After yesterday making all-time highs, shares of Honeywell (HON 143.51, -0.09 0.06%) are modestly in the red on Tuesday in light of this morning’s news that the company will spin-off its Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business, into two stand-alone, publicly-traded companies. HON also gave preliminary Q3 results and raised the low-end of FY17 earnings per share guidance.
First, HON announced the results of its comprehensive portfolio review, including its intention to separately spin off its Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business, into two stand-alone, publicly-traded companies. The planned separation transactions are intended to be tax-free spins to HON shareowners for U.S. federal income tax purposes and are expected to be completed by the end of 2018. The planned separations will not require a shareowner vote.
- The new Homes and Global Distribution business is expected to have annualized revenue of about $4.5 billion, a high-yield credit rating, about 13,000 employees, and financial responsibility for certain Honeywell legacy liabilities.
- The new Transportation Systems business is expected to have annualized revenue of about $3 billion, a high-yield credit rating, about 6,500 employees and financial responsibility for Honeywell legacy automotive segment liabilities in an amount equal to our Bendix legacy asbestos liability.
- In addition, Honeywell's Smart Energy business unit, previously part of HBT, will immediately be integrated into the Process Solutions unit within Honeywell Performance Materials and Technologies.
- Also, effective immediately, former Ingersoll-Rand Company SVP Gary Michel will serve as president and CEO of Honeywell's Home and Building Technologies (HBT) strategic business group.
HON also announced expectations for the upcoming Q3 print; sales are expected to be $10.1 billion, up 3% reported and up 5% organic, and earnings per share is expected to be $1.75, up 9% reported and up 16%1 ex-divestitures, normalized for tax at 26%, driven by strong results at its Aerospace and Performance Materials and Technologies business groups.
The company also raised the low-end of its full-year 2017 earnings per share guidance by 5 cents to a new range of $7.05 - $7.10, excluding any pension mark-to-market adjustment.
Full Q3 earnings are slated for a Friday, October 20, premarket release.