One other breakup is on the horizon. Later this month, Honeywell will separate its Solstice Superior Supplies unit. Honeywell shareholders as of Oct. 17 will obtain one share of Solstice for each 4 shares of Honeywell. The 2 firms will start buying and selling independently on Oct. 30, with Solstice below the ticker SOLS and Honeywell conserving its present ticker, HON. The upcoming spin is step one in Honeywell’s multi-stage breakup plan. Within the second half of 2026, Honeywell will separate its remaining automation and aerospace companies, in a transfer that was first pushed for by the activist funding administration agency Elliott Administration nearly one yr in the past. When Elliott first referred to as for these modifications, it despatched a letter to Honeywell administration detailing its greater than $5 billion funding within the firm. Elliott’s thesis was that the conglomerate construction was not acceptable, and Honeywell’s totally different divisions would profit from a extra simplified and centered group construction. They pointed to the profitable breakups of United Applied sciences, Common Electrical, and Ingersoll Rand, as examples of how simplifying can unlock vital worth. By the best way, Honeywell is within the technique of reviewing its Productiveness Options and Companies (PSS) and Warehouse and Workflow Options (WSS) companies for strategic alternate options to additional simplify its automation enterprise. So, there are a whole lot of modifications taking place right here. HON YTD mountain Honeywell YTD However with the Solstice spin on faucet, what precisely are shareholders getting? The corporate is a mid-sized specialty chemical substances enterprise, with almost $4 billion in gross sales, and nearly $1 billion in adjusted standalone earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA). It sells a diversified vary of merchandise spanning refrigerants (34% of gross sales), constructing options and intermediates (20%), analysis and efficiency chemical substances (13%), different vitality providers (12%), digital supplies (10%), healthcare packaging (6%), and security and protection options (5%). Solstice experiences its financials by way of two segments: Refrigerants & Utilized Options and Digital & Specialty Supplies. The bigger section is Refrigerants & Utilized Options, making up about $2.7 billion of internet gross sales in 2024, or greater than two-thirds of gross sales, with a powerful adjusted EBITDA margin of slightly below 40%. Its greatest product group is refrigerants, accounting for about half the section’s income and serving enticing finish markets like stationary HVAC (heating, air flow, and air-conditioning), information heart cooling, and automotive HVAC. It additionally has a big portfolio of constructing options and middleman merchandise, that are used for increased efficiency insulation and client and industrial aerosols. The section’s different vitality providers cater to the nuclear {industry}, and its health-care enterprise focuses on an ultra-high moisture barrier polymer utilized in healthcare packaging and propellants used for inhalers. The Digital & Specialty Supplies enterprise did about $1 billion in internet gross sales final yr at an adjusted EBITDA margin of 19.2%, making it the slower-growing, lower-margin of the 2. Analysis and Efficiency chemical substances make up rather less than half of the section’s gross sales, and it caters to chemical, pharmaceutical, and building markets. A bit of greater than one-third of the section’s gross sales are from digital supplies, and this enterprise is benefiting from lots of the identical themes we mentioned with DuPont ‘s spinoff Qnity Electronics. The third piece of Solstice’s Digital & Specialty Supplies section is security and protection options, which is the place Solstice makes fibers utilized in ballistic supplies which can be offered into U.S. navy enforcement purposes. Geographically, the corporate will get 61% of its gross sales right here within the U.S., with one other 23% from the Europe, Center East, and Africa (EMEA) area, and the final 16% from different worldwide markets. Regardless of its international footprint, Solstice has been resilient to tariffs and modifications to international provide chains due to its native manufacturing. About 90% of its gross sales in the US are manufactured throughout the U.S. And, about 60% of its gross sales to the remainder of the world are manufactured in every respective area. The place there was publicity to tariffs, administration mentioned it moved rapidly to go by way of prices or transfer its provide chains to a extra favorable area to mitigate the influence. Let’s flip to the financials. Solstice has grown its gross sales from $2.8 billion in 2017 to $3.8 billion in 2024, representing a 4.4% compound annual progress fee. That is barely higher than its peer group’s median CAGR (compound annual progress fee) of three.9%. Solstice defines its peer group as eight different specialty chemical firms: Avient , Chemours , Eastman , Factor , Entegris , Materion , and RPM . Solstice’s profitability was higher than its peer group in 2024, coming in at 26.4% versus its peer median of 17.8%. The corporate additionally earned a a lot increased return on its invested capital, which is a vital metric for capital-intensive companies. In 2024, Solstice’s return on invested capital (ROIC) was 21.5%, greater than double the peer median of 8.4%. Though the corporate champions itself with a “observe document of above-market progress with best-in-class margins and returns,” we must always notice that gross sales have stagnated over the previous few years. The gross sales development has gone from $3.6 billion in 2022 and 2023 to $3.8 billion in 2024. On the firm’s investor occasion final week, Solstice guided income to $3.75 billion to $3.85 billion for the full-year 2025. Trying ahead, administration’s medium-term framework is to ship low to mid-single digit natural internet gross sales compound annual progress, with adjusted EBITDA rising at a mid-single digit share. The corporate can be coming public with a powerful stability sheet, which is essential within the cyclical chemical substances {industry}, with a internet leverage ratio of 1.5 instances. Web leverage measures an organization’s internet debt in relation to its adjusted EBITDA. By the appears to be like of it, Solstice has a stable industry-leading enterprise with a observe document of outperforming its peer group. However this appears to be like like an excellent home in a foul neighborhood – and people do not all the time make good investments. We favor progress, and that is been lacking right here over the previous couple of years. To counter that, administration harassed a number of instances at its Investor Day that it believes the enterprise is at an inflection level, due to secular progress traits in superior computing, environmental and vitality evolution, bettering well being outcomes, and private security protection. Nevertheless, there’s nonetheless a whole lot of publicity to extra cyclical markets. Backside line We’ll watch how Solstice trades after it separates and there might be a dynamic the place shareholders promote Solstice to purchase extra guardian Honeywell to achieve extra publicity to the aerospace division, which is our favourite of the three firms. As soon as aerospace is spun out the remaining Honeywell shall be a pure-play automation firm. However long run, and because the financial system improves, Solstice ought to profit from turning into an unbiased firm and stand out inside its {industry} because of its publicity to sturdy themes. (Jim Cramer’s Charitable Belief is lengthy HON, DD. See right here for a full checklist of the shares.) As a subscriber to the CNBC Investing Membership with Jim Cramer, you’ll obtain a commerce alert earlier than Jim makes a commerce. 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