Shares of Johnson Controls International PLC (JCI) jumped 4.4% in premarket trading Friday, after the building products and heating, ventilation and air conditioning (HVAC) company beat fiscal second-quarter earnings expectations and lifted its full-year outlook, citing a “healthy” pipeline and margin expansion. Net income rose to $133 million, or 19 cents a share, from $11 million, or 2 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of 75 cents beat the FactSet consensus of 73 cents. Sales grew 9.6% to $6.89 billion, above the FactSet consensus of $6.50 billion. Cost of sales grew 6.9% to $5.40 billion, with the growth in sales more than offsetting the increased cost of sales.
The company’s strong second-quarter results were largely due to robust sales in its heating, ventilation, and air conditioning (HVAC) and building products segments. The HVAC segment accounted for $3.45 billion in sales, a 19% increase compared to the same quarter last year, while building products sales increased 10.2% to $2.00 billion. The performance in these segments resulted in Johnson Controls’ overall sales growth of 9.6% during the quarter.
Additionally, the company witnessed margin expansion for the second quarter, which contributed to a higher net income. Gross margin increased to 21.7%, up from 21.3% in the prior-year period. This increase in gross margin came due to “healthy growth in volumes, pricing discipline, and productivity improvements” according to the company’s Chief Executive Officer, George Oliver.
Johnson Controls also raised its full-year outlook for fiscal 2022, citing the healthy pipeline, margin expansion, and continued strength in its core businesses as key drivers. The company now expects adjusted earnings per share to be in the range of $3.02 to $3.12, up from its previous guidance of $2.98 to $3.08. The new guidance translates to a growth rate of 10.6% to 14.2% from the adjusted earnings per share of $2.73 in fiscal 2021.
In addition to strong financials, Johnson Controls continues to make progress on its sustainability initiatives. The company recently announced its commitment to achieve net-zero carbon emissions by 2040, becoming the first major HVAC industry player to make such a pledge. Furthermore, Johnson Controls has set a target to reduce its energy intensity by 30% by 2030, and it aims to source 100% renewable electricity for all its operations by 2040.
To support these targets, the company is investing in R&D to drive innovation in energy-efficient solutions, such as its OpenBlue platform, which caters to smart, sustainable buildings. Additionally, Johnson Controls plans to invest $30 million annually in sustainability initiatives over the next five years, with a focus on reducing greenhouse gas emissions, decreasing its water use, promoting recycling and waste reduction, and implementing energy efficiency measures across its facilities.
While the strong second-quarter results have boosted investor confidence in Johnson Controls, there are still uncertainties surrounding the company’s future due to external factors like global supply chain disruptions and increasing material costs. However, the company has managed to navigate these challenges effectively during the past few quarters, and it remains optimistic about maintaining its growth trajectory. As George Oliver stated during the earnings call, “We continue to successfully manage these headwinds, and I am confident in our ability to drive top and bottom-line growth and margin expansion in the coming quarters.”
Johnson Controls’ strong performance in the second quarter and its upgraded full-year outlook reflect the company’s ability to adapt to a changing business environment, as well as its commitment to driving innovation and sustainability initiatives. Given the strong demand for HVAC and building products, as well as the ongoing focus on energy efficiency and carbon reduction across the globe, the company is well-positioned to capitalize on these trends and maintain its growth momentum going forward.
In summary, Johnson Controls International PLC’s second-quarter results and full-year outlook reflect strong sales growth, margin expansion, and a healthy pipeline, driven by robust demand for HVAC and building products. The company’s commitment to sustainability initiatives, as well as its focus on driving innovation and energy efficiency, positions it well for continued growth in the future. However, external factors like global supply chain disruptions and increasing material costs may pose challenges for the company, but its track record of navigating these headwinds successfully should give investors confidence in its ability to maintain its growth trajectory.
