Honeywell’s Breakup: Is HON Stock a Sweet Deal for Investors?

Key Points

• Honeywell is trying to unlock shareholder value by breaking up into three parts.
• The deal is being driven by its Aerospace division which is outperforming the rest of the company. 
• The split won’t be complete until 2026 which means investors have to value the company for what it is today.  

It’s said that imitation is the sincerest form of flattery. If that’s the case, then General Electric's NYSE: GE CEO must be blushing after hearing that Honeywell International Inc. (NASDAQ: HON) is adopting a similar strategy by breaking up into separate entities.

On February 6, 2025, Honeywell announced plans to fully separate its Automation and Aerospace Technologies divisions. This follows its earlier decision to spin off its Advanced Materials unit. However, the push for a full breakup was largely driven by activist investor Elliott Investment Management. The firm took a $5 billion stake in November 2024, pressuring the company to unlock shareholder value.

Once the split is complete, which is expected in 2026, investors will hold shares in three distinct business units encompassing aerospace stocks, materials stocks, and technology stocks. Honeywell aims to create stronger, more focused businesses that can grow independently. This mirrors GE’s approach when it announced its own breakup in 2021. That restructuring resulted in three separate companies: GE Aerospace, GE HealthCare Technologies Inc. NYSE: GEHC, and GE Vernova NYSE: GEV, which oversees its renewable energy operations.

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Traders Sell, Analysts Indicate Caution

HON stock fell roughly 6% on the news, extending its losses in 2025 and pushing the stock below its 250-day simple moving average. From a technical standpoint, the stock appears oversold at these levels.

However, the drop was primarily linked to the company’s fourth-quarter earnings report. While Honeywell delivered strong headline numbers, a deeper look at the results suggests another reason for the split. The company reported earnings per share of $2.47, which was higher than the $2.37 analysts expected. Revenue came in at $10.09 billion, beating estimates of $9.83 billion. Despite these strong numbers, most of the company’s growth in 2024 came from the aerospace division, while other segments struggled. The separation could allow the aerospace unit to grow without being weighed down by slower-performing divisions.

This raises questions about the near-term outlook for HON stock. The full breakup will not be completed until 2026. The Basic Materials spinoff is expected in 2025, but investors who buy in now will need a long-term perspective to benefit from the restructuring.

That means looking at Honeywell’s forward guidance, which was cautious and may hint at the rationale behind the split. Management and activist investors may see the conglomerate as too complex to manage effectively as a single entity.

For income-focused investors, Honeywell’s dividend yield of 2.18% and annual payout of $4.52 per share may provide a reason to hold onto shares. Analysts currently rate the stock a Moderate Buy with a consensus price target of $248.71, representing a 19% upside. However, several analysts have lowered their price targets since the earnings report, with some falling below the consensus.

What’s Old Is New Again

It remains to be seen whether Honeywell’s breakup will achieve its intended goals. However, the decision to spin off its aerospace division follows a pattern seen with companies like GE and Lockheed Martin, which have restructured in recent years.

This marks a shift from the decades-long trend of consolidation in the aerospace industry. Many of the same companies that once sought diversification now see greater value in a more focused approach.

For GE, the strategy has paid off. Its stock is up 47% in the past 12 months and 23% in 2025 as of February 11.

Honeywell is hoping for similar success. However, investors will be watching closely to see if the move truly unlocks more value or simply reshuffles the company’s existing challenges.