Why Is Johnson Controls (JCI) Up 12.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Johnson Controls (JCI). Shares have added about 12.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Johnson Controls due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Johnson Controls Q1 Earnings Beat, Revenues Rise Y/Y

Johnson Controls reported first-quarter fiscal 2024 (ended Dec 31, 2023) adjusted earnings of 51 cents per share, which beat the Zacks Consensus Estimate of earnings of 50 cents per share. However, the bottom line decreased 23.9% year over year.

Total revenues of $6,094 million missed the consensus estimate of $6,126 million. The top line increased 0.4% year over year.

Segmental Results

Building Solutions North America: The segment’s revenues were $2,487 million, up 5% year over year. Organic sales jumped 4%, driven by the strong performance of applied heating, ventilation and air conditioning (HVAC) & controls business. The segment’s EBITA increased 7% year over year to $285 million.

Building Solutions Europe, Middle East, Africa/Latin America: Revenues from this segment totaled $1,038 million, up 6% year over year. Organic sales climbed 2% due to growth in service, HVAC & controls, fire & security businesses. The segment’s EBITA was $80 million, up 7% from the year-ago period.

Building Solutions Asia Pacific: Revenues decreased 22% to $507 million in the reported quarter. Sales declined 21% organically due to weakness in the China region. The segment’s EBITA was $46 million, down 32% year over year.

Global Products: Revenues in this segment declined 1% year over year to $2,062 million. Organic sales were down 1% due to a decline in the global Residential HVAC business. The segment’s EBITA was $369 million, down 3% year over year.

Financial Position

Johnson Controls had cash and cash equivalents of $1,801 million as of Dec 31, 2023, compared with $835 million at the end of fiscal 2023. Long-term debt was $7,959 million compared with $7,818 million at the end of fiscal 2023.

The company reported a free cash outflow of $338 million in the first three months of fiscal 2024 compared with $430 million cash outflow in the year-ago period.

The company did not repurchase any shares in the first quarter of fiscal 2024.

Fiscal Q2 Guidance

For the second quarter of fiscal 2024, Johnson Controls anticipates organic revenue growth to be flat year over year. The segment EBITA margin is estimated to be approximately 14.5%. The company expects adjusted earnings to be 74-78 cents per share in the fiscal second quarter. The mid-point of the guided range — 76 cents per share — lies below the Zacks Consensus Estimate of earnings of 77 cents per share.

FY24 Guidance

Johnson Controls anticipates year-over-year organic revenue growth to be in the mid-single digits in fiscal 2024. The adjusted segment EBITA margin is expected to improve 50-75 bps year over year.

JCI expects adjusted earnings to be approximately $3.60-$3.75 per share in fiscal 2024 compared with earnings of $3.65-$3.80 per share predicted earlier. The mid-point of the guided range — $3.67 per share — lies above the Zacks Consensus Estimate of earnings of $3.66 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Johnson Controls has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson Controls has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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