Should You Buy Honeywell Stock Before the Split?

Industrial conglomerate Honeywell (HON) is set to split into two separate companies, forcing investors to weigh a large backlog against current operational headwinds and a premium stock price, according to a report from Trefis.

Split Details

Honeywell announced plans to separate its businesses into two entities: one focused on automation and aerospace solutions, and the other on chemicals and performance materials. The exact timeline and structure have not been finalized.

Massive Backlog

Honeywell boasts a multi-billion-dollar backlog, particularly in its aerospace and defense segments. This provides strong revenue visibility and a cushion against short-term volatility.

Operational Challenges

On the flip side, the company faces headwinds including inflationary cost pressures, supply chain disruptions, and slowing demand in some end markets like commercial construction.

Premium Valuation

HON stock trades at a P/E ratio above 20x, which is high relative to industrial peers. This could limit upside if growth doesn't meet expectations.

What It Means for Investors

The split could unlock shareholder value, but execution risks remain. Investors should monitor the separation progress, evaluate each new entity's prospects, and consider the current valuation before making a move.