Honeywell Automation

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1 Dividend-Paying Dow Jones Stock to Buy in August
The Motley Foolยท 2025-08-14 10:30
Core Viewpoint - Honeywell's transformation into three separate publicly traded companies presents a buying opportunity for investors, especially given its recent stock decline despite strong financial performance [2][4][12]. Financial Performance - Honeywell reported an 8% sales growth and a 10% increase in adjusted earnings per share (EPS), exceeding previous guidance [9]. - The updated guidance for 2025 includes projected revenue of $40.8 billion to $41.3 billion, adjusted EPS of $10.45 to $10.65, and free cash flow (FCF) of $5.4 billion to $5.8 billion [9]. - The stock is currently valued at 20.5 times the midpoint of adjusted 2025 earnings and 24.7 times FCF, which is a discount compared to its five-year median P/E ratio of 25.5 and price-to-FCF of 29.5 [10]. Strategic Changes - Under CEO Vimal Kapur, Honeywell is undergoing a portfolio review and plans to split into three companies: Honeywell Automation, Honeywell Aerospace, and Solstice Advanced Materials [3][4]. - The decision to separate is seen as a way to enhance shareholder value, acknowledging that the conglomerate structure has become a disadvantage [7]. Dividend and Valuation - Honeywell has a 14-year history of increasing its dividend, currently yielding 2.1%, with sufficient FCF to support future increases [11]. - The potential for each stand-alone company to achieve different valuations based on their growth prospects, particularly in sectors like artificial intelligence, is noted [13]. Investment Recommendation - The current stock price presents a strong buying opportunity before the breakup, with the potential for significant value appreciation post-split [12].