Dow Components Honeywell, Nike, and Salesforce Under Review Amidst Strategic Shifts and Market Pressures
U.S. equities markets are closely monitoring several Dow Jones Industrial Average components that have experienced recent underperformance, including Honeywell International (HON), Nike (NKE), and Salesforce (CRM). Despite current headwinds, these companies are undertaking significant strategic initiatives or trading at valuations that suggest potential long-term opportunities for investors willing to navigate transitional periods.
Honeywell International: Strategic Restructuring to Unlock Value
Honeywell International is poised for a significant transformation, having announced plans to separate into three distinct, publicly traded entities: Honeywell Automation, Honeywell Aerospace, and Advanced Materials. This strategic move, confirmed on February 6, 2025, with completion anticipated by the second half of 2026, aims to create more focused and agile businesses, each better positioned to pursue tailored growth strategies. The decision follows a comprehensive portfolio evaluation and aligns with activist investor calls, such as those from Elliott Investment Management, which took a substantial stake in November 2024 advocating for such a breakup.
The Advanced Materials business, which reported nearly $4 billion in revenue in 2024 with an EBITDA margin exceeding 25%, is expected to complete its spin-off by late 2025 or early 2026. Subsequently, Honeywell Automation, projected to have $18 billion in 2024 revenues with a focus on AI-powered industrial solutions, and Honeywell Aerospace, with estimated $15 billion in 2024 revenues as a key technology provider for aviation, will separate in the second half of 2026. This staggered approach is designed to be tax-free to shareholders.
Financially, Honeywell reported robust Q4 2024 results, with adjusted EPS reaching $2.83 against analyst estimates of $2.32, and sales exceeding $10.4 billion compared to the $9.83 billion estimate. The company's 2024 total revenue stood at $37.85 billion, reflecting strong operational performance. For 2025, Honeywell projects sales between $39.6 billion and $40.6 billion, with adjusted EPS ranging from $10.10 to $10.50. The company currently trades at a P/E ratio of 25.6x.
Nike: Navigating Turnaround Amidst Competitive Pressures
Nike, the global athletic apparel leader, is undergoing a critical transitional phase, marked by leadership changes and a comprehensive "Win Now" strategic plan under CEO Elliott Hill. The company's fiscal 2025 results revealed declining revenues and shrinking margins, with annual revenue at $46.3 billion, down 10% year-over-year. The fourth quarter was particularly challenging, reporting a 12% drop in revenue and a 440-basis-point decline in gross margin to 40.3%. Quarterly earnings per share fell sharply to $0.14, an 86% decrease from the prior year.
Nike's turnaround efforts are centered on product innovation, a "product reset cycle," and a rebalancing towards athletic performance products. The company is also recalibrating its distribution strategy, evidenced by its decision to resume selling directly on Amazon in 2025, reversing previous policies that favored a more tightly controlled Direct-to-Consumer (DTC) model. This pivot addresses the DTC model's limits, as seen in Q4 2025, where Nike Direct sales fell 14% and digital sales plunged 26%.
The company faces intense competition from rapidly growing athleisure brands like Hoka (Deckers Outdoor) and On Holdings, which have demonstrated faster innovation cycles and stronger connections with younger consumers. Analysts have noted concerns about Nike's weak guidance, with fiscal 2025 projections anticipating a mid-single-digit revenue decline. Despite these challenges, Nike maintains a 2.3% dividend yield and has a 23-year streak of increasing its payout, providing an incentive for long-term investors.
Salesforce: AI Integration and Valuation at a Crossroads
Salesforce (CRM), a prominent SaaS provider, is navigating an uncertain landscape marked by slowing growth and investor concerns regarding its ability to effectively monetize artificial intelligence (AI). Trading down 26.5% year-to-date, Salesforce is among the worst-performing Dow components in 2025. The company faces the dual challenge of AI competition potentially undercutting its SaaS offerings and the imperative to integrate AI solutions into its core business model.
In response, Salesforce has developed its Agentforce 3 platform, deploying autonomous AI agents to automate workflows and generate new revenue streams. Agentforce 3 drove a 120% year-over-year AI Annual Recurring Revenue (ARR) growth to $1.1 billion in Q3 2025. While this platform demonstrates scalability and strong adoption (8,000 engagements), it currently accounts for less than 3% of Salesforce's total revenue, highlighting challenges in broader monetization.
Despite concerns, Salesforce is trading at a historically low valuation, with a forward P/E ratio of just 21.7. The company initiated its first-ever dividend in early 2024, raising it by 4% in March, signaling a commitment to returning value to shareholders. Its strategic value in unifying siloed data through Salesforce's Data Cloud remains a critical enabler of AI workflows, positioning it for potential long-term growth in the rapidly expanding agentic AI market.
Market Reaction and Broader Context
The market's reaction to these Dow components reflects a nuanced view, balancing current performance challenges with future growth catalysts. For Honeywell, the anticipated breakup is largely seen as a positive catalyst, mirroring successful strategies adopted by conglomerates like General Electric, aiming to unlock greater shareholder value through focused entities. Activist investors suggest the split could lead to a significant increase in value per share, potentially reaching $321 to $383 by the end of 2026.
Nike's underperformance indicates investor skepticism regarding the pace and effectiveness of its turnaround strategy amidst aggressive competition. The competitive landscape in athleisure is intense, with newer brands capturing market share through agility and targeted innovation. The return to wholesale partnerships and increased marketing spend underscore the magnitude of the challenge to re-establish market dominance and brand appeal.
Salesforce's valuation reflects investor anxiety over its ability to adapt and profit from the evolving AI landscape. While Agentforce 3 shows promising ARR growth, its relatively small contribution to overall revenue indicates the scale of the transition required. The current low P/E ratio, especially for a company that was once a high-growth stock commanding a premium, suggests that the market has discounted its near-term prospects while waiting for clearer signs of AI monetization.
Analysts widely view Honeywell's planned spin-offs as a strategic imperative to capitalize on individual market opportunities for its diverse businesses. The move is expected to allow the high-growth aerospace unit to thrive unconstrained by slower-performing divisions. Regarding Nike, while leadership changes and strategic recalibration are acknowledged, concerns persist over the company's ability to swiftly counter competitive incursions and effectively resonate with a younger consumer base. The significant drop in quarterly EPS and revenue underscores the market's current cautious stance. For Salesforce, experts are monitoring the company's execution of its Agentforce strategy, particularly its capacity to convert AI ARR growth into substantial overall revenue contributions and maintain its competitive moat against emerging AI-centric solutions. The dividend initiation is seen as a measure to appeal to a broader investor base during a period of growth uncertainty.
Looking Ahead
Investors will closely monitor several key indicators for these companies. For Honeywell, the execution timeline and financial specifics of the spin-offs, particularly the investor days for Solstice Advanced Materials (formerly Advanced Materials), will be critical. The market will be watching to see which entity will retain its place in the Dow Jones Industrial Average post-split.
For Nike, forthcoming quarterly results will provide crucial insights into the efficacy of its "Win Now" strategy, particularly the impact of new product launches and the recalibrated distribution model. The ability to stem revenue declines and improve gross margins will be paramount.
Salesforce investors will focus on the continued expansion and monetization of its Agentforce AI platform, assessing its contribution to overall revenue growth and its ability to defend market share against emerging AI competitors. The company's guidance on future growth, particularly regarding its SaaS offerings in the AI era, will be a significant factor in its valuation trajectory. The broader market will continue to evaluate the potential for these established Dow components to adapt and thrive amidst evolving industrial, consumer, and technological landscapes.
Edgen Stock·Sep 28 2025, 16:32
