Industrial 3M (NYSE: MMM), Honeywell (NASDAQ: HON) and General Electric (NYSE: GE) are all trading higher after recent earnings reports.
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One truth about the industrial sector: the activities of these companies are closely linked to economic cycles. We may be familiar with the consumer products offered by these companies, such as 3M’s Post-It notes, Honeywell’s air purifiers and humidifiers, and GE’s light bulbs.
However, all of these companies also have high exposure to corporate and corporate clients. That means they feel the effects of cyclical demand as the economy rises and falls, and companies and manufacturers expand and contract their purchases.
Despite widespread concerns about a recession, the broader industrial sector, as followed by the Industrial Select Sector SPDR ETF (NYSEARCA: XLI)is down 8.49% since the start of the year, but has participated in the recent broad market rally, rising 9.30% in one month.
The industry’s most heavily weighted components and their one-month returns are:
3Mrepresenting 3.08% of the sector weighting, reported quarterly results on July 26, and the stock has been gaining momentum since then. Earnings came in at $2.48 per share, a 10% year-over-year decline. Revenue was $8.7 billion, down 3%. That was the second quarter in a row with declining profits. On the revenue side, 3M saw zero revenue growth in the previous two quarters.
The stock has returned a whopping 15.35% in the past month.
So what’s the advantage here? Why is the share rising?
The company announced a spin-off of its healthcare technology focused on wound care, oral care, healthcare IT and biopharmaceutical filtration. It expects the tax-free transaction to be completed by the end of 2023. It previously announced a spin-off of its food safety business, with a target closing date of September 1, 2022.
Spin-offs can create shareholder value by allowing two different companies to focus on their core businesses. In this case, the new 3M expects to retain a 19.9% ​​stake in healthcare, which it says will bring in money over time. 
In the meantime, honeywell reported earnings of $2.10 per share on July 28, a high of $0.07 per share. Revenue came in at $8.95 billion, also exceeding the views, according to MarketBeat’s earnings data.
The company has surpassed earnings expectations in every quarter since October 2017, when it met opinion.
Honeywell’s aerospace sales rose while air traffic bounced back. In addition, the business unit, which serves the oil and gas industry, also achieved strong sales.
Reveal MarketBeat Analyst Data that Wall Street has a “moderate buy” rating for Honeywell, with a price target of $210.08, up 8.09%.
Over the past month, Honeywell shares are up 11.90%. The stock remains below the 200-day moving average but above the 50-day line. When the longer-term average is above the shorter-term, it can be a signal that an uptrend can weaken and fail. At some point, however, the trends reverse. There is a slight move higher in the 50-day line that could potentially indicate a more sustained rally, although it is far too early to know for sure.
General Electric, which makes up 3.02% of the industrial sector, reported quarterly earnings on July 26 and the stock traded higher. It has a one-month gain of 18.86%.
That was over $0.40 a share. Revenue was $18.65 billion, well above expectations of $17.90 billion, according to MarketBeat data.
The big news for GE is an imminent split into three separate companies: GE HealthCare, GE Aerospace and GE Vernova.
GE HealthCare will be listed on the Nasdaq under the ticker GEHC. Trading is expected to begin in early 2023.
GE Aerospace comprises the company’s aviation business unit. The plan is to expand beyond the engines it is known for. That spin-off is expected to be completed in 2024, and this company is expected to keep the traditional GE ticker.
GE Vernova will comprise the company’s portfolio of energy companies. The company has not disclosed the ticker for this business unit.
Should you buy a stock prior to a split that has already been announced? While some analysts see an attractive advantage in the trio of companies, seven analysts have slashed their price targets for GE since late April, Reveal MarketBeat Analyst Data. 
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