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Why Is Johnson Controls (JCI) Up 2.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Johnson Controls (JCI). Shares have added about 2.6% 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 drivers.

Johnson Controls Q2 Earnings In Line, '22 EPS View Cut

Johnson Controls reported adjusted second-quarter fiscal 2022 earnings per share of 63 cents, in line with the Zacks Consensus Estimate and up nearly 21% year over year. The company reported adjusted revenues of $6,098 million, up 9% year over year. The top line, however, missed the Zacks Consensus Estimate of $6,138 million amid lower-than-expected sales across all segments but the Global Products.

Segmental Results

Building Solutions North America: This segment’s adjusted revenues came in at $2,227 million, up 6% from the year-ago quarter’s $2,092 million on growth in HVAC & Controls platform. The metric, however, missed the Zacks Consensus Estimate of $2,269 million. The segment’s adjusted EBITA decreased to $235 million from $266 million reported in second-quarter fiscal 2021 and also lagged the consensus mark of $291 million.

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Building Solutions Europe, Middle East, Africa/Latin America: Revenues from this segment totaled $958 million, up 3% year over year with double-digit growth in Service, and robust performance in Fire & Security platforms. The metric, however, missed the consensus mark of $967 million. The segment’s adjusted EBITA came in at $90 million, up from $88 million in the comparable year-ago period but falling short of the consensus mark of $97 million.

Building Solutions Asia Pacific: Revenues grew to $623 million, up 5% year over year on higher project installations and services, driven by strong growth in Commercial Applied HVAC & Controls and Industrial Refrigeration equipment. The metric missed the consensus mark of $656 million. The segment’s adjusted EBITA came in at $74 million, up nearly 1% but lagged the consensus mark of $76 million.

Global Products: Revenues in this segment climbed to $2,290 million, increasing 16% year over year, mainly on higher sales in Commercial and Residential HVAC and Fire & Security. The figure also outpaced the consensus mark of $2,217 million. The segment’s adjusted EBITA came in at $369 million, up around 30% year over year, aided by operational efficiency, favorable product mix and higher sales. The metric also beat the Zacks Consensus Estimate of $345 million.

Financial Position

Johnson Controls had cash and cash equivalents of $1,787 million as of Mar 31, 2022. Long-term debt marginally decreased to $7,366 million. Free cash flow in first-quarter fiscal 2022 was negative $193 million. During the reported quarter, Johnson Controls completed more than $500 million in share repurchases.

Guidance

For third-quarter fiscal 2022, Johnson Controls expects adjusted EPS in the range of 82-87 cents per share. It forecasts organic revenue growth in the high single digits on a year-over-year basis. Adjusted segment EBITA margin is anticipated to decline 80-100 basis points on a year over year basis.

JCI has downwardly revised its fiscal 2022 guidance, given the delayed backlog conversion amid supply chain disruptions. For fiscal 2022, adjusted EPS expectation is in the band of $2.95-$3.05, implying an 11-15% jump on a year-over-year basis but down from the prior guided range of $3.22-$3.32. Organic sales growth is envisioned in the range of 8-10% year over year. Adjusted segment EBITA margin is expected to decline 0-0.3% year over year.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -16.16% due to these changes.

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 C. 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. It's no surprise Johnson Controls has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Johnson Controls belongs to the Zacks Security and Safety Services industry. Another stock from the same industry, Allegion (ALLE), has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Allegion reported revenues of $723.6 million in the last reported quarter, representing a year-over-year change of +4.2%. EPS of $1.07 for the same period compares with $1.20 a year ago.

For the current quarter, Allegion is expected to post earnings of $1.34 per share, indicating a change of +1.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Allegion. Also, the stock has a VGM Score of C.


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