Honeywell International Inc. HON recently announced its decision to combine its Quantum Solutions business with Cambridge Quantum Computing (“CQC”). Notably, the transaction is anticipated to create the biggest standalone quantum computing company in the world.

The company’s shares jumped 0.7% yesterday, ending the trading session at $229.81.

Founded in 2014, CQC is a leading independent quantum computing software company, with presence across the United States, Japan and Europe. It is engaged in designing tools, with a focus on commercialization of quantum technologies.

Inside the Headlines

As noted, the new company will be capable of offering the best performing quantum computer along with a complete suite of quantum software. The technologies will serve customer requirements for enhanced computation in several fields like drug discovery and delivery, cyber security, material science as well as finance.

On completion of the transaction, the ownership of majority stake in the new company will be with Honeywell. Along with an investment of $270-$300 million into the new company, Honeywell is also expected to enter into a long-term deal to facilitate the production of critical ion traps required for powering the quantum hardware.

Notably, the merger is anticipated to close in third-quarter 2021, subject to customary closing conditions and regulatory approvals. Honeywell did not modify its financial outlook for 2021, on account of the transaction.

Zacks Rank, Price Performance and Estimate Trend

Honeywell, with a $159.6-billion market capitalization, currently carries a Zacks Rank #3 (Hold). Strength in the company’s defense and space business, supported by stable U.S. government defense budgets, is likely to act as a tailwind in the quarters ahead. For 2021, it anticipates organic growth in the defense and space business to be flat to up in low-single digits. Also, signs of recovery in business aviation aftermarket bode well. However, weakness across the commercial aerospace end market might adversely impact its near-term performance.

In the past three months, the company’s shares have gained 8% compared with the industry’s growth of 8.9%.

Image Source: Zacks Investment Research

In the past 30 days, the Zacks Consensus Estimate for the company’s earnings has moved up 0.3% to $8.01 for 2021, while the same for 2022 has been raised 0.7% to $9.12.

Key Picks

Some better-ranked stocks from the same space are Griffon Corporation GFF, ITT Inc. ITT and Macquarie Infrastructure Company MIC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Griffon delivered an earnings surprise of 50.00% in the last reported quarter.

ITT delivered an earnings surprise of 21.84% in the last reported quarter.

Macquarie delivered an earnings surprise of 25.00% in the last reported quarter.