Deutsche Bank upgrades Honeywell because of break-up plan, sees 30% upside

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Deutsche Bank upgrades Honeywell because of break-up plan, sees 30% upside

Honeywell ‘s decision to split up will result in a huge advantage for the stock, according to Deutsche Bank. On Thursday, Honeywell announced plans to officially break up into three independently listed companies, under pressure from activist investor Elliott Management. Analyst Nicole DeBlase upgraded the multinational conglomerate to a buy from hold rating. The analyst accompanied the move by lifting her price target to $260 from $236. DeBlase’s revised price target implies that the stock could rally another 24% from its current level. But there could even be more upside, the analyst said. “Our updated base case sum-of-the-parts valuation now shows attractive 30% upside potential to the current stock price,” wrote the analyst in a Thursday note. HON 1Y mountain HON 1Y chart “As we have learned through numerous recent examples in industrials, the rationale for a separation is about much more than a financial engineering exercise — it is about creating more focused, better-run companies that can control their own destiny with respect to reinvesting capital,” the analyst added. Meanwhile, DeBlase also expects earnings-related tailwinds on the horizon for Honeywell. Separately on Thursday, the company guided for 2025 adjusted earnings of between $10.10 to $10.50, well below the median consensus of $10.94. DeBlase believes that Honeywell purposefully set a conservative bar that will reward the company with an earnings beat. “If we are right about this, we think the stock’s multiple can re-rate towards the peer group average, ~23x **** P/E,” she added. “So, we essentially believe that earnings momentum can bridge ‘deal limbo’, creating a near-term positive catalyst, followed by the breakup catalyst in 2026.” Honeywell shares fell 5% on Thursday, but were set to open higher on Friday.

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