Honeywell's business and stock are looking good — Cramer has this advice for investors
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CNBC Finance
6 min read
Honeywell shares jumped on Thursday after the industrial conglomerate capped off 2025 with a strong fourth quarter and moved up its aerospace spinoff. Adjusted earnings per share increased 16.7% from the year-ago period to $2.59, beating the LSEG estimate of $2.54. Adjusted revenue in the quarter ending Dec. 31 rose 9.8% year over year to $10.07 billion, exceeding the LSEG-compiled consensus estimate of $9.85 billion. Adjusted revenue grew 11% organically, excluding mergers and acquisitions and other outside drivers. While not typical, we are using an adjusted revenue metric, which removes the impact of the settlement of Flexjet-related litigation. As a result, the Aerospace unit recorded a significant acceleration in revenue growth, providing a strong setup ahead of this year's planned split. Management also said the separation of Aerospace will come ahead of schedule in the third quarter. Why we own it Honeywell is a provider of industrial technology to firms in various industries. The company's planned three-part breakup should be a value-creating event for shareholders. Competitors: Emerson Electric , RTX , 3M Weight in portfolio: 2.37% Most recent buy: Nov. 14, 2025 Initiated: July 5, 2020 During Thursday's Morning Meeting, Jim Cramer said he would hazard to say the potential of Aerospace is worth as much as all of Honeywell right now. He advised investors not to sell Honeywell shares. Bottom Line The headline beats and the acceleration of Honeywell's spinoff plans pushed the Club stock up 4% â just a couple of dollars shy of its all-time, intraday high of $228.73 back in November 2024. Shares of the Dow component have gotten off to a roaring start to 2026, jumping more than 15%, versus the S & P 500 's gain of less than 1% year to date. After a strategic review that ended in Q4, Honeywell said it plans to sell its Productivity Solutions and Services (PSS) and Warehouse and Workflow Solutions (WWS) businesses. Also during Q4, Honeywell completed its spinoff of Solstice Advanced Materials . Earlier this month, we took our gains and exited our extremely small post-spinoff Solstice position. But we put it in the Bullpen to keep watch. HON 5Y mountain Honeywell 5 years Quantinuum, majority-owned by Honeywell, also appears to be doing well as the quantum computing business continues to sign up important customers ahead of its eventual separation. Speaking with Jim Cramer on CNBC on Thursday, Honeywell CEO Vimal Kapur said that Quantinuum launched a more powerful machine back in November and will launch another in about 18 months. "We are doing everything we can to set up this business as an independent company," Kapur added. Quantum stocks have been a hot trade in recent months, even though the technology won't be ready for prime time for a couple of years. Discussing artificial intelligence, which should prove a major driver of the automation side of the business going forward, Kapur said that Honeywell has the data across industries needed to train AIs destined for an oil refinery, or a life sciences facility, or a hospital. "I have been in this industry, Jim, for 35 years, and I have not been excited anytime more, in terms of opportunities it's going to create the next five to 10 years, with this physical AI momentum we have with us," Kapur explained in Thursday's CNBC interview with Jim. We liked what we saw in the quarter and think the results make clear that management's efforts to streamline and optimize the portfolio are paying off. While guidance was a bit lighter than expected, given the multiple spinoff catalysts ahead, each resulting in more focused companies able to better deliver on growth initiatives, we're increasing our price target to $250 per share from $242. We decided to keep our hold-equivalent 2 rating on the stock, looking for a better opportunity to upgrade it. Segment commentary Aerospace Technologies revenue in Q4 rose 21% year over year to a better-than-expected $4.83 billion. Segment margin and segment profit growth also beat. On the conference call, CFO Michael Stepniak said, "Robust demand across all end markets led a third consecutive quarter of strong double-digit order growth and book-to-bill of 1.2." Remember, a book-to-bill ratio over 1 indicates backlog growth. It means the company took in more orders than it could deliver. Industrial Automation beat on sales, segment margin, and segment profit. However, all three metrics were lower than a year ago. Building Automation revenue and profit growth were better than expected. Segment margin missed estimates but was up slightly year over year. Energy and Sustainability Solutions , which consists only of the UOP petroleum business following the Solstice Advanced Materials spin-off and subsequent classification of advanced materials as discontinued operations, sales fell 9.6% due to "demand softness in petrochemical catalysts." Segment profit dipped and fell short of estimates. Segment margin beat but came in lower than a year ago. Portfolio realignment Looking ahead, Honeywell's reporting structure is set to change with the next earnings release. The change will not impact Aerospace or Building Automation . The Energy and Sustainability Solutions segment is being dissolved as UOP will combine with the core process solutions division of Industrial Automation to form the new Process Automation and Technology segment. Slimmed-down Industrial Automation will remain the fourth segment. Kapur said in the earnings release that the new structure is "built on complementary business models that will drive cross-portfolio synergies and accelerate profitable growth over the long term." Guidance Management provided full-year 2026 guidance. Sales: $38.8 to $39.8 billion versus $39.6 expected according to LSEG Organic Growth: 3% to 6% versus 5.4% expected according to FactSet Segment Margin: 22.7% to 23.1% versus 23.6% expected according to FactSet Adjusted EPS: $10.35 to $10.65 versus $10.38 expected according to LSEG Free Cash Flow: $5.3 to $5.6 billion versus $5.5 billion expected according to FactSet Management provided current quarter (fiscal 2026 first quarter) guidance. Sales: $9.1 to $9.4 billion versus $9.29 expected according to LSEG Organic Growth: 3% to 5% versus 4.4% expected according to FactSet Segment Margin: 22.4% to 22.6% versus 22.8% expected according to FactSet Adjusted EPS: $2.25 to $2.35 versus $2.34 expected according to LSEG (Jim Cramer's Charitable Trust is long HON. 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. 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