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UBS maintained its buy rating and $116.00 price target on Johnson Controls (NYSE:JCI) Tuesday, citing potential for significant earnings growth over the next three years. The stock, currently trading near its 52-week high of $105.19, has delivered an impressive 53.72% return over the past year, according to InvestingPro data.
The investment firm projects a 70% earnings upside for Johnson Controls from fiscal year 2025 through fiscal year 2028, driven by what it describes as "structural self-help, margin catch-up, and robust capital returns."
UBS highlighted the company’s recent $9 billion increase in share repurchase authorization announced last week, with approximately $5 billion expected to be deployed over the next three to six months.
The firm’s positive outlook centers on a structural margin improvement opportunity under Johnson Controls’ new leadership. UBS noted that JCI’s current operating margin is approximately 40% below that of its closest commercial HVAC peer, Trane Technologies (NYSE:TT), suggesting significant room for profitability improvement.
This margin gap implies a potential 40% earnings uplift if Johnson Controls reaches peer-level profitability, even before accounting for revenue growth, according to UBS’s analysis.
In other recent news, Johnson Controls International reported better-than-expected second quarter earnings, with adjusted earnings per share of $0.82, surpassing the analyst expectation of $0.79. The company also reported a revenue increase of 1% year-over-year to $5.68 billion, exceeding the consensus estimate of $5.64 billion. Following these results, Johnson Controls raised its full-year EPS outlook to approximately $3.60, up from its previous guidance and above Wall Street’s consensus. Additionally, Oppenheimer raised its price target for Johnson Controls to $96, citing the company’s strong second fiscal quarter performance and increased adjusted EPS guidance for fiscal year 2025. Deutsche Bank (ETR:DBKGn) upgraded the company’s stock rating from Hold to Buy, increasing the price target to $112, reflecting optimism about future performance under new CEO Joakim Weidemanis.
Furthermore, Johnson Controls announced a $9 billion share repurchase program, adding to the $1.1 billion remaining from its previous authorization. The company also realigned its organizational structure from four to three reporting segments to simplify operations and accelerate growth. These strategic developments are part of Johnson Controls’ ongoing efforts to enhance operational efficiency and capitalize on growth opportunities.
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