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In
a letter sent to Honeywell's board, Elliott said that the
Charlotte, North Carolina-based company needs to simplify its
structure as it deals with uneven execution, inconsistent
financial results and an underperforming stock price.
Elliott is advising Honeywell to separate its automation and
aerospace businesses.
“As independent entities, Honeywell Aerospace and Honeywell
Automation would benefit from simplified strategies, focused
management, improved capital allocation, better operational
performance, enhanced oversight, and numerous other benefits now
enjoyed by dozens of large businesses that have moved on from
the conglomerate structure, including former conglomerates
General Electric, United Technologies, and many more,” Elliott
wrote.
The activist investor believes splitting up the aerospace and
automation businesses would result in share-price gains of 51%
to 75% over the next two years. Over the past five years, the
stock has gained about 7% on an annualized basis, or less than
half the S&P 500 return.
“Honeywell’s board of directors and management acknowledge and
appreciate the perspectives of all our shareholders,” Stacey
Jones, chief communicator at Honeywell, said in a statement.
“Although Elliott had not made us aware of their views prior to
today, we look forward to engaging with the firm to obtain their
input. Our leadership welcomes investor feedback as we continue
to execute a disciplined strategy, which includes pursuing
sustainable growth, optimizing the portfolio, and maintaining an
accretive capital deployment program.”
In the third quarter, Honeywell reported revenue growth but net
income dipped a bit although earnings per share topped analyst
forecasts. The company said it would spin off its advanced
materials business by early 2026 and said its board approved a
boost in its annual cash dividend, to $4.52 per share from $4.32
per share.
Elliot’s stake makes it one of Honeywell’s largest shareholders.
It has a long history of activism, most recently at Southwest
Airlines where the carrier last month agreed to overhaul its
board of directors.
Shares of Honeywell rose 3% in afternoon trading Tuesday.
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