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Here's Why You Should Retain Johnson Controls (JCI) Stock Now

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Johnson Controls International plc (JCI - Free Report) is poised to gain from strength in the Building Solutions North America segment, acquired assets and shareholder-friendly moves despite softness in the Global Products segment and increasing costs.

What’s Aiding JCI?

Business Strength: Johnson Controls has been experiencing strong momentum in the Building Solutions North America and Building Solutions Europe, Middle East, and Africa/Latin America (EMEA/LA) segments. Solid demand for heating, ventilation and air conditioning (HVAC) platform in data centers & strength in controls businesses are driving the Building Solutions North America segment. The segment’s revenues jumped 9% year over year in the second quarter (ended Mar 31, 2024).

The increase in demand for the HVAC platform across Latin America and Middle East regions, and strength in industrial refrigeration and service businesses are supporting the Building Solutions EMEA/LA segment. Revenues from this segment increased 3% year over year in the fiscal second quarter.

Investments in Digital Offerings: Investments in digital offerings, like the OpenBlue platform, which plays an integral part in meeting customer needs, are expected to drive growth. Johnson Controls expanded its suite of digital services and offerings to include connected chillers, industrial refrigeration equipment, connected controls and BAS systems. The digital integration of OpenBlue with Johnson Controls' core building systems will optimize the performance of the full HVAC system. Within the company’s OpenBlue platform, Net Zero Buildings as a Service offering, which includes a full portfolio of sustainability products tailored for various segments, boosts its long-term prospects.

Expansion Efforts: Over time, Johnson Controls has steadily strengthened its business through acquisitions. The acquisition of digital workplace management and Internet of Things solutions provider, FM:Systems, in July 2023 expanded OpenBlue’s digital buildings offerings, thereby adding cloud-based software as a service digital workplace management capabilities. The company spent $1 million on acquisitions in the first six months of fiscal 2024. Synergies from the acquisition are expected to be accretive to JCI’s earnings and revenues in fiscal 2024. Also, the company’s partnership with Accenture will deliver two new Johnson Controls - OpenBlue innovation centers, which will bolster the development of AI-enabled building control systems and strengthen its portfolio of digital solutions.

Rewards to Shareholders: The company’s measures to reward its shareholders are encouraging. In the first six months of fiscal 2024, Johnson Controls paid a dividend worth $504 million (up 4.8% year over year) to its shareholders. The company also repurchased shares worth $474 million (up 91.9%) in the same period. It had announced two dividend hikes in fiscal 2023. In June 2023, it hiked its dividend by 2.8% to 37 cents per share (annually: $1.48). In March 2023, the company had raised its dividend by 2.9% to 36 cents per share.

In light of the above-mentioned positives, we believe investors should retain JCI stock for now. The company currently carries a Zacks Rank #3 (Hold). Shares of JCI have risen 26.4% in the year-to-date period, outperforming the industry’s 11.8% growth.

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Stocks to Consider

Some better-ranked companies from the Industrial Products sector are discussed below.

Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 8.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has improved 2.1% in the past 60 days. The stock has risen 16.4% in the year-to-date period.

Belden Inc. (BDC - Free Report) presently carries a Zacks Rank #2 (Buy) and has a trailing four-quarter earnings surprise of 14.7%, on average.

The consensus estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have risen 22.8% in the year-to-date period.

Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.

The Zacks Consensus Estimate for CR’s 2024 earnings has increased 3.3% in the past 60 days. Its shares have risen 25.2% in the year-to-date period.

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