Thank God the Europeans Didn’t Let Jack Welch Buy Honeywell

Honeywell (HON) shareholders should regularly say a quiet ‘thank you’ to Italy’s Prime Minister Mario Monti. Back in 2001, Monti was the European Union’s competition commissioner, and he blocked the $42 billion takeover of Honeywell by Jack Welch’s General Electric (GE). Honeywell’s been the better for it ever since, with the two companies on a somewhat divergent path since the merger collapsed.

HON Chart

HON data by YCharts

Both were hurt badly by the economic implosion in 2008, but Honeywell bounced back faster than GE. And some earlier strategic gaffes have been replaced by solid execution under the leadership of David Cote, 59, who took over in 2002 after at one point being CEO of GE Appliances during Welch’s tenure. Revenue at the two firms ran in tandem for some time, until Honeywell pulled away a couple of years ago.

HON Revenues TTM Chart

HON Revenues TTM data by YCharts

And though Honeywell’s profit history has been a little more erratic than the well-choreographed path at GE, it’s been superior over time.

HON Net Income TTM Chart

HON Net Income TTM data by YCharts

GE holders have spent the past decade waiting for Jeff Immelt, Welch’s successor, to make the magic happen again, but instead have seen subpar earnings gains, a dreadful stock performance and then overreliance on the GE Capital unit render the company extremely vulnerable to the financial crisis of 2008, when it needed government backstopping to fund itself. The market remains doubtful and GE’s PE and well below Honeywell’s PE.

HON PE Ratio Chart

HON PE Ratio data by YCharts

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.



Please note that this feature is only available as an add-on to YCharts subscriptions.

Please note that this feature requires full activation of your account and is not permitted during the free trial period.

Start My Free Trial {{}} No credit card required.

Already a subscriber? Sign in.