Honeywell International Inc. plans to shutdown two N95 mask facilities this year. Yahoo Finance's Brian Sozzi weighs in.
MYLES UDLAND: All right, well, welcome back to "Yahoo Finance Live" on this Tuesday morning. Well, as we continue to see mask mandates lifted across the country, Brian Sozzi, some companies that have ramped up production of masks have started thinking about ramping that down.
BRIAN SOZZI: Yeah, I'll just preface this by saying, guys, it's just weird to see announcements such as this at the likes of a Honeywell because we all remember at this point last year or even before then, all these companies are racing to add production because we all needed masks. So it's just an interesting point in time. I guess, Myles, it is in fact mid-cycle, as you mentioned earlier on.
But nonetheless, Honeywell closing down two mask facilities that were put together someone in a hurry last year to make more masks. One facility in Smithfield, Rhode Island and the other one in Phoenix. About 1,200 workers will be displaced or laid off as a result of this initiative.
A Honeywell spokesperson telling Yahoo Finance this morning, quote, "We are now seeing a dramatic reduction in demand for N95s--" that would be the masks-- "--in the US, as many states are ending or scaling back mask mandates, and vaccinations are being widely distributed. For these reasons, Honeywell is adjusting its N95 operations and ceasing manual production of N95s at one facility Rhode Island--" as I just mentioned-- "--and the other in Phoenix."
Now, this has not necessarily had an impact on Honeywell shares. Keep in mind, Honeywell has made a big pivot to airline technology, other forms of technology, notably also in the building automation space. So far, so good there for Honeywell. But where it could impact is a company like a 3M.
3M, last year, they put out or distributed close to about 2 and 1/2 billion masks 2 and 1/2 billion masks they distributed last year. They built out a lot of new capacity. They, in fact, doubled their capacity last year. In the first quarter alone, they sold 630 million masks. So they have been leading, in many respects, the mask movement of the year and a half-plus of the pandemic.
Now, 3M perhaps teasing that that is going to be a different story in the back half of this year. 3M CEO Mike Roman, last week at a Bernstein conference noting, quote, "We're seeing demand changes in certain geographies and post-peak pandemic daily needs. In the US, for example, given the improving vaccination rates, health care-related demand has begun to moderate."
3M shares are up about 15% year to date. But given the concerns on the pace of the mask business for them in the second half of this year, you have to wonder, how does that impact the company's guidance when they ultimately report second quarter earnings in coming weeks.
JULIE HYMAN: Yeah. I don't know about you guys, but the number of discarded masks that you see around could probably outfit someone for a year, the number that end up on the ground. But I'm also really curious, Brian, about the sort of small companies that got into the mask business, from entrepreneurs on Etsy-- we know that there were a lot of masks sold that way-- to smaller factories that repurposed entirely from whatever else they were doing and pivoted to this.
I mean, you saw the same thing with hand sanitizer, with a lot of small alcohol distillers switching over to producing hand sanitizer. And at the time, we covered this stuff a lot, right? What's that transition like? What are the costs? How are they making that transition? And there's been much less attention to the transition back. But I do wonder what that process is like for a lot of those smaller companies.
BRIAN SOZZI: I also wonder, Julie, as well-- now, this is a good indication of what the second half of this year might look like for those companies that benefited, really, at the height of the pandemic. How did the second half growth rates later this year, Myles, look, for an example, like companies such as DocuSign, a company such as Peloton?
I think you're starting to see that potential of what could happen in terms of growth rates just looking at these mask companies, notably 3M and, secondarily, Honeywell.
MYLES UDLAND: People want to know what it takes to be a financial markets commentator. All you need to know is you need to be able to go from a story about Honeywell ramping down its mask production to what it means for DocuSign's second half growth trajectory. Brian Sozzi, like a true professional.