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Investing.com -- Oppenheimer downgraded Johnson Controls (NYSE:JCI) to Perform from Outperform following a recent re-rating, as analysts await further details on the company’s strategic review.
The downgrade comes as the HVAC sector has outperformed key benchmarks quarter-to-date, rising 25.8% compared to the Industrial Select Sector’s 8.5% and S&P 500’s 6.6% gains.
Johnson Controls shares have outperformed peer averages both quarter-to-date and year-to-date, with valuation now sitting at historical highs.
According to Oppenheimer, this valuation implies faster improvement in financial performance relative to consensus expectations.
The firm believes the current valuation reflects improving growth prospects under a streamlined operating model and potential levers for shareholder value creation under a CEO-led strategic review guided by lean and customer-centric principles.
Oppenheimer also raised its price target on Vertiv (NYSE:VRT) to $132 from $116, citing strengthening data center demand indicators.
The firm increased its fiscal year 2025-2026 orders outlook for Vertiv, noting that first-quarter earnings underscored strong and diversifying demand.
The report highlighted several focus topics for the HVAC sector, including easing tariff pressures. Trane Technologies (NYSE:TT) and Carrier Global (NYSE:CARR) are expected to see fiscal year 2025 margin upside due to reduction in tariff regimes and retention of tariff-related price increases.
Lennox (NYSE:LII) was identified as a potential leading relative beneficiary given previous cost impacts from tariffs.
Oppenheimer listed Lennox as a top idea, calling it a "contrarian play benefiting from easing tariffs, stronger underlying residential demand, and building control system gains."
Modine Manufacturing (NYSE:MOD) was also highlighted as a top "catch-up play" with recent positive catalysts.
For commercial HVAC trends, Oppenheimer anticipates modestly positive commercial HVAC orders growth against tough comparisons in the second quarter.
The firm noted constructive original equipment manufacturer demand commentary pointing to growing project funnels led by data centers, healthcare, and manufacturing.
In the residential segment, Oppenheimer sees stronger underlying demand but continues to monitor potential challenges amid elevated channel inventories, mild weather, and refrigerant transition issues.
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