Elliott Management pushes restructuring at Honeywell forward

Honeywell International is currently experiencing turbulent times after the activist investor Elliott Management acquired a five billion dollar stake in the company. Elliott Management advocates for splitting the company to enhance management efficiency and unveil the true value of the currently undervalued conglomerate. The spin-off of the aerospace division, which contributes a remarkable 40 percent to the total revenue, is now imminent. This separation occurs at a time when the aerospace industry is recovering from the strains of the Covid-19 pandemic. Thanks to improved management and positive industry trends, this step could be successful. With clients like Boeing and Airbus, the division could be valued at 90 to 120 billion dollars, including debt. The stock has already increased by over 3 percent today and has risen by 13.5 percent since hitting its low in November, reflecting investors' confidence in the activist investor's initiative. Furthermore, the restructuring allows management to focus on the industrial automation division, which recorded a 5 percent year-over-year decline last quarter and is currently struggling. Further details on this are expected to be announced during the fourth-quarter earnings call. Elliott Management is pleased with the announcement, confirmed partners of the investor today. This development is surprising, as Honeywell has successfully fended off the pressure of activist investors in the past. In 2017, the company managed to counteract a split. After Elliott Management announced the stake buildup last month, the company sold its personal protective equipment business for 1.3 billion dollars. Honeywell (HON) is not on the recent list of the 31 most popular stocks among hedge funds. According to our database, 55 hedge fund portfolios held HON at the end of the third quarter, up from 50 previously. While Honeywell is recognized as a leading investment, we believe some AI stocks offer more potential for higher returns in a shorter period. If you are looking for a promising AI stock that trades like HON but for less than five times its earnings, you should consider our analysis of the cheapest AI stock.