JCI Upgraded to Buy by Deutsche Bank Amid Optimism for Operational Improvements | JCI Stock News

Author's Avatar
May 12, 2025
Article's Main Image

Deutsche Bank has raised its rating for Johnson Controls (JCI, Financial) from Hold to Buy, accompanied by an increased price target of $112, up from $101. This decision comes following the initial public introduction of the company’s new CEO, Joakim Weidemanis, during the recent Q1 earnings call. Weidemanis, only six weeks into his tenure, conveyed a strong vision to investors, identifying notable opportunities for enhancing the company's operations. The bank acknowledges these opportunities, suggesting they could enable Johnson Controls to significantly improve its operational margins, closing a long-standing gap compared to its main competitors. Deutsche Bank considers JCI an exceptional investment opportunity, highlighting its potential for a 500 basis point increase in operating margin that is currently underestimated by existing market projections.

Wall Street Analysts Forecast

1921858082678403072.png

Based on the one-year price targets offered by 18 analysts, the average target price for Johnson Controls International PLC (JCI, Financial) is $97.62 with a high estimate of $115.00 and a low estimate of $79.00. The average target implies an upside of 6.21% from the current price of $91.92. More detailed estimate data can be found on the Johnson Controls International PLC (JCI) Forecast page.

Based on the consensus recommendation from 23 brokerage firms, Johnson Controls International PLC's (JCI, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.

Based on GuruFocus estimates, the estimated GF Value for Johnson Controls International PLC (JCI, Financial) in one year is $76.15, suggesting a downside of 17.16% from the current price of $91.92. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Johnson Controls International PLC (JCI) Summary page.

JCI Key Business Developments

Release Date: May 07, 2025

  • Organic Sales Growth: 7% increase.
  • Segment Margins: Expanded 180 basis points to 16.7%.
  • Adjusted EPS: Increased 19% to $0.82.
  • Orders Growth: Up 5%.
  • Backlog: Grew 12% to $14 billion.
  • Available Cash: Approximately $800 million.
  • Net Debt: Decreased to 2.4 times.
  • Adjusted Free Cash Flow: Increased approximately $1.1 billion year-to-date.
  • Building Solutions Orders: North America up 4%, EMEA/LA up 10%, Asia Pacific flat.
  • Building Solutions Organic Sales: North America up 7%, EMEA/LA up 5%, Asia Pacific up 13%.
  • Building Solutions Margin: EMEA/LA expanded 410 basis points to 12.5%, APAC expanded 360 basis points to 14.6%, North America declined 20 basis points to 13.4%.
  • Global Products Organic Sales Growth: 8%.
  • Applied HVAC Growth: More than 20%.
  • Adjusted Segment EBITA Margin: Expanded 600 basis points to 30.3%.
  • Full Year Guidance: Adjusted EPS to approximate $3.60, representing roughly 12% growth.
  • Free Cash Flow Conversion: Anticipated to be approximately 100% for the full year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Johnson Controls International PLC (JCI, Financial) reported strong second-quarter results with organic sales growth of 7% and a 19% increase in adjusted EPS.
  • Segment margins expanded by 180 basis points to 16.7%, indicating improved operational efficiencies.
  • The company raised its full-year guidance, reflecting confidence in continued growth and operational improvements.
  • JCI's backlog grew by 12% to $14 billion, showcasing sustained demand for its solutions.
  • The company is implementing a new organizational model to enhance customer focus and operational performance, which is expected to drive future growth.

Negative Points

  • The company faces complexities in its current product offerings, including a high number of SKUs, which may slow operational and innovation execution.
  • Tariffs and geopolitical uncertainties pose potential risks, with an estimated exposure of 2% of sales or 3% of cost of goods sold.
  • Despite improvements, the North America segment saw a slight decline in adjusted margin by 20 basis points due to system growth outpacing service growth.
  • The company's operational and innovation execution is hindered by complexities in its footprint and operating methods.
  • There is a need for further strategic evaluation of the portfolio to optimize growth and shareholder value, indicating potential areas of underperformance.

Disclosures

I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.