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Here's Why You Must Hold on to Johnson Controls (JCI) Now

Johnson Controls International JCI is backed by multiple tailwinds despite the impact of commodity cost inflation and supply chain disruptions.

This Zacks Rank #3 (Hold) company is benefiting from strength in the Building Solutions North America segment owing to growth in project-based business and continued improvement in HVAC & Controls. Segmental revenues increased 7.8% year over year in fiscal 2022.

In first-quarter fiscal 2023, revenues increased 10% year over year owing to growth in the Install business. Growth in a service-based business and Fire & Security drove a 2% increase in revenues at the Building Solutions Europe, Middle East, Africa/Latin America segment in the fiscal first quarter.

Johnson Controls’ bullish forecast for the fiscal second quarter and fiscal 2023 is encouraging. For the fiscal second quarter, Johnson Controls anticipates organic revenue growth of approximately 10% year over year. The company expects adjusted earnings of 72-74 cents per share, indicating a 15-18% rise year over year.

For fiscal 2023, the company anticipates organic revenue growth between high-single digits and low-double digits year over year. JCI predicts adjusted earnings of $3.30-$3.60 for fiscal 2023, reflecting an increase of 10-20% year over year.

Pricing actions support a healthy margin performance despite foreign exchange impacts. In the fiscal first quarter, JCI’s adjusted EBITA margin improved 140 basis points (bps) year over year to 13.7%. For the fiscal second quarter, the adjusted segment EBITA margin is expected to improve 100 to 110 bps year over year.

For fiscal 2023, the company expects the same to increase 90-120 bps, year over year. Cost-control initiatives are helping the company generate substantial productivity savings. In the fiscal first quarter, JCI generated productivity cost savings of $90 million. The company expects to achieve savings of $340 million in fiscal 2023.

Investments in digital offerings, like the OpenBlue digital platform, which plays an integral part in meeting customer needs, are expected to drive Johnson Controls’ growth. In fiscal 2022, Johnson Controls expanded its suite of digital services and offerings to include connected chillers, industrial refrigeration equipment, connected controls and BAS systems. Digital integration of OpenBlue with Johnson Controls' core building systems will optimize the performance of the full HVAC system.

Amid these positives, shares of Johnson Controls have gained 9% in the past six months.

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Zacks Investment Research


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Key Picks

Some better-ranked stocks within the broader Industrial Products sector are as follows:

Deere & Company DE currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained 10.2% in the past six months.

Ingersoll Rand IR presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 8.5%, on average.

Ingersoll Rand has an estimated earnings growth rate of 4.7% for the current year. The stock has rallied approximately 14% in the past six months.

Allegion plc ALLE currently carries a Zacks Rank #2. The company pulled off a trailing four-quarter earnings surprise of 10.3%, on average.

Allegion has an estimated earnings growth rate of approximately 12% for the current year. The stock has rallied around 14% in the past six months.

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Johnson Controls International plc (JCI) : Free Stock Analysis Report

Deere & Company (DE) : Free Stock Analysis Report

Ingersoll Rand Inc. (IR) : Free Stock Analysis Report

Allegion PLC (ALLE) : Free Stock Analysis Report

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