Honeywell Is Now Three Companies. Here's Which Piece I'd Actually Own. | The Motley Fool
Wall Street goes through cycles. One that recurs with some regularity is the shift between conglomeration and corporate separations. Right now, conglomerates are separating, creating multiple businesses from one. Honeywell is a good example of this trend, with the conglomerate breaking into Honeywell Technologies (HON +0.95%), Solstice Advanced Materials (SOLS +3.85%), and Honeywell Aerospace (HONA +3.90%).
If you are thinking about buying one of these three companies, you may want to consider following the CEO who orchestrated the corporate split. Here’s what you need to know.
Image source: Getty Images.
What is the point of a conglomerate like Honeywell?
When it comes to acquisitions, there can be a fine line between a CEO who is simply trying to build an empire and one who is piecing together a coherent business. Honeywell was a large industrial company with the financial resources to support the businesses it operated. Bringing more industrial businesses under one roof could increase revenue diversification, eliminate redundant tasks (such as accounting), share technology and innovation among businesses, and enable enhanced access to capital markets.
Those are all good things, but conglomerates also have their downsides. For example, business units often compete for funding. Bureaucracy can slow down decision-making. And sometimes small or underperforming business units get ignored, making poor performance hard to fix. When the negatives outweigh the positives, conglomerates often spin off businesses or break up, as Honeywell has done. That said, Wall Street’s desire for de-conglomeration can also lead to business breakups simply to satisfy shifts in investor sentiment.
Today’s Change
(0.95%) $1.98
Current Price
$209.61
Key Data Points
Market Cap
Day’s Range
$206.92 – $210.00
52wk Range
$195.77 – $260.15
Volume
2.7M
Avg Vol
3.4M
Gross Margin
37.84%
Dividend Yield
2.14%
By breaking a business into parts, each new business can focus all its energy on just one thing. That, in turn, is expected to lead to improved results for each of the newly independent businesses. Sometimes it works out, sometimes it doesn’t. But it is usually worth watching to see which company the CEO who initiated the corporate split-up sticks around to manage.
What is Honeywell today?
The company that retained the HON ticker is Honeywell Technologies, a pure-play industrial automation business. This is the company run by Vimal Kapur, the CEO who led Honeywell when it was an industrial conglomerate. That likely suggests that he believes automation is the most desirable business within Honeywell, noting that artificial intelligence (AI) is likely to be an important trend in industrial automation. When the company reported second-quarter 2026 earnings, the reason for his choice became clear.
Today’s Change
(3.90%) $6.05
Current Price
$161.01
Key Data Points
Market Cap
Day’s Range
$154.03 – $161.29
52wk Range
$150.03 – $297.50
Volume
3.2M
Avg Vol
3.5M
The spin-off of Honeywell Aerospace didn’t occur until June 29. So it was still part of Honeywell for the quarter, but it will not be part of it going forward. Thus, Honeywell provided two sets of earnings, one with Honeywell Aerospace included and one without. One key number was very different. With the two businesses, orders rose 4%. If you isolate Honeywell Automation, however, orders rose 16%. Meanwhile, Honeywell Automation accounted for $20 billion of the combined business’ $38 billion backlog. Adjusted earnings rose 10% year over year.
Automation looks like the business that is set to grow more rapidly. That’s not to suggest that Honeywell Aerospace is a bad business; that’s hardly true. Aviation spending is expected to remain strong as more people travel by plane. Still, when Honeywell Aviation reported second-quarter earnings, it lowered its organic sales growth guidance. It is clearly off to a bit of a rocky start.
But don’t forget about Solstice Advanced Materials, the first business to be spun off, which reported an 11% year-over-year sales increase and a 23% jump in earnings per share in the second quarter, while increasing its full-year guidance. However, at a roughly $9.5 billion market cap, it is a relatively small business compared to Honeywell, which has a market cap of $65 billion. For reference, Honeywell Aerospace’s market cap is $49 billion. If you owned Honeywell because it was a large business, Solstice Advanced Materials would be the smallest piece of the puzzle.
Solstice Advanced Materials
Today’s Change
(3.85%) $2.36
Current Price
$63.73
Key Data Points
Market Cap
Day’s Range
$61.42 – $65.20
52wk Range
$40.43 – $90.80
Volume
2.7M
Avg Vol
3.3M
Gross Margin
30.62%
Dividend Yield
0.37%
No easy answers, but I’d follow the CEO
You can make a case for owning any of the three businesses that have come out of Honeywell. Honeywell Aerospace lowering guidance out of the box probably makes it the easiest to pass over, despite the long-term opportunity in the aviation industry. Solstice Advanced Materials, despite solid early results, is the smallest of the three companies, which could be viewed as a negative. That leaves Honeywell’s automation business, which is both large and appears to be doing relatively well.
But the real key could be that the CEO who initiated the corporate breakup decided to oversee Honeywell’s large automation operations. The business is seeing robust demand, as evidenced by a growing backlog. Second quarter earnings rose a solid 10% when the company’s automation operations were separated out. And AI is likely to lead to a renewed push for industrial automation as it is used to improve corporate operations. That’s a very solid story, and I think it makes Honeywell the best pick of the three. Though, to be honest, I’d probably have preferred if Honeywell had just remained a diversified conglomerate.
