Honeywell International Inc.

🇺🇸NASDAQ Global Select
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Honeywell International Inc. stock analysis HON overview
Bullish +75

Honeywell’s quantum company goes public. What investors should know about the IPO

🚀 Quantinuum shares jumped as much as 19% to over $71 in their Thursday debut on the Nasdaq.

📊 The stock closed up less than 1%, bringing the market cap to $15.66 billion after pricing at $60 per share.

💰 The IPO raised $1.68 billion, which was above the previous expected range of $53 to $55 per share.

🏢 Honeywell retains a 48% stake in Quantinuum and maintains majority voting power following the offering.

🤝 Unlike a spin-off, this deal does not provide existing Honeywell shareholders with new shares of Quantinuum.

🧪 Quantinuum was formed in 2021 through the merger of Honeywell's Quantum Solutions group and Cambridge Quantum.

🔬 The company is still in its early innings regarding revenue generation as quantum computing remains a nascent industry.

🗣️ CEO Rajeeb Hazra stated Honeywell will remain a disciplined shareholder and help with supply chain agreements.

💸 Honeywell aims to monetize the Quantinuum asset over time, though specific plans have not been fully revealed.

📈 The IPO provides a valuation for a business that investors previously had to estimate without concrete data.

⚠️ Many public quantum stocks like Rigetti and IonQ have shown high volatility despite recent gains from federal grants.

🏭 Honeywell CEO Vimal Kapur is streamlining operations by spinning off non-core businesses over the past three years.

✈️ The final piece of this restructuring involves Honeywell Aerospace becoming a separate company later this month.

📉 Honeywell shares have been relatively flat since late 2021 despite hitting an all-time high in early March.

🎯 Honeywell Aerospace expects to bring in at least $6.5 billion in annual adjusted EBIT by the end of the decade.

🛫 Jim Currier, CEO of Honeywell Aerospace, expects the most growth in commercial air transport and defense markets.

Bullish Signals
  • Quantinuum shares jumped as much as 19% to over $71 each in their Thursday debut, with the stock closing up less than 1% for a market cap of $15.66 billion.
  • The IPO was priced at $60 per share, above its previous expected range of $53 to $55, raising $1.68 billion in capital.
  • Honeywell retains a 48% stake in Quantinuum, giving it majority voting power and allowing the industrial conglomerate to benefit from the valuation of this high-growth quantum computing business.
  • Quantinuum was among companies awarded $2 billion in federal grants by the Commerce Department, providing significant financial support for its development.
  • Honeywell Aerospace has disclosed long-term financial targets, expecting at least $6.5 billion in annual adjusted EBIT by the end of the decade.
  • Analysts estimate the aerospace segment within the current Honeywell configuration would make $6.2 billion in operating income in 2029.
  • The spin-off of Honeywell Aerospace is expected to unlock substantial firepower and bring out more shareholder value by allowing a purpose-built management team to focus on one strategy.
  • Honeywell Aerospace CEO Jim Currier expects the most growth in the commercial air transport market and in defense and space sectors.
Risk Factors
  • Honeywell shareholders do not receive direct shares in Quantinuum despite Honeywell retaining a 48% stake and majority voting power, meaning investors miss out on upside from the quantum company's success.
  • Quantinuum is described as 'highly speculative' with significant volatility, similar to other public quantum stocks like Rigetti, IonQ, and D-Wave.
  • The quantum computing industry is characterized as an 'unestablished market' that is still 'in search of commercialization,' with applications still being developed.
  • There are significant unknowns about the future market landscape for quantum computing, with experts noting there are 'a lot of maybes right now in terms of what the market will look like in a few years.'
  • Honeywell stock has been relatively flat since late 2021 despite hitting an all-time high in early March, indicating potential stagnation or lack of sustained momentum.
  • The breakup of Honeywell into separate entities (HON and HONA) is described as 'spin purgatory,' suggesting a period of uncertainty or transition that may not immediately drive value.
Full Analysis
Honeywell-backed Quantinuum went public on Thursday with shares trading as high as $71 before closing up less than 1% at a market capitalization of $15.66 billion. The company priced its offering at $60 per share, raising $1.68 billion, which was above the previously expected range of $53 to $55. Honeywell retains a 48% stake in Quantinuum and maintains majority voting power, though Honeywell shareholders do not receive direct shares of the quantum company. CEO Rajeeb Hazra stated that Honeywell will remain a disciplined shareholder and continue to support supply chain and manufacturing agreements, with plans to monetize the asset over time. The IPO represents an incremental win for Honeywell by providing a valuation for its quantum computing business, which was previously unpriced. Quantinuum was formed in 2021 through the merger of Honeywell's Quantum Solutions group and Cambridge Quantum, and while it is not a major revenue source yet, it positions Honeywell in the high-growth quantum sector. The company recently received $2 billion in federal grants for quantum computing, contributing to recent stock price gains for Honeywell. This move is part of Honeywell's broader strategy under CEO Vimal Kapur to streamline operations and monetize non-core businesses through spin-offs and divestitures. The final step in this restructuring is expected later in the month when Honeywell Aerospace will separate as a standalone company under the ticker HONA, while the remaining automation business will be renamed Honeywell Technologies and keep the HON ticker. Management expects the aerospace segment to generate at least $6.5 billion in annual adjusted EBIT by the end of the decade, with significant growth anticipated in commercial air transport, defense, and space markets.