Johnson Controls Posts Strong Backlog, Confident Outlook

Johnson Controls International (NYSE:JCI), the diversified global leader in smart, healthy, and sustainable buildings, saw its shares trade modestly lower on Tuesday, despite reporting a strong third quarter that surpassed analyst expectations.

The company, a prominent American-Irish multinational conglomerate specializing in fire, HVAC, and security equipment for buildings, delivered strong top-line growth and improved profitability, leading to an upward revision of its fiscal 2025 earnings guidance.

For the third quarter, Johnson Controls posted total sales of $6.05 billion, a 2.6% increase year-over-year, comfortably exceeding the consensus analyst estimate of $5.97 billion. This revenue expansion translated into adjusted earnings per share (EPS) of $1.05, a notable rise from $0.95 in the prior-year period, also outperforming analyst projections of $1.00.

Also Read: Johnson Controls International Analysts Increase Their Forecasts After Upbeat Earnings

The company’s gross profit for the quarter climbed 6.5% to $2.25 billion, elevating the gross margin by 135 basis points (bps) year-over-year to 37.1%. However, selling, general, and administrative (SG&A) expenses saw a substantial increase of 58.3% to $1.42 billion. Income from continuing operations stood at $618 million, down from $851 million a year ago, with an operating margin of 10.2%.

A closer look at segment performance reveals varied regional dynamics. In the Americas, sales remained flat at $4.0 billion year-over-year, though organic sales demonstrated a healthy 7% increase, primarily driven by sustained strength in Applied HVAC and Controls. Excluding the impact of mergers & acquisitions (M&A) and adjusted for foreign currency fluctuations, orders in the Americas segment grew 5% year-over-year, contributing to a 10% increase in backlog to $10.3 billion. The segment’s EBITA margin, however, saw a 150 basis point decline to 18.4%, largely attributed to the effects of divestitures and prior-year earn-out adjustments.

The Europe, Middle East, and Africa (EMEA) region recorded an 8% rise in sales to $1.3 billion. Organic sales growth of 4% was led by an 8% expansion in services, encompassing strong growth in Applied HVAC and Fire and Security sales. Orders, adjusted for M&A and foreign currency, increased 2% year-over-year, pushing the backlog up 9% to $2.6 billion. The EMEA segment’s EBITA margin improved by 80 basis points to 13.9%, a testament to productivity enhancements and a favorable mix stemming from service growth.

In the Asia Pacific (APAC) region, sales advanced 7% to $737 million, with organic sales increasing by 6%, propelled by robust double-digit growth in the service business. Despite an 8% decrease in orders (excluding M&A and foreign currency adjustments), the backlog in APAC expanded 14% year-over-year to $1.7 billion. The segment’s EBITA margin rose by 70 basis points to 19.4%, primarily due to productivity improvements.

From a liquidity standpoint, Johnson Controls generated $787 million in cash from operating activities from continuing operations during the quarter, with free cash flow reaching $693 million. The company concluded the quarter with a solid cash and equivalents position of $731 million as of June 30, 2025.

Outlook

Looking ahead, Johnson Controls provided an optimistic outlook. For the fourth quarter, the company anticipates adjusted EPS to range from $1.14 to $1.17, aligning closely with the analyst consensus estimate of $1.15. It also projects low-single-digit organic sales growth and an adjusted segment EBITA margin of approximately 18.6%.

For the full fiscal year 2025, Johnson Controls raised its adjusted EPS outlook to a range of $3.65 to $3.68, up from the previous estimate of $3.60, now squarely within the analyst consensus of $3.67. The company reiterated its expectation for mid-single-digit organic sales growth and maintained its forecast for an adjusted segment EBITA margin improvement of approximately 90 basis points year-over-year.

Despite the positive earnings report and upward guidance, Johnson Controls International shares experienced a slight downturn in Tuesday trading. The stock has surged over 41% year-to-date and gained over 35% in the last three months.

Price Action: At last check Tuesday, JCI shares were trading lower by 7.34% at $103.34.

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