On May 5th we informed our readers that Honeywell was splitting up and likely ending up in late 2026 with three separate companies. At that time, we launched a position in HON. The price at the time was $213. Today July 9th, it sits at $237, a 10% uplift.
Honeywell gave the press an update yesterday, only 2 months after the original announcement as the company expanded on its breakup plans, disclosed early in the year.
Management said it would evaluate “strategic alternatives for its Productivity Solutions and Services, (PSS) and Warehouse and Workflow Solutions, (WWS), businesses, which serve the transportation, warehouse, and logistics markets.” This language often means the company is considering selling those operations.
While Honeywell is best known for producing building-automation and aerospace technology, it also designs, manufactures, and integrates complete warehouse-automation solutions. The PSS and WWS businesses fall into the latter category.
The move is part of the company’s plan to simplify its operations before it breaks up.
Honeywell laid out plans to separate into three companies: One dedicated to automation, one to aerospace, and another to advanced materials.
Automation is the largest business, with about $18 billion in annual sales. Aerospace revenue is in the range of $15 billion. Advanced Materials is the smallest business, with about $4 billion in annual sales.
PSS and WSS are part of the automation business, with annual sales of only about $1 billion each. PSS makes bar-code scanners and other products, competing with the likes of Zebra Technologies. WSS helps automate warehouses with conveyors, robots, and other technology. “Today’s announcement marks an important milestone in positioning Honeywell for success as a pure-play automation business following our planned Honeywell Aerospace separation next year,” said CEO Vimal Kapur in a news release. With PSS and WSS removed, Honeywell automation will put more emphasis on building and process controls, focusing more “on our core areas of automation expertise, each of which is exposed to long-term secular growth drivers that position us as a powerful, global automation leader.”
Honeywell stock added 0.2% to $239.80, while the S&P 500 and Dow Jones Industrial Average fell 0.1% and 0.4%, respectively.
Through Tuesday’s close, shares were up about 14% over the past 12 months. Much of that gain has come over the past 2 months. It appears investors are warming up to the idea that the three-way breakup could create value.
The materials business is expected to be spun off at year’s end, with the separation of automation and aerospace completed by the end of 2026.
In a report, Barclays analyst Julian Mitchell said the aerospace business deserves a higher valuation. GE Aerospace stock, $250 a share for instance, trades for about 44 times estimated 2025 earnings (P/E). Honeywell stock trades for about 23 times estimated 2025 earnings (P/E).
We remain bullish on the future of Honeywell, maybe more so by selling off PSS and WSS. We will look for opportunities to increase our stake if / when the moment is right.
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