What Happened?
Shares of home automation and security solutions provider Resideo Technologies (NYSE:REZI) jumped 12.9% in the afternoon session after an upgrade from Morgan Stanley, which raised its rating on the stock to Overweight from Equal-Weight. The investment bank boosted its price target to $35 from a previous $24. The upgrade was driven by several positive developments, including Resideo's strong second-quarter results, which surpassed the high end of guidance and marked the best organic revenue growth in 15 quarters. Additionally, analysts highlighted the recent cancellation of a "longstanding and complex" indemnification agreement with Honeywell. This move is seen as removing a significant structural barrier for investors and creating a clearer path to what Morgan Stanley estimates could be approximately $3 in earnings power. The company's plan to separate its ADI Global distribution business in 2026 was also noted as a potential catalyst for unlocking shareholder value.
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What Is The Market Telling Us
Resideo’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Resideo and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 7.5% on the news that the company reported record second-quarter financial results that beat analyst expectations and raised its full-year guidance. The company posted record revenue of $1.94 billion, a 22% increase from the previous year, and adjusted earnings per share of $0.66. These figures surpassed Wall Street's forecasts. While Resideo recorded a net loss of $825 million, this resulted from a one-time expense to end an agreement with Honeywell. Investors appeared to focus on the strong operational performance, as both its Products and Solutions and ADI segments achieved organic revenue growth. In a sign of confidence, the company also lifted its full-year 2025 financial outlook and announced plans to spin off its ADI business segment.
Resideo is up 37% since the beginning of the year, and at $31.21 per share, has set a new 52-week high. Investors who bought $1,000 worth of Resideo’s shares 5 years ago would now be looking at an investment worth $2,255.
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