10:50 AM EDT, 08/12/2025 (MT Newswires) -- Resideo Technologies' ( REZI ) cancellation of its indemnification agreement and planned spinoff of ADI Global will drive value, Morgan Stanley said in a Tuesday note.

The company's Q2 performance was "strong" with results surpassing the high end of guidance, as it continues to execute consistently, Morgan Stanley analysts said.

Resideo ( REZI ) agreed to make a one-time payment of $1.59 billion to Honeywell ( HON ) to eliminate all future monetary obligations under a 2018 indemnification and reimbursement agreement tied to its spin-off from Honeywell ( HON ).

The recent cancellation of the Honeywell ( HON ) indemnification agreement has removed a "structural impediment for investors" and adds an upside of around $0.40 to Resideo's ( REZI ) annual non-GAAP EPS, the analysts said. They noted that the market continues to underappreciate the importance of the removal of this significant headwind.

The planned spinoff of ADI Global "creates a much clearer path" to unlocking value, the analysts said. The transaction makes sense as the remaining Products and Solutions business of Resideo ( REZI ) have few strategic synergies under one business entity, and both now have an opportunity to increase focus and accelerate reinvestment, they said.

Morgan Stanley upgraded Resideo's ( REZI ) stock rating to overweight from equal-weight and raised the price target to $35 from $24.

Price: 30.99, Change: +3.52, Percent Change: +12.81