Headquartered in Cork, Ireland, diversified technology and multi-industrial company Johnson Controls International’s (JCI) shares have more than doubled since hitting their $33.33, 52-week low on July 10, 2020. The stock has rallied 69.6% over the past nine months and15.2% over the past three months to close yesterday’s trading session at $69.01, after hitting its 52-week high of $69.21. The surge can be attributed in part to increasing demand for its heating, ventilation and air conditioning (HVAC) related products and services amid growing climate change concerns.

JCI and the City of La Crosse launched the next phase of the City’s sustainability initiative last month. The company completed the acquisition of Silent-Aire on May 12, which further expands its portfolio of sustainable and reliable data center solutions.

Given the favorable backdrop, JCI has raised its fiscal 2021 full-year guidance. It now expects its adjusted EPS to come in between $2.58 – $2.65. And the company’s adjusted segment EBITDA margin is expected to be between 70 – 90 basis points.

Here’s what we think could shape JCI’s performance in the near term:

Strategic Partnerships

JCI partnered with DigiCert on May 20 to accelerate smart-building cybersecurity by simplifying deployment and management of public key infrastructure (PKI) and digital identities. Also, JCI company announced a global partnership with the International WELL Building Institute on April 22 to promote global application of the WELL Building Standard.

JCI also partnered with Pelion, a Connected IoT Device service provider and subsidiary of Arm, in April. The partnership is expected to accelerate innovation by removing the complexities of bringing artificial intelligence (AI) to a range  of devices at the edge, enabling smarter buildings that evolve and adapt through JCI’s OpenBlue technology.

Robust Financials

For its fiscal second quarter, ended March 31, 2021, JCI’s net sales were $5.59 billion compared to $5.44 billion in the prior-year quarter. Its gross profit for the quarter increased 7.9% year-over-year to $1.94 billion. The company’s net income came in at $397 million, which represents a 68.2% year-over-year rise. And its adjusted EPS was  $0.52, up 23.8% year-over-year.

Favorable Growth Estimates

Analysts expect JCI’s revenue to increase 7.7% for the quarter ending September 30, 2021, 5.6% in fiscal 2021 and 6.6% in fiscal 2022. The company’s EPS is expected to increase 23.9% for the quarter ended June 30, 2021, 14.5% for the quarter ending September 30, 2021, and 17.9% in fiscal 2021. Moreover, its EPS is expected to grow at a rate of 17.4% per annum over the next five years.

POWR Ratings Reflect Rosy Prospects

JCI has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, JCI has a B grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase.

The stock also has a B grade for Sentiment. This is justified given that 11 of the 19 covering analysts have rated JCI, Strong Buy or Buy.

JCI is ranked #24 of 53 stocks in the Industrial – Building Materials industry. Click here to see the additional POWR Ratings for JCI (Value, Momentum, Stability, and Quality).

Also, click here to access 27 other top-rated stocks in the same industry.

Bottom Line

JCI has generated significant returns over the past few months by leveraging its wide portfolio of products and services and strategic alliances. While the company’s residential business is already strong, its non-residential business is expected to grow with the reopening of economies. So, it could be wise to bet on the stock now.

JCI shares were unchanged in premarket trading Friday. Year-to-date, JCI has gained 49.39%, versus a 15.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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