What’s Next For Johnson Controls Stock After A 20% Rise In A Month?

+29.84%
Upside
49.29
Market
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JCI: Johnson Controls logo
JCI
Johnson Controls

Johnson Controls stock (NYSE: JCI) reported its Q3FY22 results earlier this month, with revenue falling short and earnings aligning with the street estimates. JCI stock has rallied around 20% in a month, while it’s still down 28% year-to-date. After the recent rise, we believe JCI stock has only a little room for growth, as discussed below.

Johnson Controls’ revenue (Q3) of $6.6 billion was up 4% (y-o-y), and EPS of $0.85 was up 3% (y-o-y), and compared to the consensus estimates of $6.7 billion and $0.85, respectively. The revenue growth was seen in North America and the Global Products segments. The operating margin trended lower y-o-y due to higher costs, primarily SG&A, which grew 16% y-o-y, compared to the revenue growth of just 4%.

However, the company saw strong order inflows and has a record backlog of $11.1 billion. The company is also focused on cost reduction and is on track to achieve the $230 million target in savings for fiscal 2022. The company narrowed its full-fiscal outlook to 8% to 9% revenue growth and 12% to 14% EPS growth. The robust outlook and strong backlog were a positive takeaway, and its stock price trading at its 52-week low last month made it attractive from a valuation point.

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We expect full-fiscal 2022 revenue to be $25.4 billion and earnings to be $3.00 on a per share and adjusted basis. We have revised Johnson Control’s Valuation to be around $64 per share (vs. $70 earlier), which is only 8% above the current market price of $58. At its current levels, JCI stock is trading close to 20x its expected forward earnings, compared to the last three-year average of 21x, implying that JCI stock has only a little room for growth.

But what about the near term?

Now that JCI stock has seen a significant rise of 20% in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a fall for JCI stock over the next month. A move of 20% or more in a month for JCI is uncommon and has occurred only seven times in the past ten years. Of those, just two instances resulted in JCI stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects a low chance of a rise in JCI stock over the next month. See our analysis of Johnson Controls Stock Chance of Rise for more details.

Johnson Controls (JCI) Return (Recent) Comparison With Peers

  • Five-Day Return: LII highest at 7.2%; EMR lowest at 1.5%
  • Ten-Day Return: TT highest at 10.3%; EMR lowest at -1.1%
  • Twenty-One Day Return: TT highest at 25.5%; EMR lowest at 8.0%

While JCI stock looks like it has a little room for growth, it is helpful to see how Johnson Controls’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for ITT New vs. Laboratory of America.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 JCI Return 9% -28% 43%
 S&P 500 Return 4% -10% 91%
 Trefis Multi-Strategy Portfolio 5% -9% 258%

[1] Month-to-date and year-to-date as of 8/18/2022
[2] Cumulative total returns since the end of 2016

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