News of a business rationalization measure lifted Honeywell International(NASDAQ: HON) stock comfortably into positive territory on Tuesday. The storied industrial company's shares closed the day almost 2% higher, a figure that was more than high enough to top the benchmark S&P 500 index's increase of less than 1%.
Advancing the rationalization process
Well before the market open, Honeywell broke the news that it plans to spin off its advanced materials business unit. It would be separated into an independent, publicly traded company. This process should be completed by the end of 2025 or early the following year. It is part of a broader effort by management to slim down and become a more focused operation.
Advanced materials isn't an immense part of the veteran industrial company, which is likely one reason the investor reaction to the news wasn't stronger. Still, the business will be large enough to be a fully self-contained entity that actively trades on the stock exchange.
Honeywell did not provide any estimates for how the spinoff would affect its fundamentals. Advanced materials, which produces rather specialized items like packaging films and refrigerants, account for approximately 10% of its parent company's total sales.
Moving toward megatrends
We should expect more such moves from Honeywell in the proximate future. The company quoted CEO Vimal Kapur as saying, "Through the powerful combination of strategic bolt-on acquisitions and subtractions of high-quality but noncore business lines, we continue to enhance our portfolio mix and further tighten Honeywell's alignment to three compelling megatrends: automation, the future of aviation, and energy transition."
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
