • FCF growth steady; capital returns stable (dividends + some buybacks). • Total return perhaps +10-30% over 2-4 years (stock appreciation + dividend + partial spin-off benefits). • Market begins to recognize separated entities; valuation improvement but not full peer premium in all segments.	• Some margin pressure erodes gains. • Spin-off costs / overhead burdens reduce net benefit. • Aerospace commercial demand might soften, e.g. airline financials, fuel cost, macro recession. • Geopolitical/trade/regulation could add friction. • Quantum remains more R&D than profit for longer.
Bear Case	• DoD / Aerospace spending growth slows (budget cuts, shifting priorities, geopolitical shifts). • Spin-offs delayed, over-costed, or create inefficiencies/distractions. • Quantinuum fails to monetize significantly; R&D cost burdens. • Inflation / input cost rises sustained; supply chain issues persist. • Recession or weak demand in industrial sectors; interest rates high.	• Revenue growth low or flat in some segments; possibly overall growth ~1-3%. • Margin contraction in key segments; overall margin flat or down. • Free cash flow growth weak or volatile; less capital for returns; possibly debt or financing pressures in spun-off entities. • Stock price underperforms; total return low to negative (maybe -5% to +5%) over the period. • Market discounts risks; spun-off entities may trade at lower valuation if unproven or underperforming.	• Unexpected cost shocks (energy, raw materials, regulatory, carbon / environmental compliance). • Weakness in commercial aerospace (fuel, demand, financing). • Quantum tech remains more cost than return; investors lose patience. • Strategic missteps in spin-offs: loss of synergy, duplication of costs, loss of customers or workforce in reorg.

Investment Considerations

Here are additional practical considerations / red flags / questions you should investigate before investing:

Spin-Off Financials Visibility: Once Solstice and the separated units publish standalone numbers (revenues, margins, debt, capex), examine them carefully. Sometimes spun-off entities carry inherited issues or lower margins than expected.
Quantinuum Exposure: How much capital is needed? What’s the path to positive cash flow / meaningful revenues? What contracts / clients already in hand? Science-to-commercialization timelines are often long, with many technical and regulatory risks.
Backlog / Order Pipeline in Aerospace / Defense: For the Aerospace & Defense segment, look at the order book, backlog growth, renewal of government contracts, exposure to delays (e.g. due to supply chain, regulatory).
Regulatory / Environmental Risks: Advanced materials (Solstice) may face both upside from environmental regulation (e.g. refrigerants, low-GWP chemicals) and risk (liabilities, compliance, raw material constraints, geopolitical supply).
Interest Rates / Cost of Capital: The spin-offs and ongoing investments will require capital; higher interest rates increase cost. Also, share buybacks / dividend policy depend on free cash generation.
Valuation Floor: How low could this go if things go badly? What’s the downside risk? Is there a margin of safety in the current price?
Competition: Both in aerospace (other OEMs, suppliers), in materials (chemical, specialty materials competitors), in defense tech, and in quantum computing (other entrants, research labs, etc.).
Macro / Trade Risk: Exports, trade wars, tariffs, supply constraints, foreign regulatory risk.

Conclusion & Recommendation

Based on the above, here’s my view:

Using a 3- to 5-year time horizon, I’d lean towards investing in Honeywell, or starting a position, but not going all in immediately. The upside (particularly from Solstice, increased DoD / Aerospace demand, and quantum exposure) seems meaningful enough to justify exposure, provided you can tolerate some volatility and execution risk.
I’d set my expectations modestly: seize gains from spin-off execution and DoD tailwinds, but assume base case unless there is strong evidence (contracts, margin expansion, Quantinuum commercialization) that a bull case is unfolding.
I’d also watch carefully for signals: quarterly financials relative to guidance; how the spin-offs are progressing; whether Aerospace / Defense backlog and margin trends stay strong; any regulatory / cost surprises in materials or quantum.
If your risk tolerance is lower, or you need returns in <2 years, this is riskier: lot of moving parts (spin-offs, macro risk), and the market might not fully reward the separated entities immediately.