Honeywell Split: Which Spinoff Should You Own?

Honeywell, a classic industrial conglomerate, has completed its breakup into three separate public companies: Honeywell Technologies (HON), Solstice Advanced Materials (SOLS), and Honeywell Aerospace (HONA). This move follows a Wall Street trend of de-conglomeration, where breaking up a diversified giant is believed to unlock shareholder value by allowing each business to focus on its core mission.

Honeywell Technologies retains the original HON ticker and is now a pure-play industrial automation company. It is led by Vimal Kapur, the CEO who orchestrated the entire split. His decision to stay with the automation business signals his confidence in its future, especially with the rise of artificial intelligence (AI) in industrial settings.

Solstice Advanced Materials was the first to be spun off, focusing on specialty chemicals and materials. It reported impressive second-quarter results with an 11% sales increase and a 23% jump in earnings per share, prompting the company to raise its full-year guidance.

Honeywell Aerospace, spun off on June 29, is the aviation-focused business. While the long-term outlook for air travel remains strong, the company recently lowered its organic sales growth guidance, indicating some near-term turbulence.

The split was designed to let each company operate with more agility, but it also means investors must now choose which piece of the former Honeywell puzzle they want to own.

For investors, the Honeywell breakup presents both an opportunity and a challenge. Each new company has a distinct risk-reward profile, and the choice you make will significantly impact your portfolio's performance.

Honeywell Technologies (HON) is the largest of the three, with a market cap of $65 billion. Its second-quarter earnings, when isolated from the aerospace segment, showed a 16% increase in orders and a 10% rise in adjusted earnings. The company also holds a substantial $20 billion backlog, providing revenue visibility. The integration of AI into industrial automation is a key growth driver, making HON an attractive play on the future of manufacturing.

Honeywell Aerospace (HONA) is also large, with a $49 billion market cap, but it faces near-term headwinds. The guidance cut suggests that the aviation market, while growing, may not be as robust as previously expected. However, for investors with a long-term horizon, the increasing demand for air travel could still make HONA a solid investment.

Solstice Advanced Materials (SOLS) is the smallest, at $9.5 billion, but it has shown strong early momentum. Its specialty materials business is performing well, but its size may limit its appeal to institutional investors or those seeking significant market exposure.

The CEO's choice to lead HON is a powerful signal. Kapur likely sees the most potential in automation, especially with AI-driven efficiency gains becoming a priority for industries worldwide. This makes HON the most compelling option among the three.