Honeywell Stock Is Down on a Litigation Charge. Why It Shouldn’t Be.

Coming into Monday trading, Honeywell stock was down about 6% this year. (Kevin Dietsch/Getty Images)

Key Points

• Honeywell stock fell after announcing a $470 million litigation charge and updated guidance.
• The company adjusted its full-year earnings per share guidance to $9.70 to $9.80, down from $10.60 to $10.70.
• The litigation charge stems from a settlement with Flexjet regarding aircraft engine maintenance disagreements.

Honeywell stock dropped early Monday after announcing a litigation charge and changes to full-year guidance.

None of the things announced amounts to much, but Honeywell investors aren’t feeling charitable this holiday season.

Shares were down more than 2% in premarket trading before recovering to close at $195.65, down 1.6%, while the S&P 500 and Dow Jones Industrial Average gained 0.6% and 0.5%, respectively.

The move followed Honeywell’s announcement of a $470 million litigation charge related to Flexjet. The litigation stems from disagreements over aircraft engine maintenance. Flexjet alleged that Honeywell failed to meet repair timelines. Honeywell pointed out that supply-chain problems made that difficult during the COVID-19 pandemic.

The charge will not affect guidance, according to the company. Its premarket stock move reduced Honeywell’s market value by about $3 billion, or six times the charge, even if the charge was completely out of the blue.

Honeywell did adjust guidance after completing the spinoff of Solstice Advanced Materials in October, though. That wasn’t big news either. Solstice is now considered a “discontinued operation.” Honeywell still controlled it in the fourth quarter.

Honeywell’s guidance for full-year earnings per share is now $9.70 to $9.80, down from $10.60 to $10.70. The missing 90 cents is with Solstice.

“Excluding the reclassification, no change to the company’s expectations for its fourth quarter non-GAAP financial guidance,” according to the company’s news release.

The litigation and discontinued operations qualify as some year-end cleanup for the company. Still, with the stock down, it doesn’t look like investors will give the company a break.

Coming into Monday trading, Honeywell’s stock was down about 6% this year. The company has had a decent year, beating earnings estimates and raising guidance, but the stock feels as if it is stuck in deal limbo. Honeywell is breaking into three parts. The Solstice spin was the first part. The larger split of its automation and aerospace businesses will be completed in 2026. Investors appear to be on the sidelines, waiting for the transactions to wrap up.

Write to Al Root at allen.root@dowjones.com