Johnson Controls International plc JCI has failed to impress investors with its recent operational performance due to continued softness across its Building Solutions Asia Pacific segment. Also, given the company’s extensive international presence, foreign currency headwind is an added uncertainty.
Headquartered in Ireland, the company’s operations include the creation of intelligent buildings, providing efficient energy solutions and integrated infrastructure. Johnson Controls provides building systems, including heating, ventilation and air conditioning controls, and security and safety products. JCI currently carries a Zacks Rank #4 (Sell).
Business Weakness: JCI is experiencing weakness across its Building Solutions Asia Pacific segment. In the face of challenging market conditions, the Building Solutions Asia Pacific segment has been witnessing continued softness in system sales in China. Johnson Controls expects economic conditions in China to remain soft throughout the remaining of fiscal 2024 (ended September 2024), which may impact the performance of the Building Solutions Asia Pacific segment in the near term.
High Costs: The escalating selling, general and administrative (SG&A) expenses pose a threat to Johnson Controls’ bottom line. Higher insurance recovery costs are pushing up the company’s SG&A expenses. During fiscal 2024, the company witnessed a 5.1% year-over-year increase in SG&A expenses to $5.7 billion.
The impact of these expenditures is evident in the rise of the SG&A expenses as a percentage of total revenues, which climbed 60 basis points to reach 24.7%. It has been incurring higher corporate costs related to additional IT investments and cybersecurity enhancement costs. High costs and expenses incurred will negatively impact its short-term profitability.
Forex Woes: Johnson Controls’ wide exposure to global markets makes it more vulnerable to forex woes. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry for the company. Adverse foreign currency translations lowered the company’s sales by $53 million in the fiscal fourth quarter.
Johnson Controls International plc Price and Consensus
Johnson Controls International plc price-consensus-chart | Johnson Controls International plc Quote
Stocks to Consider
Some better-ranked companies are discussed below.
Louisiana-Pacific Corporation LPX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LPX delivered a trailing four-quarter average earnings surprise of 30.6%. In the past 60 days, the Zacks Consensus Estimate for Louisiana-Pacific’s 2024 earnings has increased 9.9%.
PotlatchDeltic Corporation PCH presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 50%.
In the past 60 days, the consensus estimate for PCH’s fiscal 2025 earnings has increased more than 100%.
RBC Bearings Incorporated RBC presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 2.5%.
In the past 60 days, the consensus estimate for RBC’s fiscal 2025 earnings has increased 2.3%.
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