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The downgrade and new price target for Johnson Controls (NYSE:JCI) were part of a broader shift by Melius, which also downgraded other capex-related stocks such as Vertiv, Eaton (NYSE:ETN), and Trane. The firm's cautious stance reflects a broader skepticism about the continuation of the recent aggressive capital spending, especially in the AI sector. InvestingPro's comprehensive analysis shows JCI maintains a FAIR overall financial health score, with particularly strong momentum and profitability metrics, offering valuable context for investors evaluating the company's long-term potential. InvestingPro's comprehensive analysis shows JCI maintains a FAIR overall financial health score, with particularly strong momentum and profitability metrics, offering valuable context for investors evaluating the company's long-term potential.
The downgrade and new price target for Johnson Controls were part of a broader shift by Melius, which also downgraded other capex-related stocks such as Vertiv, Eaton, and Trane. The firm's cautious stance reflects a broader skepticism about the continuation of the recent aggressive capital spending, especially in the AI sector. InvestingPro's comprehensive analysis shows JCI maintains a FAIR overall financial health score, with particularly strong momentum and profitability metrics, offering valuable context for investors evaluating the company's long-term potential.
The analysts pointed out that the positive capex revisions, which have been a significant driver of industrial spending, appear to have reached their zenith. Given this, they anticipate more downside than upside potential for these stocks in the current year. This assessment comes despite a sharp market reaction the previous day, which the analysts believe has already factored in some of these risks.
Melius suggested a strategic pivot towards lower-valuation industrial stocks, which have not been as heavily influenced by the AI investment surge over the past year. The firm sees these as less volatile and potentially offering a clearer path to outperformance, given the current market dynamics.
The downgrade and new price target for Johnson Controls were part of a broader shift by Melius, which also downgraded other capex-related stocks such as Vertiv, Eaton, and Trane. The firm's cautious stance reflects a broader skepticism about the continuation of the recent aggressive capital spending, especially in the AI sector.
In other recent news, Vertiv's stock rating was downgraded to Hold by Melius Research, reflecting a cautious approach towards companies heavily involved in the AI capex space. Johnson Controls, on the other hand, has been making significant strides. The company recently reported a robust fourth-quarter performance for fiscal 2024, with a 7% increase in orders and a 22% rise in adjusted earnings per share to $1.28. For fiscal 2025, Johnson Controls projects an adjusted EPS of $3.40 to $3.50 and mid-single-digit organic sales growth.
Johnson Controls also announced changes to its executive team, appointing Julie Brandt as Vice President and President of Global Field Operations, and Nathan Manning as Vice President and President of Building Solutions North America. In an effort to maintain a robust balance sheet, the company priced an additional $250 million in senior notes due 2032, supplementing the previously issued $400 million, and a €500 million senior notes offering due in 2033.
In addition, Johnson Controls announced a $400 million restructuring plan, which includes the sale of its Residential & Light Commercial segment to Bosch (NSE:BOSH), aiming to achieve $500 million in annual cost savings. On the governance front, board member Simone Menne announced she will not seek re-election and will retire following the company's annual general meeting in 2025. These are recent developments in a series of strategic moves by Johnson Controls to enhance its operating model and customer experience.
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