Honeywell has responded to activist hedge fund Elliott Investment Management’s calls to break up the industrial conglomerate. Jim Cramer says it’s good news for the stock. The news On Monday, Honeywell said it is considering a potential separation from its high-margin aerospace division as part of the broader effort to reshape its large portfolio of businesses. “Honeywell is now well-positioned for significant transformational alternatives, and we are continuing our deeper, more granular exploration of their feasibility and possible timing,” CEO Vimal Kapur said in a statement. The company plans to provide another update with its fourth-quarter earnings release. Elliott, who took a more than $5 billion position in Honeywell last month and has pushed management to separate into two standalone firms — one focused on automation and the other on aerospace — applauded the remarks. “We believe the portfolio transformation Vimal and his team are leading represents the right course for Honeywell, and we look forward to the upcoming completion of the review and to supporting Honeywell as it implements the necessary steps to realize its full value,” Elliott said in a statement. The stock is up more than 3% Monday. HON YTD mountain Honeywell International (HON) year-to-date performance Big picture Monday’s pop in share price continues an upward trend for the industrial stock in recent weeks. Honeywell shares are up nearly 4% since the Nov. 11 close, the session prior to Elliott revealing its massive position in the company. The S & P 500 industrial sector is down 4% in comparison over that period. The outperformance follows a lengthy period of stagnant revenue growth and lagging share price for Honeywell. Wall Street analysts have criticized the firm for its lack of focus, housing too many far-flung businesses in its massive portfolio. To be sure, the company has already made strides to divest businesses. In November, management announced plans to sell its personal protective equipment business for $1.3 billion . Prior to that, Honeywell said it will unload its advanced materials business , which could be worth $10 billion as a standalone company. Bottom line Honeywell appears to be mulling a more aggressive approach to focus on more profitable segments. That’s great news for shareholders like the Club and Elliott who see more potential in Honeywell than what it has delivered for investors in recent years. In particular, the aerospace division is Honeywell’s crown jewel, so it’s a solid move on management’s part to address that segment sooner than later. “I think it’s a brilliant thing to do,” Jim said Monday about the potential split. “This would be the pure play that we’re looking for.” He cited other successful conglomerate spin-offs like GE Aerospace. “It’s going to get multiple expansion over time, [but] not instantly,” Jim added. “And you end up with something, that’s frankly a winner.” (Jim Cramer’s Charitable Trust is long HON. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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Honeywell has responded to activist hedge fund Elliott Investment Management’s calls to break up the industrial conglomerate. Jim Cramer says it’s good news for the stock.
