Here’s What To Expect From Johnson Controls’ Q2

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Johnson Controls

Johnson Controls (NYSE: JCI) is scheduled to report its Q2 fiscal 2023 results on Wednesday, May 3. We expect Johnson Controls stock to move higher in the near term, with revenue and earnings likely exceeding the consensus estimates. Strong demand trends and better price realization for its HVAC products should drive the company’s performance in Q2. Not only do we expect the company to post upbeat results, but its stock also appears to have more room for growth, as discussed below. Our interactive dashboard analysis on Johnson Controls’ Earnings Preview has additional details.

(1) Commercial HVAC products to drive the sales growth

  • Trefis estimates Johnson Controls’ FYQ2 2023 revenues to be around $6.6 billion, reflecting an 8% y-o-y rise and slightly above the $6.5 billion consensus estimate.
  • The company has guided for low double-digit organic revenue growth in Q2. This will likely be driven by better price realization and strong demand trends for its commercial HVAC products, a trend seen in the recent past.
  • The company’s top line should also benefit from last year’s Tempered Networks (a cyber security company) acquisition.
  • Looking back at Q1, Johnson Controls reported a 4% rise in the top-line to $6.1 billion, led by higher sales for the North America segment.
  • Our dashboard on Johnson Controls Revenues offers more details on the company’s segments.
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(2) EPS likely to be slightly above the consensus estimates

  • Johnson Controls FYQ2 2023 adjusted earnings per share (EPS) is expected to be $0.74 per Trefis analysis, slightly above the $0.73 consensus estimate and at the higher end of the company’s provided outlook of $0.72-$0.74. This compares with the $0.63 the company reported in the prior-year quarter.
  • We expect the pricing actions to aid margin growth, likely resulting in an earnings beat. The company expects over 100 bps improvement in EBITA margin in Q2.
  • Johnson Controls’ adjusted net income of $463 million in FYQ1 2023 reflected a robust 22% rise from its $380 million figure in the prior-year quarter. This can primarily be attributed to higher revenues and a 140 bps rise in EBIT margin.
  • Looking forward, for the full-fiscal 2023, we expect the adjusted EPS to be higher at $3.59, compared to $3.00 in fiscal 2022.

(3) JCI stock has room for growth

  • We estimate Johnson Controls Valuation to be $71 per share, about 19% above the current market price of $60.
  • At its current levels, JCI stock is trading at 17x its expected $3.59 EPS for fiscal 2023, compared to the last three-year average of 21x, implying that it has more room for growth.
  • 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 like it can see higher levels, 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 Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 JCI Return -1% -6% 45%
 S&P 500 Return 1% 9% 86%
 Trefis Multi-Strategy Portfolio 1% 9% 242%

[1] Month-to-date and year-to-date as of 4/30/2023
[2] Cumulative total returns since the end of 2016

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