Johnson Controls International plc: Making buildings smarter

written on April 29, 2021

Long before anyone ever talked about climate change and carbon footprints, American college professor Warren Johnson was frustrated by his inability to regulate individual classroom temperatures. Seeking to find a solution to this problem, he devised the multi-zone pneumatic control system. Inspiring the future, Johnson went on to launch an industry focused on energy efficiency and a company that was set to enter new fields and explore ground-breaking ideas.

Performing one of the largest tax inversions in history, Johnson Controls International has added more than $10 billion to its total revenue since 2016, with worldwide sales topping $22 billion, while it has joined the ranks of the Fortune Global 500 list since 2017. As one of the key players in the building automation market which is expected to reach a valuation of $273 billion by 2023 and with multiple growth factors, including increased exposure to commercial buildings, the company is likely to see an increase in demand for its products in the near future.

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A brief history of Johnson Controls International

With a history spanning several decades, for Johnson Controls International it all began in 1883, when professor Warren S. Johnson received a patent for the first electric room thermostat. His invention launched the building control industry, while it helped establish what was known back then as the Johnson Electric Service Company which went on to manufacture, install and service automatic temperature regulation systems for buildings. Johnson’s system was adopted worldwide, from office buildings and schools to hospitals, hotels and any large building that sported multiple rooms and required temperature regulation.

As the company embarked on exploring new ways to harness and conserve precious energy resources, Johnson Controls went on to become a heavyweight in the industry, achieving several notable milestones throughout the 20th century, such as producing thousands of steam-powered cars, fire trucks, limousines and ambulances and branching out into the automotive battery production, apart from crafting other innovative products.

With the aim to expand and diversify, the company made several acquisitions throughout its history like purchasing Hoover Universal, its source of its automotive seating and plastics machinery businesses, as well as automotive seating supplier Ferro Manufacturing, to name a few. Meanwhile, Johnson Controls became a major player in reducing the Empire State Building’s energy use by up to 38%, while it became Walmart’s sole source of automotive, marine, powersport and lawn and garden batteries. By 2001, it boasted 130,000 employees, providing products and services for more than 200 million vehicles, 12 million homes and one million commercial buildings.

The multinational conglomerate that is today was formed in 2016, when the American company Johnson Controls and the Irish Tyco Interntional joined forces. Since then, Johnson Controls International is headquartered in Cork, Ireland, while its operations are segmented into two business units, namely Building Efficiency and Global WorkPlace Solutions. A globally diversified technology and multi-industry company, Johnson Controls International is focused on developing energy solutions, integrated infrastructure and transportation systems, while its technology and service capabilities include fire, security, HVAC, power solutions and energy storage.

When did Johnson Controls International go public?

In 1940, the then Johnson Service Company went public, listing its securities over the counter (OTC). Then, on October 1965, it listed on the New York Stock Exchange (NYSE), issuing 1.6 million shares of common stock. The same year, the company’s revenue topped $92 million.

Is Johnson Controls International a buy?

The company reported adjusted earnings per share of $0.45 for first-quarter fiscal 2021, mainly due to higher-than-expected revenues and operational efficiency. Although the fiscal first-quarter revenues of $5,341 million was down by an estimated 4.2% year-over-year, the revenue figure did beat estimates, such as that by the Zacks Consensus Estimate which anticipated a $5,284 million revenue. Gross profit also increased to $1,975 million from the year-earlier quarter’s $1,803 million. Meanwhile, the stock has appreciated significantly since its March 2020 lows. Between its first earnings report and end of February 2021, shares have added around 13.1%.

Dividend-paying companies with growing earnings can be highly rewarding in the long-term. But is Johnson Controls International a good dividend stock? If we analyse its track record, the company has paid consecutive dividends since 1887, with these declining on just one occasion over the past 10 years. On March 19, 2021, the company started trading ex-dividend, which means that only shareholders who purchased the stock prior to the ex-dividend date are eligible for the cash payment. Scheduled for April 16, at $0.27 per share, this represents an increase of 3.85%.

Since its inception, Johnson Controls International is known for providing customers with world-class technologies through its powerful complementary brands and channels, while its strategic acquisitions have reinforced its standing in the market. In December of 2020, the company joined forces with Microsoft to digitally transform how buildings and spaces are conceived, built and managed, by creating a comprehensive digital twin platform the supports the entire ecosystem of a building. The collaboration was not only a vital ingredient in its innovation strategy but it also boded well for its long-term prospects.

With the economic rebound following the containment of the Covid-19 pandemic underway, sales are expected to improve and revenues to reach $23.3 billion in 2021 and $24.3 billion in 2022. While it is hard to truly predict how the pandemic is going to progress and how it will affect the company, Johnson Controls International’s financial health and growth prospects demonstrate that its stock has the potential to perform in-line with the market.

What’s next for Johnson Controls International?

Interestingly, the conglomerate is planning 150 new product launches for fiscal 2021, which are set to speed up its revenue pipeline. And in response to the uncertainty posed by the pandemic, the company has taken several steps to alleviate any of its effects, such as initiating meaningful costs savings throughout its operations which are bound to help it with its margins.

At the same time, the company has also unveiled its ambitious sustainability, environmental, social and governance commitments, pledging to achieve zero-carbon emissions by 2040, while it has committed to lower its operational and customer emissions by 55% and 16% respectively by 2030, though its OpenBlue digital platform. As one of the global leaders of smart and sustainable buildings, the company should be able to achieve its goals. The digital integration of OpenBlue with its core building systems will further optimise the performance of the full HVAC system, making shared spaces not only more sustainable, but also safer. The company has already launched sever new OpenBlue offerings in the fiscal first quarter, while its scaling up of this digital platform is looking both promising and likely to boost its growth strategy.

How to invest in Johnson Controls International (JCI) stock with Moneybase Invest

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  • Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
  • On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. JCI has been added to your portfolio.

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Life’s full of mysteries. Your money shouldn’t be one of them.