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Here's Why You Should Retain Johnson Controls (JCI) Stock Now
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Johnson Controls International (JCI - Free Report) is benefiting from strong performance of the Building Solutions North American 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.
While a slowdown in residential demand is weighing on JCI’s Global Products segment, growth in a service-based business and Fire & Security is driving revenues at the Building Solutions Europe, Middle East, Africa/Latin America segment.
Johnson Controls’ bullish forecast for the fiscal second quarter and fiscal 2023 holds promise. For the fiscal second quarter, JCI, carrying a Zacks Rank #3 (Hold), 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 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, augur well for Johnson Controls’ growth. In fiscal 2022, JCI expanded its suite of digital services and offerings that 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 acquisition of Tempered Networks in June 2022 should go a long way in bolstering the OpenBlue technology stack.
Amid these positives, shares of Johnson Controls have gained 10.5% in the past six months, outperforming the industry’s 5.9% increase. The company is poised to benefit from easing supply-chain disruptions and an anticipated reduction in raw material costs due to a deceleration in inflation.
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Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Allegion has an estimated earnings growth rate of 5.2% and 12.1% for 2022 and 2023, respectively. The stock has gained 11.8% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Valmont Industries has an estimated earnings growth rate of 26.7% and 13.7% for 2022 and 2023, respectively. The stock has rallied 12.4% in the past six months.
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Here's Why You Should Retain Johnson Controls (JCI) Stock Now
Johnson Controls International (JCI - Free Report) is benefiting from strong performance of the Building Solutions North American 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.
While a slowdown in residential demand is weighing on JCI’s Global Products segment, growth in a service-based business and Fire & Security is driving revenues at the Building Solutions Europe, Middle East, Africa/Latin America segment.
Johnson Controls’ bullish forecast for the fiscal second quarter and fiscal 2023 holds promise. For the fiscal second quarter, JCI, carrying a Zacks Rank #3 (Hold), 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 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, augur well for Johnson Controls’ growth. In fiscal 2022, JCI expanded its suite of digital services and offerings that 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 acquisition of Tempered Networks in June 2022 should go a long way in bolstering the OpenBlue technology stack.
Amid these positives, shares of Johnson Controls have gained 10.5% in the past six months, outperforming the industry’s 5.9% increase. The company is poised to benefit from easing supply-chain disruptions and an anticipated reduction in raw material costs due to a deceleration in inflation.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE pulled off a trailing four-quarter earnings surprise of 8.8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
Allegion has an estimated earnings growth rate of 5.2% and 12.1% for 2022 and 2023, respectively. The stock has gained 11.8% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Valmont Industries has an estimated earnings growth rate of 26.7% and 13.7% for 2022 and 2023, respectively. The stock has rallied 12.4% in the past six months.