An unwarranted post-earnings decline in Honeywell shares on Thursday presented a buying opportunity for new investors ahead of the conglomerate’s breakup into three publicly traded companies. Revenue in the second quarter ended June 30 rose 8.1% year over year to $10.35 billion, topping expectations of $10.07 billion, according to market data service LSEG. Organic sales advanced 5% versus the year-ago period, more than double the 2.4% increase the Street was looking for, according to FactSet. Adjusted earnings per share (EPS) rose 10.4% from last year to $2.75, exceeding estimates of $2.66, LSEG data showed. Bottom line As Jeff Marks put it during Thursday’s Morning Meeting, the 5% drop in Honeywell stock in the face of these results was nothing short of “disrespectful.” Q2 was a strong showing from Honeywell as revenue, organic sales growth, and adjusted EPS not only outpaced Wall Street estimates but the company’s expectations as well. Management also raised its full-year outlook for all three of these metrics. We’re reiterating our buy-equivalent 1 rating and $255-per-share price target. HON YTD mountain Honeywell YTD It wasn’t all perfect. Segment margin was disappointing both for the quarter and in the company’s forward guidance. That was partly due to an increase in research and development (R & D) costs, including about $200 million in the aerospace division. While we don’t like to see profit metrics miss the mark, we think it’s more important that management continues to push ahead with growth investments. Committing to R & D, even ahead of Honeywell’s aerospace, automation, and advanced materials split, will help foster post-separation success. Speaking of separation, we know Honeywell’s advanced materials business will be spun off first. On the call, management updated the targeted timeframe for completion, narrowing it to the fourth quarter. The aerospace separation will be next, with the team continuing to target the back half of 2026. The remaining businesses will become a pure-play automation company. “We are not waiting for the separation to reshape our portfolio for future growth. We continue to selectively deploy capital towards acquisitions, announcing two new deals in the past couple of months,” Honeywell CEO Vimal Kapur said, adding the team is also still looking at alternative options for businesses that don’t fit into the company’s future vision. Kapur will be a guest on “Mad Money with Jim Cramer” on Thursday evening. Quarterly commentary Second-quarter sales in Honeywell’s aerospace technologies segment, the company’s largest and most crucial unit, missed estimates but still grew 10.7% to $4.31 billion. On the call, management said aerospace was negatively impacted by destocking efforts at one of its original equipment manufacturing (OEM) customers. Destocking refers to when a customer is trying to sell excess inventory and slows or pauses orders from its supplier. The team believes that this issue will be a…
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