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Johnson Controls (JCI) Prices $700M Worth of Notes Offering

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Johnson Controls International plc (JCI - Free Report) announced the pricing of senior notes yesterday. Subject to the fulfilment of customary conditions, the public offering of notes is expected to close on Apr 19, 2024.

It is worth mentioning here that the company’s shares lost 0.3% yesterday, ending the trading session at $64.23.

Inside the Headlines

As noted, the offering will comprise $700 million of 5.500% senior notes, due to expire on Apr 19, 2029. Senior notes have been priced at 99.737% of the principal amount, plus accrued interest (if any) from Apr 19, 2024.

Interest on senior notes will be paid out semi-annually — on Apr 19 and Oct 19 of each year. The first interest payment will be made on Oct 19, 2024. Notably, the issuer has the option to redeem senior notes before Mar 19, 2029. The offering’s rating is expected to be Baa2 (Stable) by Moody’s and BBB+ (Stable) by S&P.

Johnson Controls will use net proceeds from the notes offering for meeting general corporate purposes that include repayment, redemption and refinancing of outstanding commercial paper and other near-term obligations.

We believe that the offering of senior notes will increase the company’s debts and, in turn, might inflate its financial obligations and hurt profitability. Exiting first-quarter fiscal 2024 (ended Dec 31, 2023), its long-term debts were $7,959 million, reflecting a 1.8% increase on a year-over-year basis.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $43.8 billion, Johnson Controls currently carries a Zacks Rank #4 (Sell). The company has been witnessing softness across its Global Products unit due to declining global residential sales. JCI's Install business under the Building Solutions Asia Pacific unit has also been subject to a challenging market condition in China. Escalating operating costs and expenses might dent its bottom line.

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In the past year, the company’s shares have risen 10.4% compared with the industry’s growth of 13.8%.

The Zacks Consensus Estimate for earnings is pegged at $3.61 for fiscal 2024 (ending Sep 30, 2024) and at $4.12 for fiscal 2025 (ending Sep 30, 2025), implying a decline of 0.6% and 0.7%, respectively, from that recorded 60 days ago.

Key Picks

Some better-ranked stocks from the same space have been discussed below.

IDEX Corporation (IEX - Free Report) carries a Zacks Rank #2 (Buy) at present. IEX delivered a trailing four-quarter average earnings surprise of 5.2%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has increased 1.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cadre Holdings, Inc. (CDRE - Free Report) presently has a Zacks Rank of 2. CDRE delivered a trailing four-quarter average earnings surprise of 45.6%. In the past 60 days, the Zacks Consensus Estimate for Cadre’s 2024 earnings has increased 7.3%.

Powell Industries, Inc. (POWL - Free Report) presently carries a Zacks Rank #2. It delivered a trailing four-quarter earnings surprise of 77.6%, on average. The Zacks Consensus Estimate for POWL’s fiscal 2024 (ending September 2024) earnings has remained unchanged in the past 60 days.

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