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On Monday, Deutsche Bank (ETR:DBKGn) analyst Nicole DeBlase upgraded shares of Johnson Controls (NYSE:JCI) from Hold to Buy, with a revised price target of $112.00, up from the previous $101.00. The adjustment reflects an 11% increase in the price target and is based on the firm’s optimistic outlook for the company’s future performance under new leadership. The company, currently valued at over $60 billion, has shown impressive momentum with a 43% return over the past year. According to InvestingPro data, JCI has achieved a perfect Piotroski Score of 9, indicating strong financial health.
The upgrade follows the introduction of Johnson Controls’ new CEO, Joakim Weidemanis, during last week’s second quarter fiscal year 2025 earnings call. Weidemanis, who previously worked at DHR, has identified significant operational improvement opportunities at the company. According to DeBlase, these improvements could help Johnson Controls to narrow its margin gap with competitors over time. With current gross margins at 36% and annual revenue of $23.25 billion, InvestingPro analysis reveals substantial room for operational enhancement. Subscribers can access detailed operational metrics and 10+ additional ProTips through the comprehensive Pro Research Report.
DeBlase’s remarks underscored the potential for Johnson Controls to enhance its operational rigor, noting the lack of lean manufacturing practices currently in place. The analyst sees this as a unique chance to invest in a company with the potential for approximately a 500 basis point increase in operating margins, a prospect not yet factored into the consensus forecasts.
The new price target of $112 is derived from a multiple of 24 times the firm’s next twelve months (NTM) earnings per share (EPS) forecast, increased from 22 times, in anticipation of the company’s projected margin expansion. This target suggests a greater than 20% upside from the current stock price, warranting the upgrade to a Buy rating.
In other recent news, Johnson Controls reported second quarter earnings that exceeded analyst expectations. The company posted adjusted earnings per share of $0.82, surpassing the anticipated $0.79, while revenue rose 1% year-over-year to $5.68 billion, beating the consensus estimate of $5.64 billion. Following these results, Johnson Controls raised its full-year earnings per share outlook to approximately $3.60, higher than the previous guidance and above the Wall Street consensus of $3.56. Oppenheimer responded to these positive developments by raising its price target for Johnson Controls to $96, maintaining an Outperform rating. The firm noted the company’s improved free cash flow conversion guidance, now at 100%, as a significant factor in its revised earnings estimates. CEO Joakim Weidemanis highlighted strong order growth and a record backlog, with the Building Solutions backlog reaching $14.0 billion, a 12% organic increase from the previous year. The company’s outlook for the fiscal third quarter anticipates adjusted earnings per share between $0.97 and $1.00, slightly below analyst projections of $1.01. Johnson Controls continues to see strong demand for its building efficiency and sustainability solutions.
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