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Honeywell (HON) announced that the transportation systems spinoff will be named “Garrett”. Honeywell will spin off the Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business into two stand-alone publicly traded companies. Timing is expected to be 2018 Q3. The Homes and ADI business have a combined annual revenue of about $4.5 bn and the Transportation Systems Business has an annual revenue of about $3 bn. The RemainCo will be composed of four businesses: aerospace, building technologies, performance materials and technologies, and safety and productivity solutions. The spin-offs will provide an avenue for Honeywell to pursue other acquisitions according to CEO Darius Adamczyk.
Central banks are in focus this week, with the FOMC scheduled to release the results of its June meeting this afternoon. The ECB and BOJ are also scheduled to release policy statements on Thursday and Friday, respectively. Inline with consensus, we expect the FOMC to raise the fed funds rate target range by 25bps and signal that another hike is likely in September. Our sense is that the ECB will provide guidance signaling a wind down its QE program later this year, and that the BOJ will reiterate it commitment to targeting the Japanese 10-year yield at 0.10%.
We track the share price performance of thematic stock baskets relative to a sector neutral benchmark. Thus far, in 2018, the best performing themes have been banks with high loan growth, banks with high incremental return on tangible assets (I-ROTA), high capex and low free cash flow yield, accelerating growth, and net-net’s. Year-to-date, worst performing themes have been low P/E stocks, beneficiaries of an improving U.S. outlook, value stocks, high ROCE companies, and serial restructurers. Click here for more info.
With the end of school year either fast approaching or having just passed in most areas of the country, we thought it would be useful to review our own mid-year report card in the context of the major calls we made in our 2018 outlook report back in mid-December. Thus far, we’ve gotten more right than we’ve gotten wrong. The key to our success has been our view that U.S. fiscal stimulus would result in an improving U.S. growth outlook and sharper upward earnings revisions than most investors expected. Importantly, our bullish base case remains largely unchanged.
Next Thursday (06/14/18), the European Central Bank meets and is expected to discuss whether to wind down its QE program, which is currently running $30b/month. It’s also possible officials may only hint at ending the program next week, but then formally announce an end to QE at the July 26th meeting.
Altice NV (ATC NA) today (06/08/18) will complete the spin-off of its 67.2% interest in Altice USA (ATUS) to its shareholders. Altice USA is one of the largest broadband communications and video services providers in the U.S that delivers broadband, pay television, telephony services, proprietary content and advertising services to approximately 4.9 million residential and business customers.
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