Honeywell's Strategic Shift: A Playbook for Value Creation in Automation

Honeywell International (HON) is executing a bold restructuring plan that underscores a critical truth in corporate strategy: focus breeds value. By initiating a strategic review of its Productivity Solutions and Services (PSS) and Warehouse and Workflow Solutions (WWS) businesses, the company is sharpening its portfolio ahead of a landmark three-way split into independent entities by late 2026. This move positions Honeywell as a pure-play automation leader, with its Process Automation segment—now under the seasoned leadership of Jim Masso—front and center. For investors, the calculus is clear: Honeywell's willingness to divest non-core assets, streamline operations, and capitalize on its automation expertise could unlock significant shareholder value in the coming quarters.

The Case for Divesting PSS and WWS: Pruning to Grow Stronger

The PSS and WWS businesses, which generated roughly $2 billion in combined revenue in 2024, are now under review for potential sale, spinoff, or other strategic alternatives. While these divisions are profitable, they sit outside Honeywell's core automation focus, which includes building, process, and industrial automation. By divesting them, Honeywell can redirect capital and management attention to high-growth areas like energy transition, smart infrastructure, and advanced robotics—markets where its Honeywell Forge IoT platform and Accelerator operating system already hold a competitive edge.

The decision also reflects a broader trend among industrial giants: simplification drives efficiency. Consider that Honeywell has already divested non-core assets like its Personal Protective Equipment business and acquired companies like SP Connect (a software firm) to bolster its automation stack. The strategic review of PSS and WWS fits this pattern, and investors should view it as a signal that Honeywell is serious about transforming into a leaner, more innovation-driven enterprise.

The Three-Way Split: A Catalyst for Multiple Expansion

Honeywell's planned separation into three independent companies—automation, aerospace, and advanced materials—represents more than just a structural change. It is a strategic move to unlock value by allowing each segment to operate with the agility and focus of a standalone entity. The automation business, expected to retain the Honeywell name, will benefit from a clearer identity as a leader in industrial and building automation, a sector projected to grow at over 7% annually through 2030.

The aerospace and advanced materials divisions, meanwhile, will have the flexibility to pursue their own strategic paths. For instance, the aerospace spinoff could attract buyers seeking exposure to defense and commercial aviation markets, while Solstice Advanced Materials—scheduled for a 2025/2026 spinoff—may command a premium as a pure-play player in sustainable refrigerants and specialty chemicals.

Investors should note that such splits often lead to multiple expansion. Historically, companies that divest non-core assets or spin off divisions see their valuations rise as markets reward focus and clarity. Honeywell's stock performance since announcing its restructuring plans will be a key indicator of this dynamic.

Jim Masso's Appointment: A Masterstroke for Process Automation

The appointment of Jim Masso as President and CEO of Honeywell's Process Automation business is a masterstroke. With over two decades in energy and industrial sectors, Masso brings deep expertise in scaling automation solutions for oil and gas, chemicals, and utilities—markets that are critical to Honeywell's growth. His leadership at Allied Power Group and GE highlights his ability to navigate complex operational environments, a skill set that aligns perfectly with Honeywell's ambition to dominate process automation.

Masso's mandate is clear: accelerate innovation and market penetration in a segment that already accounts for nearly 40% of Honeywell's R&D spending. His tenure could prove pivotal in converting Honeywell's technological advantages—such as its AI-driven process optimization tools—into sustained revenue growth.

Risks and Considerations

No restructuring is risk-free. Honeywell faces execution challenges, including the complexity of separating three businesses while managing ongoing operations. Geopolitical tensions and macroeconomic volatility could also delay or complicate the process. Investors should also assess whether buyers for PSS and WWS will materialize at acceptable valuations.

However, Honeywell's track record since 2023—$14 billion in accretive acquisitions and disciplined divestitures—suggests management has the expertise to navigate these hurdles. Furthermore, the appointment of Centerview Partners as financial advisor signals a seriousness of intent that should reassure investors.

Investment Thesis: Position for Near-Term Catalysts

For investors, the near-term catalysts are compelling. The PSS/WWS strategic review could conclude by early 2026, potentially unlocking value through a sale or spinoff. The Solstice spinoff in late 2025/early 2026 and the aerospace separation by mid-2026 will also test the market's appetite for Honeywell's restructured entities.

Given Honeywell's fortress balance sheet—its debt-to-equity ratio of 0.4 and consistent dividend growth—investors can take a measured position in HON now, with a focus on the coming monetization events. The stock's current valuation, trading at ~16x forward earnings (vs. its 5-year average of 18x), suggests room for expansion as the restructuring unfolds.

Final Takeaway

Honeywell's strategic moves are not merely about cutting costs or raising capital. They are a deliberate playbook to dominate automation, a sector that will increasingly define industrial competitiveness in the 2020s. With a clear path to simplification, a visionary leader in Masso, and a portfolio optimized for innovation, Honeywell is primed to reward shareholders who bet on its transformation. The next 12 months will be pivotal—investors should position now to capitalize on the upside.

Disclosure: The analysis above does not constitute personalized investment advice. Investors should conduct their own due diligence before making decisions.