Resideo Technologies, Inc. ( REZI ) ended its long-standing Honeywell International Inc. ( HON ) indemnification with a $1.59 billion buyout, removing a major overhang and clearing the way for cleaner earnings and an ADI Global separation.

Morgan Stanley analyst Erik W Woodring upgraded Resideo ( REZI ) from Equal-weight to Overweight, raising the price forecast from $24 to $35.

Woodring laid out a three-part case. The analyst said Resideo ( REZI ) continues to execute, with second quarter above the high end of guidance, the strongest organic growth in 15 quarters, and a ninth straight P&S gross-margin gain.

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Woodring argued that last week’s end of the long, complex Honeywell ( HON ) indemnity removes a structural overhang and clears a path to about $3 in calendar year 2026 earnings power.

The analyst’s non-GAAP EPS for 2026 is $3.02, roughly 23% above consensus.

He added that the planned ADI Global separation in the second half of 2026 sharpens the sum-of-the-parts story.

Woodring argued the market still underestimates the impact of canceling the Honeywell ( HON ) indemnification.

When Resideo ( REZI ) was spun off in 2018, it took on a legal agreement requiring $140 million of annual cash payments through 2043 to settle an environmental liability unrelated to its business, an obligation that also added needless complexity. He said years of investor conversations made clear how that burden weighed on the story.

The analyst noted that on July 30 Resideo ( REZI ) agreed to pay Honeywell ( HON ) $1.59 billion, funded with about $400 million of cash and roughly $1.2 billion of debt, to pull forward all remaining payments and terminate the agreement, which had also constrained material corporate actions.

He called the move transformational for two reasons: it removes a long-standing structural overhang that discouraged deeper diligence, and, even after financing costs, it adds an estimated 40 cents to annual non-GAAP EPS. He has included that uplift in a new CY26 EPS estimate of $3.02, which he believes consensus has not fully reflected.

Price Action: REZI shares trading higher by 14.02% to $31.33 at last check Tuesday.

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