Why Johnson Controls International stock is in focus

Johnson Controls International (NYSE:JCI) is back on investor radars after its late July earnings update showed year over year growth in revenue, net income, and earnings per share for both the quarter and nine month period.

On the price side, Johnson Controls International has 7 day and 90 day share price returns of 10.21% and 10.34% respectively. This contributes to a 25.62% share price return year to date and a 48.70% total shareholder return over one year. This points to building momentum as investors respond to the earnings update, ongoing buybacks, and interest around its upcoming data center and cloud infrastructure presentation.

If Johnson Controls International's recent move has you looking at other infrastructure linked ideas, now could be a useful time to scan 37 power grid technology and infrastructure stocks

After this sharp move in Johnson Controls International, the gap between the current price, analyst targets, and intrinsic value estimates has become more important. Where does a reasonable view of fair value really sit now?

Most Popular Narrative: 1% Undervalued

Johnson Controls International's most followed narrative points to a fair value of $155.21 compared with the latest close at $153.65, so the implied gap is narrow but still supportive of a slightly higher value.

The analysts have a consensus price target of $155.21 for Johnson Controls International based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $180.0, and the most bearish reporting a price target of just $111.0.

Want to see what is sitting underneath that fair value for Johnson Controls International? The narrative leans heavily on rising profitability, steadier revenue and a richer earnings multiple. Curious which forecast levers matter most in that equation.

Result: Fair Value of $155.21 (UNDERVALUED)

However, investors still need to watch for execution hiccups in the new operating model, as well as any slowdown in data center related orders that could weaken the Johnson Controls International narrative.

Another View on Johnson Controls International Valuation

The fair value narrative for Johnson Controls International suggests a small upside, yet the market pricing tells a different story. The stock trades on a P/E of 42.7x compared with a fair ratio of 39x, the US Building industry at 23.1x, and peers at 30.5x. That creates a rich valuation that could amplify any disappointment in execution or data center demand. How comfortable are you with paying this kind of premium for the current story?

Next Steps

Mixed views on Johnson Controls International's current setup make this a useful moment to look at the numbers yourself and move quickly if needed. To weigh the potential upside against the issues investors are watching, start with the 2 key rewards and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.