Copyright Barchart
The chemical sector is bracing for a major shift on Oct. 30, as Honeywell (HON) moves ahead with the spin-off of its Solstice Advanced Materials business, marking a milestone in the evolution of industrial materials and sustainability solutions. In the third quarter of 2025, Honeywell reported sales of $10.4 billion, a 7% year-over-year (YoY) increase, alongside a 22% jump in overall orders, supported by strength in energy, sustainability, and automation. Industry demand for advanced materials and green technologies is running high, with the global chemicals market projected at $1.26 trillion in 2025 and a 1.46% compound annual growth rate expected from 2025–2029, which helps explain investor focus on this move. The spin-off will create Solstice as a pure-play specialty materials company serving semiconductor manufacturing, refrigerants, data center cooling, and healthcare packaging, with shares distributed at one Solstice for every four Honeywell shares as of the Oct. 17 record date. Given the strong quarterly results, the coming separation, and firm sector backdrops, what could Solstice’s independence mean for Honeywell stockholders and materials investors in the weeks ahead? Let’s find out. Tracking Honeywell’s Strength Before the Spin-Off Honeywell is well known for working across automation, aerospace, energy, and advanced materials. The company combines its technology, manufacturing, and focus on sustainability to keep its business steady, even when the economy shifts. Currently, as the Solstice Advanced Materials spin-off approaches, HON stock is a mixed bag. Over the past 52 weeks, shares are up about 4%, but since the year started, the stock has slipped around 5%. On the value front, Honeywell trades at a forward price-to-earnings (P/E) ratio of 20.74x, a little lower than the industrial sector’s 21.29x average, signaling potential undervaluation, especially since Honeywell keeps generating solid cash and running a tight ship. Income investors have more to like with Honeywell’s approach to dividends. The company pays an annual yield of 2.09%, or 4.52% annualized, and has a forward payout ratio of 44.19%. Honeywell has not missed a dividend increase in 15 years, and the checks go out every quarter, with the latest $1.13 paid on Aug. 15. The financials point to a strong business heading into the spin. In the third quarter, sales were up 7% from last year, with 6% organic growth as commercial aftermarket, defense, and space helped drive profits. Segment profit moved up 5% to $2.4 billion, though operating income did fall by 6% as margins slipped down to 16.9%. Adjusted earnings per share came in at $2.82, up 9%, while GAAP EPS jumped 32% to $2.86. Honeywell brought in $3.3 billion in operating cash flow, a big 65% lift, but free cash flow was down 16% to $1.5 billion. What’s Powering Honeywell’s Growth Story The Solstice Advanced Materials spin-off stands out as one of Honeywell's most important moves right now. Solstice will operate on its own as a specialty materials company, with strong positions in refrigerants, semiconductor materials, data center cooling, alternative energy, protective fibers, and healthcare packaging. Building on that momentum, Honeywell recently announced a global partnership with LS Electric to speed up innovation for data centers and battery energy storage systems. The deal brings together Honeywell's automation and controls with LS Electric's expertise in power systems. Together, they plan to connect power distribution directly with building management using the Honeywell Forge platform, which relies on AI to spot maintenance needs early and manage energy more efficiently. The two companies are also developing modular battery storage systems that can set up microgrids for industrial sites. Honeywell has been making strategic buys, too. The company picked up SparkMeter's data platform and grid management tools to expand its Smart Energy business, adding more capabilities to its Forge Performance+ suite. Around the same time, Honeywell bought Li-ion Tamer from Nexceris to improve fire detection for lithium-ion batteries. That addition strengthens Honeywell's Building Automation lineup with early-warning technology that detects dangerous off-gassing before thermal runaway happens. This matters more as lithium-ion battery demand is expected to grow by over 30% each year through 2030. How Wall Street Sees Honeywell Post-Spin Wall Street has its eyes on Oct. 30 because that's when Honeywell's updated forecast factors in the Solstice Advanced Materials spin-off. The separation is expected to cut full-year sales by $0.7 billion, adjusted EPS by $0.21, and free cash flow by $0.2 billion once it closes. Even with that, Honeywell raised its full-year adjusted EPS guidance to $10.60 to $10.70, up 10 cents at the midpoint, with sales expected between $40.7 billion and $40.9 billion. That context helps explain why most analysts remain positive. Barclays' Julian Mitchell has kept a “Buy” rating, first at $265 and then raising it to $270 after the Q3 results beat expectations. He's banking on Honeywell's transformation plan and how the company looks after the spin. Not everyone is as optimistic, though. Wells Fargo is holding at a “Neutral” rating with a $220 price target, while Jefferies cut its target from $240 to $230 before the spin-off, pointing to margin pressure and short-term challenges even if the long-term strategy makes sense. Overall, the analyst's view is still supportive. The consensus of the 23 analysts covering HON stock is a "Moderate Buy," with an average price target of $250.20. Compared to the current price, that works out to about a 17% upside potential. Conclusion Ultimately, Oct. 30 is set to become a pivotal date for Honeywell investors. With the much-anticipated Solstice spin-off bringing structural changes and sector-wide attention, the market’s outlook skews toward optimism despite some near-term caution. Analysts paint a constructive picture, and with a consensus price target that suggests a clear 17% upside from current levels, shares have a solid shot at recovery and renewed momentum over the next several months. If Honeywell can deliver on its new guidance and Solstice proves its value as a standalone materials powerhouse, investors could well see the upside the Street is betting on.
