UPDATE 3-Honeywell seeks M&A as it keeps aero, spins off 2 units

* Conglomerate to spin-offs two business after corporate rethink

* Says will spend proceeds on M&A, debt repayment, buybacks

* Raises low end of full-year results forecast

* Shares little changed after falling 2.3 percent initially (Adds detail from conference call, analyst comments)

NEW YORK, Oct 10 (Reuters) - Diversified manufacturer Honeywell International Inc unveiled a business makeover on Tuesday that will tie its growth more strongly to aerospace technology and spin off other businesses as two publicly-traded companies by the end of 2018.

The company also raised the low-end of its full-year 2017 earnings guidance by 5 cents to between $7.05 and $7.10 per share, and said it would spend proceeds from the spin-offs on share buybacks, acquisitions and paying down debt.

The reorganization will simplify Honeywell's wide-ranging portfolio, boost growth and give it more firepower to make acquisitions, Honeywell Chief Executive Officer Darius Adamczyk said on a conference call on Tuesday.

"We've got two exciting new businesses that we think can grow at an accelerated rate," Adamczyk said. "I'm very excited about M&A in all four of our (remaining) businesses. And I think these two spins ... give me a lot of different levers to invest our M&A dollars."

Analysts praised the moves, but said Honeywell had more changes to make, and warned that the aerospace business, with products ranging from jet engines to airplane WiFi systems, may need to merge to gain the size to compete with larger rivals.

An aerospace spin-off or merger with General Electric Co's aerospace unit would make Honeywell a stronger competitor to United Technologies and a "more powerful supplier to Boeing Co and Airbus SE," Scott Davis, analyst at Melius Research, wrote in a note. "That's a deal worth thinking about."

Honeywell shares were down 0.3 percent at $143.16 in New York trading, after falling 2.3 percent initially.

Adamczyk, like his peers at other industrial conglomerates, has been under pressure to pull apart a portfolio of disparate businesses that includes automotive turbo chargers, burglar alarms and the Xtratuf boots popular in Alaska's fishing industry.

Hedge fund Third Point began agitating in April for Honeywell to spin off its aerospace division, which accounted for about 38 percent of revenue in 2016 and which Third Point said could generate $20 billion in shareholder value if sold.

Honeywell said it will split off its home and ADI global distribution businesses, which deal with building systems ranging from air conditioning to smoke alarms, into one public company. It will spin off its transportation systems business, which includes low-margin automotive turbochargers, into a second company.

The auto parts move follows other companies, including auto supplier Delphi Automotive Plc, in that are shedding technology tied to the internal combustion engine as regulators around the world crack down on emissions and talk of mandating a switch to battery-electric vehicles over the next two decades.

Honeywell said the two spun-off business units together would generate annualized revenue of about $7.5 billion. It said it would gain $3 billion from the spin-offs.

Ahead of its quarterly earnings report on Oct. 20, the company said third-quarter sales were expected to be $10.1 billion, up 5 percent in organic terms higher than an earlier forecast range of up or down 1 percent.

(Reporting by Alwyn Scott in New York and Arunima Banerjee in Bangalore; editing by Patrick Graham and Nick Zieminski)