Honeywell International completing its $4.95 billion acquisition of Carrier ‘s security business exemplifies how the disparate industrial conglomerate must lean into core businesses. It’s not enough. “More and more people will realize that this [Global Access Solutions] was a good acquisition,” Jim Cramer said Monday. But it’s how to value Honeywell without the dead weight that must be addressed. To revive its lagging stock, management must also figure out which businesses are better on their own — kind of like the split announced last month by fellow Club stock DuPont . Jim Cramer pointed to Honeywell’s underperformance compared to peers like RTX . Honeywell stock has dropped 4.6% year-to-date. RTX has advanced 27%. The S & P 500 has gained 10%. Investors need to see that Honeywell can strip away weaker businesses and put more of its cash to work from its massive balance sheet to buy more profitable ones, Jim added. HON RTX YTD mountain Honeywell vs. RTX year-to-date Following the close of the Global Access Solutions deal, Honeywell hiked its 2024 outlook for adjusted earnings-per-share to $10.15 and $10.45 from $9.80 to $10.10. While rising guidance is good, it was not a needle-mover for our investment thesis in this case because it was more of an accounting change. The deal follows criticism from Wall Street analysts and the Club that Honeywell has its hands in too many industries with limited growth prospects. Honeywell’s Aerospace Technologies, which accounted for more than a third of companywide revenue in the first quarter, has shined . Smaller units have struggled like Building Automation, where management hopes to get a lift from Global Access Solutions. Honeywell’s Industrial Automation segment was also soft in Q1. To be sure, management has acknowledged these issues. Honeywell has said it will divest up to 10% of overall revenue from its businesses that don’t align with the future of aviation, the transition to sustainable energy, and automation. CEO Vimal Kapur was only a few months on the job when he identified these megatrends as ones to focus on. The Global Access Solutions deal, which was his biggest move to date, closed in the month of his first anniversary as chief exec. (Jim Cramer’s Charitable Trust is long HON, DD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Honeywell International Inc. signage is displayed on a monitor on the floor of the New York Stock Exchange (NYSE) in New York.
Michael Nagle | Bloomberg | Getty Images
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