CEO Transition Doesn't Change Citi's View On Honeywell

As Honeywell International Inc. HON announced its current president and COO, Darius Adamczyk, to succeed Dave Cote as CEO, Citi indicated there was no change in its view. However, analysts expect the fresh leadership era to help jumpstart its organic growth commencing from next year. They have a Buy rating and $132 price target on shares.

The analysts opined in a note, "We said recently (coming out of EPG) that we thought Adamczyk was tabbed for a newly created COO role to help ensure an important time in HON's history is managed effectively (with a primary objective on elevating growth). This announcement seems no different. In his prior roles, COO Adamczyk was responsible for doubling the size of HON's Scanning & Mobility business over four years, and overseeing a turnaround/margin expansion in PMT."

Citi Research admitted the announcement on the elevation of Adamczyk came earlier than it expected. However, the analysts thought that the company wants to put to rest all speculations, as well as, the uncertainty on the new CEO.

The brokerage believes Adamczyk has software expertise, which would help the company's focus on breakthrough growth "strategies/new software product opportunities." The analysts think that the elevation of its COO could boost the likelihood of achieving its organic growth of 4–5 percent next year. They believe that the target is highly optimistic since the current year prediction is only 1–2 percent.

While admitting that Cote would be missed, Adamczyk would be inheriting the best-in-class portfolio and that should help a smooth transition.