We’re exiting our position in a spin-off play gone wrong
Shortly after the opening bell, we will be exiting our position in Honeywell Aerospace , selling 320 shares at roughly $172.00. Following the trade, Jim Cramer’s Charitable Trust will no longer own a position in HONA. Following our comments Wednesday night on the Honeywell Aerospace quarter, we’re selling the position at roughly 15% loss. Our investment thesis in Honeywell Aerospace was centered on a clean execution story, similar to the success we saw at GE Aerospace after its breakup. The remaking of United Technologies — now known as RTX Corporation — as a pure-play aerospace and defense stock offered another example in recent years. But the recent spin-out from Honeywell Technologies got off to a rough start as a separate company. After the close Wednesday, the company slashed its full-year organic sales growth and adjusted operating income outlook. It also provided a standalone adjusted earnings per share outlook well below the Street consensus. As management explained on the earnings call, supply chain constraints in the first quarter resulted in factory volume growth below expectations. The company expected a steady ramp in output through the first half of the year with an acceleration in the second half, but the improvement did not materialize at the pace needed to meet its prior financial outlook. It’s unusual for a newly public company to lower guidance on its first earnings call, particularly one with the long operating history of Honeywell Aerospace. We appreciate management resetting its outlook to a more achievable level, but this execution misstep hurts their credibility, and it will take time to restore investor trust. (Jim Cramer’s Charitable Trust is long HON. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
