Solstice Advanced Materials Starts Trading. It’s a Play on AI and Nuclear Power.

Solstice Advanced Materials is Honeywell’s materials spinoff. (Elijah Nouvelage/Bloomberg)

Key Points

• Solstice Advanced Materials, a Honeywell spin-off, begins trading on Nasdaq on Thursday. It focuses on materials for AI and nuclear power.
• The company generated approximately $3.8 billion in sales and $1 billion in Ebitda in 2024, with historical sales growth of 4% to 5% annually.
• Solstice’s stock trades at nine or ten times trailing Ebitda, below the S&P 500 specialty-chemical average of 15.5 times.

Investors have a new way to play the growth of artificial intelligence and nuclear power, courtesy of Honeywell.

A company it spun out, Solstice Advanced Materials, started trading on the Nasdaq under the symbol “SOLS” on Thursday. Solstice describes itself as a “differentiated advanced materials company and a leading global provider of refrigerants, semiconductor materials, protective fibers, and healthcare packaging.”

Shares gained 0.2%, closing at $48.95. The S&P 500 and Dow Jones Industrial Average fell 1% and 0.2%, respectively.

Refrigerants end up in air conditioning and cars, among other things. Its electronic materials are critical to the manufacturing and cooling of semiconductors used everywhere, including AI data centers.

Solstice also provides uranium hexafluoride conversion and related services to utilities operating nuclear power plants. Working with a partner, General Atomics, it is the only provider of uranium hexafluoride in the U.S.

Growing demand for nuclear power has that business essentially sold out through 2030, says Solstice CEO David Sewell.

In 2024, before the spinoff, Solstice generated about $3.8 billion in sales and $1 billion in earnings before interest, taxes, depreciation, and amortization, or Ebitda. Sales have grown about 4% to 5% a year historically, a level investors can expect in the future.

It could turn out to be better than that.

“We are at an inflection point in these markets we talk about,” says Sewell. “What we’re excited about is the opportunity to really be a differentiated specialty materials business…we are going to be a growth company.”

The stock doesn’t look priced for growth yet. The stock, trading on a so-called when-issued basis, closed at $49.25 on Wednesday, valuing the company, including debt, at about $9.5 billion.

That leaves shares trading for about nine or 10 times trailing Ebitda.

Specialty chemical and similar industrial companies in the S&P 500 trade for an average of about 15.5 times trailing Ebitda, according to FactSet. The range is wide, though, going from about 7 times to 22 times. Commodity chemical producer Eastman Chemical has the lowest multiple. Ecolab has the highest.

BMO analyst John McNulty took note, recently launching coverage of the stock with a Buy rating and $70 price target.

“Honeywell gives birth to a beautiful specialty materials company,” he wrote. “The split of Solstice from Honeywell gives materials investors the opportunity to buy a high-quality, stable growth company.”

Spinoffs can drive some selling in shares. Honeywell investors, perhaps more interested in the company’s aerospace business, might dump the stakes in Solstice they got when the spinoff went through. That is a risk McNulty acknowledges.

Still, he likes the stock at this price.

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