Honeywell is selling off after disappointing first-quarter numbers. However, the report included a key update on the industrial conglomerate’s major breakup, which should reward shareholders who hang on. Adjusted earnings per share increased 10.1% from the year-ago period to $2.45, outpacing the LSEG estimate of $2.32 apiece. Adjusted revenue in the quarter ending March 31 rose 2.4% year over year to $9.1 billion, missing the LSEG-compiled consensus estimate of $9.3 billion. Adjusted revenue grew 2% organically, excluding mergers and acquisitions and other outside drivers. HON 1Y mountain HON 1-year return Bottom line A tough quarter, weighed down by the war in Iran — management alerted investors to the headwind in March — and a supply disruption in its aerospace unit that hurt sales. Shares initially plunged more than 5% on the report but regained some footing, down 3% in midday trading. Investors focused solely on the numbers are missing the forest for the trees. We’d argue that the more important update was the company’s announcement that it is selling its Workflow Solutions business in an all-cash transaction to American Industrial Partners. The deal is expected to close in the back half of 2026, along with its previoulsy announced sale of its Prodoctivity Solutions and Services unit. Management also set a date for the spin-off of its Aerospace business for June 29, pending board approval. “When you get the two pieces, Honeywell [the remaining automation company] is going to be worth more than what it’s selling for now,” Jim Cramer said on Thursday’s “Morning Meeting.” He urged member to hold onto their shares, even if there’s a slight dip heading into the separations. As with the separation of Qnity from DuPont , spinning off a strong asset frees it to trade as a pure-play, drawing in new investors and often resulting in a higher valuation. In financial analysis, there is the concept of the conglomerate discount. The idea: A conglomerate comprising multiple unrelated industries can suffer from inefficient resource allocation, a lack of focus from higher-level management, and the general difficulty of valuing complex business units operating on different business cycles and in different operating environments. Sometimes investors reward conglomerates — think Alphabet or Amazon — when their units can create a flywheel effect, with each part strengthening the others in a continuous positive feedback loop. However, Honeywell is not that, and the conglomerate discount should unwind once aerospace is spun off, creating a pure-play aerospace and defense company, with the remaining company a focused high-tech automation company. In fact, the stock’s bounce-back is likely due to investors reacting to management’s discussion of the transformation strategy and viewing the sell-off as a buying opportunity. We agree and are reiterating our $250 price target and 1 rating. Why we own it Honeywell is a provider of industrial technology to firms…
Read More: Honeywell disappoints on quarterly results but delivers on breakup plan