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 protecting 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 known 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 way in which, Honeywell is within the strategy of reviewing its Productiveness Options and Providers (PSS) and Warehouse and Workflow Options (WSS) companies for strategic alternate options to additional simplify its automation enterprise. So, there are numerous 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%), various vitality companies (12%), digital supplies (10%), healthcare packaging (6%), and security and protection options (5%). Solstice stories its financials by two segments: Refrigerants & Utilized Options and Digital & Specialty Supplies. The bigger phase is Refrigerants & Utilized Options, making up about $2.7 billion of web 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 phase’s income and serving engaging finish markets like stationary HVAC (heating, air flow, and air-conditioning), knowledge middle cooling, and automotive HVAC. It additionally has a big portfolio of constructing options and middleman merchandise, that are used for larger efficiency insulation and client and industrial aerosols. The phase’s various vitality companies 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 web 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 phase’s gross sales, and it caters to chemical, pharmaceutical, and building markets. Just a little greater than one-third of the phase’s gross sales are from digital supplies, and this enterprise is benefiting from most of the identical themes we mentioned with DuPont ‘s spinoff Qnity Electronics. The third piece of Solstice’s Digital & Specialty Supplies phase is security and protection options, which is the place Solstice makes fibers utilized in ballistic supplies which are bought into U.S. army enforcement functions. 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 america are manufactured inside 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 cross by prices or transfer its provide chains to a extra favorable area to mitigate the impression. 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 development price. That is barely higher than its peer group’s median CAGR (compound annual development price) of three.9%. Solstice defines its peer group as eight different specialty chemical firms: Avient , Chemours , Eastman , Component , 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 larger return on its invested capital, which is a crucial 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 “monitor report of above-market development with best-in-class margins and returns,” we should 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 web gross sales compound annual development, with adjusted EBITDA growing at a mid-single digit share. The corporate can be coming public with a powerful steadiness sheet, which is essential within the cyclical chemical substances {industry}, with a web leverage ratio of 1.5 instances. Web leverage measures an organization’s web debt in relation to its adjusted EBITDA. By the appears of it, Solstice has a strong industry-leading enterprise with a monitor report of outperforming its peer group. However this appears like an excellent home in a nasty neighborhood – and people do not at all times make good investments. We choose development, and that is been lacking right here over the previous few years. To counter that, administration burdened a number of instances at its Investor Day that it believes the enterprise is at an inflection level, due to secular development developments in superior computing, environmental and vitality evolution, enhancing well being outcomes, and private security protection. Nevertheless, there’s nonetheless numerous publicity to extra cyclical markets. Backside line We’ll watch how Solstice trades after it separates and there could possibly be a dynamic the place shareholders promote Solstice to purchase extra mum or dad 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 will probably be a pure-play automation firm. However long term, and because the economic system improves, Solstice ought to profit from changing into an impartial firm and stand out inside its {industry} as a consequence of its publicity to sturdy themes. (Jim Cramer’s Charitable Belief is lengthy HON, DD. See right here for a full record 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. Jim waits 45 minutes after sending a commerce alert earlier than shopping for or promoting a inventory in his charitable belief’s portfolio. 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