The Morning Brief: Honeywell Investors React to Third Point Stake

May 01, 2017   Stephen Taub


Dan Loeb’s firm has taken a stake in the company and is pressuring it to spin off one of its divisions.

Shares of Honeywell International jumped 1 percent on Friday after Daniel Loeb’s Third Point disclosed a stake in the conglomerate and called on the company to spin off its aerospace unit. However, the stock had risen nearly 4 percent earlier in the trading session.

In its first-quarter letter, made public after the market closed the day before, the sometime-activist firm stated that "despite the attractive positioning and financial characteristics of Honeywell’s assets," the stock still trades at a "substantial discount to its industrial peer group." Third Point thinks the spinoff would boost shareholder value by $20 billion. "It is clear to us, as well as several sell-side analysts, that Aerospace’s presence in the portfolio is the chief cause of Honeywell’s discounted valuation and that Aerospace would be better off as a stand-alone entity," Third Point adds.

In a statement, Honeywell said it tries to keep an open dialogue with all of its shareholders. "Honeywell’s management and Board regularly conduct portfolio assessments and have a demonstrated track record of effective portfolio realignment and capital deployment actions. Regarding the Third Point investment thesis, we intend to take the time necessary to ensure a comprehensive, informed and objective review of the potential separation of the Aerospace business."

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Shares of KKR rose about 1.3 percent to $18.98 after ValueAct Capital disclosed it held a 4.9 percent position in the private equity pioneer. Speaking at a conference, ValueAct Capital Management President Mason Morfit said the stock is worth closer to $37 a share.

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UBS raised its price targets on Alphabet and Amazon.com the morning after the two internet giants reported revenues and earnings that blew through consensus estimates.

The investment bank raised its target on the C shares of search giant Alphabet, the parent of Google, from $980 to $1,050, citing a hike in its earnings estimate as well as a slight increase in its price-to-earnings multiple assumption. The stock climbed 3.6 percent, to close at $905.96.

UBS raised its price target on e-commerce giant Amazon.com from $930 to $1,100. "For long-term investors, Amazon (at current levels) still presents a secular growth category winner in two categories -- global eCommerce and cloud computing adoption," the bank states in a separate note to clients. The stock rose 0.7 percent, to close at $905.96.


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