To hear some talk about Honeywell (NYSE:HON), you'd think this is a lousy business, never mind the solid margins and returns on capital. There are nits to pick with respect to organic revenue growth and free cash flow generation, I'll grant, but it's interesting to me to see what companies get a "pass" and what companies don't. Now with a new CEO in place, one who hasn't earned the benefit of the doubt from investors and analysts, there could be more pressure on Honeywell to remake the business in a more dramatic fashion.
I don't know whether or not Honeywell will restructure itself in a major way, up to and including separating from the aerospace business, but management has at least validated it as a talking point in response to a letter from an activist investor. Relative to my cash flow expectations, Honeywell shares are trading at an implied return in that space between "mid" and "high" single digits, which isn't bad, and could still offer some upside as comps get easier and the company considers its strategic options.
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Honeywell Has Several Options To Go From Very Good To Great