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Why Is Johnson Controls (JCI) Up 13.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Johnson Controls (JCI - Free Report) . Shares have added about 13.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Johnson Controls due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Johnson Controls Reports Stellar Q1 Earnings

Johnson Controls International plc reported adjusted earnings per share of 43 cents for first-quarter fiscal 2021, outpacing the Zacks Consensus Estimate of 40 cents. The outperformance stemmed from higher-than-expected revenues and operational efficiency. The bottom line also rose 7.5% year over year, primarily owing to lower SG&A costs as well as the absence of restructuring and impairment expenses. Precisely, SG&A costs for the quarter declined 9.1% year over year to $1,294 million.

Johnson Controls reported fiscal first-quarter revenues of $5,341 million, down 4.2% year over year. The revenue figure, however, beat the Zacks Consensus Estimate of $5,284 million. Gross profit also increased to $1,975 million from the year-earlier quarter’s $1,803 million.

Segmental Results

Building Solutions North America: This segment’s adjusted revenues came in at $2,034 million, down from the year-ago quarter’s $2,167 million on decline in HVAC & Controls and Fire & Security. The segment’s EBITA decreased to $255 million from $259 million re    ported in first-quarter fiscal 2020.

Building Solutions Europe, Middle East, Africa/Latin America: Revenues in this segment came in at $906 million, down 2.4% year over year due to fall in project installations, and volume declines across all regions as well as platforms. However, the segment’s EBITA rose 6% year over year to $95 million on cost-containment efforts.

Building Solutions Asia Pacific: Revenues decreased to $615 million from the year-ago quarter’s $629 million on declines in project installations and services. The segment’s EBITA came in at $79 million, up from the first-quarter fiscal 2020 level of $72 million on favourable mix and cost-cut efforts.

Global Products: Revenues in this segment declined to $1,786 million from the prior year’s $1,852 million, mainly due to lower sales in commercial HVAC, Fire & Security, as well as Industrial Refrigeration. This segment’s EBITA was $213 million, up 4% year over year, thanks to operational efficiency.

Financial Position

Johnson Controls had cash and cash equivalents of $1,839 million as of Dec 30, 2020, down from $1,951 million on Sep 30, 2020. Long-term debt decreased to $7,469 million for the reported quarter from $7,526 million as of Sep 30, 2020. Free cash flow for first-quarter fiscal 2021 came in at $400 million, on par with the year-ago period. During the quarter under review, Johnson Controls bought back 8 million shares for $346 million. 

Guidance

The company projects growth in organic revenues and adjusted EBITA for second-quarter fiscal 2021. It also expects adjusted EPS in the range of 47-49 cents per share, indicating 12-17% growth year over year.

For fiscal 2021, adjusted EPS is expected in the band of $2.45-$2.55 a share, indicating 9-14% increase on a year-over-year basis. Meanwhile, organic revenues are expected to scale up in low-to-mid single digits.

Highlights From Johnson Controls’ New ESG Commitments

Johnson Controls announced a set of new environmental, social & governance commitments in a separate release. The company, one of the global leaders of smart and sustainable buildings, has pledged to achieve zero-carbon emissions by 2040. By 2030, it commits to lower operational and customers’ emissions by 55% and 16%, respectively, via the OpenBlue digital platform. Within the next five years, the firm targets to double the representation of women leaders worldwide. It also intends to collaborate with historically black colleges and universities to train the next-gen sustainability leaders.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Johnson Controls has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson Controls has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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