Berenberg announced on Tuesday that it had raised its price target for Honeywell from $242 to $300, while maintaining its Buy recommendation on the stock.
In a research note, the analyst said he welcomed yesterday's announcement by the American industrial conglomerate that it was studying a potential spin-off of its aerospace activities.
In his view, this is a positive element in view of (1) the share's ongoing underperformance, (2) the existence of an unjustified discount to its intrinsic value, and (3) the recent letter sent by activist investor Elliott advocating a possible break-up of the company.
For Berenberg, the highly "probable" scenario of a demerger could thus generate a potential upside of 46%.
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Honeywell International Inc. specializes in the manufacturing and marketing of industrial equipment. The group also offers maintenance, technical assistance and engineering services. Net sales break down by family of products as follows:
- aeronautical equipment (40.2%): engines, navigation hardware and software, propulsion and communication systems, satellite and space components, lighting equipment, wheels, etc. The group also offers turbochargers for motor vehicles;
- performance materials and technologies (26.1%): polymers, fibers, resins, acids, additives, catalysts, sorbents, semiconductor packaging materials, coating materials, etc.;
- building automation and control systems (17%): heating and ventilation control systems, fire alarms, thermostats, monitoring systems, etc.;
- security and productivity optimization solutions (16.7%): personal safety equipment, warning systems, gas detection systems, data collection and thermal printing computer solutions, warehouse and supply chain automation systems, data and production process management solutions, etc.
Net sales are distributed geographically as follows: the United States (56.7%), Europe (22.8%) and other (20.5%).
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