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Investing.com - Jefferies downgraded Johnson Controls (NYSE:JCI) from Buy to Hold on Thursday, while maintaining a price target of $120.00. The building products giant, currently valued at $72.47 billion, trades at a P/E ratio of 32.9x, reflecting its premium market position.
The downgrade follows Johnson Controls’ significant outperformance compared to the Industrial Select Sector SPDR Fund (XLI) since April’s market bottom, with JCI shares outpacing the index by 18%. According to InvestingPro data, the stock has delivered an impressive 66% return over the past year and is currently trading near its 52-week high of $110.59.
Jefferies noted that Johnson Controls now trades at approximately 18.5 times its estimated fiscal 2026 EBITDA, suggesting the stock has reached a fair valuation level.
The firm’s previous Buy rating had been based on expectations that Johnson Controls would close its margin gap with industry peers and subsequently receive a multiple upgrade from investors.
Jefferies indicated that with the valuation multiple gap "largely closed," the primary catalyst for its previous bullish stance has now materialized, prompting the rating change despite market anticipation of future margin expansion from upcoming LEAN initiatives to be announced by Johnson Controls’ new CEO.
In other recent news, Johnson Controls has been awarded a substantial $377.9 million contract by the U.S. Department of Defense. This contract involves the procurement, installation, maintenance, and service of building automation systems, with the U.S. Army Corps of Engineers overseeing the project. On the financial front, Wolfe Research raised its price target for Johnson Controls to $130, maintaining an Outperform rating, citing potential earnings growth. However, Oppenheimer downgraded the company from Outperform to Perform, pointing to valuation concerns and the need for further strategic clarity. In leadership changes, Johnson Controls appointed Chris Scalia as the new executive vice president and chief human resources officer. Scalia, who previously held similar roles at The Hershey Company (NYSE:HSY), will report directly to CEO Joakim Weidemanis. These developments are part of a series of recent updates from the company.
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