Honeywell International Inc. (HON - Free Report) recently announced to have progressed with its portfolio transformation strategy, having declared spin-off dividends of shares of Resideo and completing the divestment of Garrett Motion Inc.
Additionally, the company communicated that it would acquire the German company Transnorm.
Honeywell’s Portfolio Transform Strategy
A snapshot of Honeywell’s portfolio transformation strategy has been provided below.
In October 2017, Honeywell communicated about its plan to spin off its Transportation Systems as well as ADI Global Distribution business and Home product offerings. In June 2018, the company decided that the spun-off transportation business would be known as Garrett Motion Inc. Further, in July 2018, the company informed that the spun-off ADI Global Distribution business and Home product offerings would be known as Resideo.
On Oct 1, 2018, the company declared that it has completed the spinoff of its transportation business into a new publically traded company, known as Garrett Motion Inc. For this spinoff, the company distributed one share of Garrett Motion for every 10 shares of Honeywell. All shareholders of record as of Sep 18 were considered eligible for this distribution. The company will trade under 'GTX' ticker symbol.
Additionally, on Oct 2, 2018, Honeywell declared that it would distribute one share of Resideo for every six shares of Honeywell. The distribution will take place on Oct 29, 2018. All shareholders of record as of Oct 16 have been considered eligible for this distribution. Resideo will start trading on the NYSE from Oct 29, under the ticker symbol ‘REZI’.
It’s worth noting here that Garret is one of the leading providers of turbocharger technologies across the globe. On the other hand, Resideo will primarily deal with security and critical comfort solutions, mostly for residential environments.
The spinoff is likely to mark the end of Honeywell’s portfolio transformation strategy once it finally gets completed in October 2018. These tactical initiatives will help the company to concentrate on high-growth industrial businesses and thus boost organic growth. Further, these strategies will expand margins and strengthen balance sheet.
Details of Transnorm Buyout
On Oct 1, 2018, Honeywell has also announced that it signed an agreement with IK Investment Partners to acquire the latter’s warehouse automation business, Transnorm. The transaction value is estimated to be €425 million.
As disclosed, Transnorm engages in providing engineered conveyor solutions. These solutions help in hassle-free movement of goods for parcel delivery and e-commerce customers. Annual revenues total €100 million, most of which are generated in Europe. Transnorm’s sales are projected to grow at least 30% in 2018.
Upon completion of the buyout, Honeywell will integrate Transnorm with its Safety and Productivity Solutions segment. Transnorm’s presence in Europe will help in strengthening Honeywell’s footprint in the region. Moreover, Honeywell’s existing businesses, including manufacturing of equipment related to automated material handling and software related to supply chain, will gain from this acquisition.
Subject to the receipt of regulatory approvals and fulfillment of customary closing conditions, this buyout is projected to be completed in November this year.
Zacks Rank & Stocks to Consider
With a market capitalization of $123.3 billion, Honeywell presently carries a Zacks Rank #3 (Hold). The company stands to gain from solid demand for its products, improved productivity and commercial excellence. However, it currently faces headwinds from rising costs and expenses.
Over the past three months, Honeywell’s shares have yielded 14.5% return, outperforming 7.6% increase recorded by the industry.
Furthermore, the stock’s earnings estimates are currently pegged at $8.15 for 2018 and $8.77 for 2019, reflecting growth of 0.1% and decline of 1% from respective 60-day-ago tallies.
Honeywell International Inc. Price and Consensus