Honeywell Field Lab on conglomerate discount: value under conglomerate structure

Abstract

This study investigates the presence of a conglomerate discount – the notion that conglomerates, on average, tend to create less value than standalone companies – in the valuation of Honeywell International. Despite the stock trading at a premium, by employing both intrinsic and market-based valuation methods, along with key insights from conglomerate theory, the research finds a 9% discount – lower than commonly observed estimates. The study concludes that increased complexity, agency problems, and resource misallocation are the primary drivers of this discount. It is recommended to divest in underperforming segments and focus on strengthening the company’s core business areas.