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Price: $141.49
Discount category: Close to intrinsic value
Next earnings: 2027-02-03
Next earnings is estimate: Yes
Company name: Johnson Controls International
Sector: Building technology and HVAC
About: Johnson Controls International makes, installs and services building products and systems: commercial heating, ventilation and air conditioning (HVAC) equipment, industrial refrigeration, building controls, security systems and fire detection and suppression. A large field workforce provides services over the life of the systems. Its customers include data centers, hospitals, pharmaceutical makers, factories and universities. It reports three segments by region: Americas, EMEA and APAC. In July 2025, it sold its Residential and Light Commercial HVAC business. In fiscal 2026, which ended on September 30, 2026, sales were $25.67 billion: $17.70 billion from products and systems and $7.97 billion from services. Its registered office is in Cork, Ireland, and Joakim Weidemanis is its chief executive officer.
Thesis: Johnson Controls trades close to its intrinsic value because investors pay for fast growth in data center cooling and building systems, but the price already includes much of that growth. In fiscal 2026, sales from continuing operations rose to $25.67 billion, and adjusted EPS rose to $5.16 from $3.76. Orders in Q4 rose 44% organically, and backlog reached $23.0 billion. In the Americas, backlog rose 54% to $17.8 billion with support from data center demand. For the stock to stay near its value, three things must be true. The company must turn its backlog into sales and reach its fiscal 2027 guidance of adjusted EPS of $6.15 to $6.30 and organic sales growth of 11% to 12%. Data center demand must not slow, because a large part of the backlog depends on it. Margins must keep rising from the new business system and lower costs while restructuring and transformation costs fall. The Q1 fiscal 2027 report, expected in early February 2027, is the next test.
Risks: Much of the order growth comes from data centers. If data center building slows or large customers delay projects, orders and the backlog can fall. The fiscal 2027 guidance needs organic growth of 11% to 12% and further margin gains. Delays in projects or higher costs can cause a miss. A subsidiary, Tyco Fire Products, faces many lawsuits about firefighting foam (AFFF). The company recorded $149 million of insurance recoveries in fiscal 2026, but new claims or rulings can cost more. Restructuring and transformation costs were $311 million and $292 million in fiscal 2026. If the new operating model saves less than planned, margins can stop rising. EMEA sales fell 2% in Q4 fiscal 2026 because of the conflicts in the Middle East. Tariffs and trade rules can also raise costs.
Balance sheet: Cash: $618M Debt: $9.3B Net debt: $8.7B EBITDA, last 12 months: $4.7B Net debt / EBITDA: 1.8× (low) Interest cover: 13× Undrawn credit line: $2.5B, to December 2028 Debt due within 12 months: $1.7B Ratings: S&P BBB+ (stable outlook), Moody's Baa1 (stable outlook) Johnson Controls funds itself with senior notes, commercial paper and term loans. At September 30, 2026, total debt was $9.28 billion: $678 million of short-term debt, $1.07 billion of long-term debt due within one year and $7.53 billion of other long-term debt. Cash was $618 million, so net debt was $8.66 billion, or 1.8 times the adjusted EBITDA of the last 12 months ($4.74 billion). The $2.5 billion revolving credit facility had no draws at June 30, 2026 and expires in December 2028. S&P rated the company BBB+ and Moody's Baa1, both with a stable outlook, at June 30, 2026. Interest cover is income before income taxes plus net financing charges, divided by net financing charges, for fiscal 2026 ($3.71 billion against $279 million). In fiscal 2026, the company paid $976 million of dividends at $0.40 per share each quarter and spent $1.51 billion on share repurchases. There were 605,741,470 shares outstanding on June 30, 2026. As of 2026-09-30.
Checkpoints: Oct 27, 2026: Q4 fiscal 2026 results and fiscal 2027 guidance. Passed. Watch: Fiscal 2026 adjusted EPS of about $5.05 or more and 2027 guidance for growth pass; lower guidance fails. Outcome: Fiscal 2026 adjusted EPS was $5.16, and the company guided fiscal 2027 adjusted EPS of $6.15 to $6.30. Feb 3, 2027 (estimate): Q1 fiscal 2027 results. Pending. Watch: Adjusted EPS of $1.15 to $1.20 or more, organic growth of 12% to 14% and a kept 2027 guidance pass; a miss or lower guidance fails. May 2027 (estimate): Q2 fiscal 2027 results: orders and backlog. Pending. Watch: Backlog at or above $23.0 billion and positive organic orders pass; falling orders or backlog fail.
Recent events: 2026-10-27: Johnson Controls reported Q4 fiscal 2026 results. Sales rose 10% to $7.1 billion, and organic sales rose 12%. GAAP EPS was $1.60 and adjusted EPS was $1.66. Orders rose 44% organically, and backlog of $23.0 billion rose 43% organically. For fiscal 2026, adjusted EPS was $5.16, against $3.76 in fiscal 2025. The company gave fiscal 2027 guidance of organic sales growth of 11% to 12% and adjusted EPS of $6.15 to $6.30, with $1.15 to $1.20 in Q1. 2026-09-25: Johnson Controls said that Julie Brandt, President, Global Commercial and Field Operations, will leave the company after a transition in an advisory role through December 31, 2026, because of changes in its operating model. 2026-07-29: Johnson Controls reported Q3 fiscal 2026 results. Sales rose 9% to $6.6 billion, and organic sales rose 10%. GAAP EPS was $1.23 and adjusted EPS was $1.42. Orders rose 27% organically, and backlog reached $21.0 billion. The company raised its fiscal 2026 adjusted EPS guidance to about $5.05 from about $4.85. In the quarter, it bought Alloy Enterprises, a maker of direct liquid cooling parts, and Nantum AI, for a total of about $291 million. 2026-05-06: Johnson Controls reported Q2 fiscal 2026 results. Sales rose 8% to $6.1 billion, and organic sales rose 6%. GAAP EPS was $0.99 and adjusted EPS was $1.19. Orders rose 30% organically, and backlog reached $20.0 billion. The company raised its fiscal 2026 adjusted EPS guidance to about $4.85. It completed a $5.0 billion accelerated share repurchase in the quarter, at an average price of $114.43 per share. 2026-02-04: Johnson Controls reported Q1 fiscal 2026 results. Sales rose 7% to $5.8 billion, and organic sales rose 6%. GAAP EPS was $0.90 and adjusted EPS was $0.89. Orders rose 39% organically. The company raised its fiscal 2026 adjusted EPS guidance to about $4.70 from about $4.55.