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Key Reasons to Hold Johnson Controls (JCI) Stock for Now
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Johnson Controls International (JCI - Free Report) is backed by multiple tailwinds despite high commodity prices and supply-chain disruptions.
This Zacks Rank #3 (Hold) company is poised for growth on the back of strength in its Building Solutions North America and Global Products segments. The Building Solutions North American segment is benefiting from growth in project-based business and continued improvement in HVAC & Controls. Segmental revenues increased 7.8% year over year in fiscal 2022. Strong price realization and continued growth in Light Commercial, Residential HVAC and Fire Detection products are aiding the Global Products segment (revenues up 10.5% year over year). Strong demand for HVAC & Controls is driving growth of the Building Solutions Asia Pacific segment (revenues increased 3.7% in fiscal 2022).
Johnson Controls’ bullish forecast for fiscal 2023 raises optimism about the stock. For fiscal 2023, JCI expects adjusted earnings of $3.20-$3.60 per share, indicating growth of 7-20% year over year. The company expects organic revenue growth of high single-digits to low double-digits year over year in the ongoing fiscal year.
Pricing actions support Johnson Controls’ healthy margin performance despite foreign exchange impacts. In the fiscal fourth quarter, adjusted EBITA margin improved 70 basis points (bps) year over year to 13.6%. For first-quarter fiscal 2023, Johnson Controls expects the adjusted segment EBITA margin to improve 120 to 130 bps year over year. The same is predicted to improve 80 to 120 bps in fiscal 2023. The company expects to benefit from favorable government incentives across the world, global heat pump demand and continued backlog strength 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. The company’s latest offering under the OpenBlue platform, Net Zero Buildings as a Service, which includes a full portfolio of sustainability products tailored for various segments, boosts its long-term prospects.
Acquired assets are expected to foster Johnson Controls’ top line. Acquisitions of Synchrony, EasyIO BEMS product line, Qolsys and Silent-Aire are set to boost JCI’s service offerings. The acquisition of Tempered Networks in June should go a long way in bolstering the OpenBlue technology stack.
Amid these positives, shares of JCI have gained 35.3% in the past six months, outperforming the industry’s 27.9% increase.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. The stock has gained 39% in the past six months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 5.7%, on average.
IDEX has an estimated earnings growth rate of 28.4% and 6.1% for the current and next years, respectively. The stock has rallied 28% in the past six months.
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Key Reasons to Hold Johnson Controls (JCI) Stock for Now
Johnson Controls International (JCI - Free Report) is backed by multiple tailwinds despite high commodity prices and supply-chain disruptions.
This Zacks Rank #3 (Hold) company is poised for growth on the back of strength in its Building Solutions North America and Global Products segments. The Building Solutions North American segment is benefiting from growth in project-based business and continued improvement in HVAC & Controls. Segmental revenues increased 7.8% year over year in fiscal 2022. Strong price realization and continued growth in Light Commercial, Residential HVAC and Fire Detection products are aiding the Global Products segment (revenues up 10.5% year over year). Strong demand for HVAC & Controls is driving growth of the Building Solutions Asia Pacific segment (revenues increased 3.7% in fiscal 2022).
Johnson Controls’ bullish forecast for fiscal 2023 raises optimism about the stock. For fiscal 2023, JCI expects adjusted earnings of $3.20-$3.60 per share, indicating growth of 7-20% year over year. The company expects organic revenue growth of high single-digits to low double-digits year over year in the ongoing fiscal year.
Pricing actions support Johnson Controls’ healthy margin performance despite foreign exchange impacts. In the fiscal fourth quarter, adjusted EBITA margin improved 70 basis points (bps) year over year to 13.6%. For first-quarter fiscal 2023, Johnson Controls expects the adjusted segment EBITA margin to improve 120 to 130 bps year over year. The same is predicted to improve 80 to 120 bps in fiscal 2023. The company expects to benefit from favorable government incentives across the world, global heat pump demand and continued backlog strength 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. The company’s latest offering under the OpenBlue platform, Net Zero Buildings as a Service, which includes a full portfolio of sustainability products tailored for various segments, boosts its long-term prospects.
Acquired assets are expected to foster Johnson Controls’ top line. Acquisitions of Synchrony, EasyIO BEMS product line, Qolsys and Silent-Aire are set to boost JCI’s service offerings. The acquisition of Tempered Networks in June should go a long way in bolstering the OpenBlue technology stack.
Amid these positives, shares of JCI have gained 35.3% in the past six months, outperforming the industry’s 27.9% increase.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 24.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. The stock has gained 39% in the past six months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 5.7%, on average.
IDEX has an estimated earnings growth rate of 28.4% and 6.1% for the current and next years, respectively. The stock has rallied 28% in the past six months.