- Honeywell International spun off its auto parts division Garrett Motion and home systems business Resideo Technologies about a year ago
- "Honeywell's a very smart company, run by the brilliant Darius Adamczyk, and you don't want to buy what he's selling," CNBC's Jim Cramer says.
- "If he didn't want exposure to autos and climate control here, then maybe you shouldn't want it either," the "Mad Money" host says.
Company breakups can unlock value for shareholders, but not all spin-offs are created equal, CNBC's Jim Cramer said Friday.
Honeywell International spun off its auto parts division Garrett Motion and home systems business Resideo Technologies about a year ago, which allowed the manufacturer to focus on the more consistent aerospace, non-residential construction and industrial software markets.
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That move is paying off for Honeywell, the "Mad Money" host said.
"Honeywell's a very smart company, run by the brilliant Darius Adamczyk, and you don't want to buy what he's selling," the host said. "If he didn't want exposure to autos and climate control here, then maybe you shouldn't want it either."
Cramer recommended Honeywell stock — above $171 per share at Friday's close — as a buy. Resideo and Garrett Motion, both trading at less than $10 a piece, are "in the penalty box until they figure out how to turn themselves around," according to the host.
Garrett Motion, valued at roughly $743 million, makes turbochargers, electric boosters and software for automobiles. The stock has lost almost half its value since the September 2018 divestiture, and Cramer thinks it "makes a ton of sense" because the auto industry is in "dire straits."
To make matters worse, the CFO is stepping away from the company, which Cramer said is "not a sign of confidence."
"For the moment, Garrett's a show-me story in an awful market," Cramer said. "We need to see some evidence of a turn in the auto industry before we can think of owning this one."
As for Resideo, the company earlier this week pre-announced a quarterly shortfall and cut its full-year guidance, causing the stock to collapse nearly 40%.
Resideo's CFO is also departing, and management is going through an operational and finance review. Resideo, holding $1.1 billion in market cap, makes home climate control and security systems. Because housing is a better market than autos, Cramer is not as sour on this equity.
Still, "Don't even consider buying this one until we see some sign that management has a plan ... to turn things around," he said.
"Right now Honeywell's one of the best performing industrials out there. It's up 30% for the year in an environment that's been tough on the industrials," Cramer said. "They'd be doing much worse if they'd held onto the housing and auto divisions."
Disclosure: Cramer's charitable trust owns shares of Honeywell.