Why Honeywell stock hit the market on Tuesday

News of a business rationalization measure has been raised Honeywell International (HON 1.80%) the stock comfortably in positive territory on Tuesday. Shares of the famous industrial company ended the day almost 2% higher, a figure that was more than enough to beat the benchmark. S&P 500 index growth of less than 1%.

Advancing the rationalization process

Well before the market opened, Honeywell announced plans to spin off its advanced materials business unit. It would be spun off into an independent, publicly traded company. This process should be completed by the end of 2025 or the beginning of the following year. It’s part of a broader effort by management to slim down and become a more focused operation.

Advanced materials aren’t a huge part of the veteran industrial company, which is likely one reason why investor reaction to the news wasn’t stronger. However, the business will be large enough to be a fully autonomous entity that is actively traded on the stock exchange.

Honeywell did not provide an estimate of how the spinoff would affect its bottom line. Advanced Materials, which produces fairly specialized items such as packaging films and refrigerants, accounts for about 10% of the parent company’s total sales.

The shift to megatrends

We should expect more such moves from Honeywell in the near future. The company quoted CEO Vimal Kapur as saying, “Through the strong combination of strategic bolt-on acquisitions and disposals of high-quality but non-core business lines, we continue to improve our portfolio mix and further strengthen our alignment Honeywell to three compelling megatrends: automation, the future of aviation and the energy transition”.