Here’s What To Expect From Johnson Controls’ Q1

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Johnson Controls

Johnson Controls (NYSE: JCI) is scheduled to report its Q1 fiscal 2023 results on Wednesday, February 1. We expect Johnson Controls stock to move higher in the near term, with revenue and earnings likely falling marginally above the consensus estimates. Strong demand trends and better price realization for its HVAC products should drive the company’s performance in Q1. Although we expect the company to post upbeat results, its stock is fully valued, as discussed below. Our interactive dashboard analysis on Johnson Controls’ Earnings Preview has additional details.

(1) Revenues expected to be marginally above the consensus estimates

  • Trefis estimates Johnson Controls’ FYQ1 2023 revenues to be around $6.3 billion, reflecting about a 7% y-o-y rise and slightly above the $6.2 billion consensus estimate.
  • The company has guided for low double-digit organic revenue growth in Q1. This will likely be driven by better price realization, a trend seen in the recent past.
  • The company’s top line should also benefit from its Tempered Networks (a cyber security company) acquisition last year.
  • Looking back at Q4, Johnson Controls reported a 5% rise in top-line to $6.7 billion, led by higher sales for its global products and sales in North America. At the same time, Europe, the Middle East, Africa, and Latin America saw a decline in sales.
  • Our dashboard on Johnson Controls Revenues offers more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • Johnson Controls FYQ1 2023 adjusted earnings per share (EPS) is expected to be $0.69 per Trefis analysis, slightly above the $0.67 consensus estimate and higher than the company’s provided outlook of $0.65-$0.67. This compares with the $0.54 the company reported in the prior-year quarter.
  • We expect the pricing actions to aid margin growth, likely resulting in an earnings beat.
  • Johnson Controls’ adjusted net income of $682 million in FYQ4 2022 reflected a modest 8.6% rise from its $628 million figure in the prior-year quarter. This can primarily be attributed to higher revenues and a 70 bps rise in EBIT margin.
  • Johnson Controls expects around over 120 bps improvement in segment margins in Q1.
  • Looking forward, for the full-fiscal 2023, we expect the adjusted EPS to be higher at $3.60, compared to $3.00 in fiscal 2022.

(3) JCI stock is fully valued

  • We estimate Johnson Controls Valuation to be $66 per share, which is 4% below the current market price of $69.
  • At its current levels, JCI stock is trading at 19x its expected $3.60 EPS for fiscal 2023, compared to the last four-year average of 20x.
  • However, if the company reports upbeat results, with sales growth and fiscal 2023 guidance better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for JCI stock.

While JCI stock looks appropriately priced, it is helpful to see how its peers stack up. Check out how Johnson Controls Peers fares on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis and recent market volatility have created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised by how counter-intuitive the stock valuation is for Novanta vs. Abbott.

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 Jan 2023
MTD [1]
YTD [1]
Total [2]
 JCI Return 8% 8% 67%
 S&P 500 Return 6% 6% 81%
 Trefis Multi-Strategy Portfolio 10% 10% 246%

[1] Month-to-date and year-to-date as of 1/27/2023
[2] Cumulative total returns since the end of 2016

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