Johnson Controls’ second quarter was marked by modest organic growth and a raised non-GAAP profit outlook, but the market responded negatively due to margin pressure and a cautious near-term demand environment. Management cited ongoing operational simplification and efficiency initiatives as key drivers, with CEO Joakim Weidemanis emphasizing, “We are building an even stronger foundation for long-term success by developing a business system focused on simplifying operations, accelerating growth and scaling our impact.” However, softness in China and a year-over-year decline in operating margin remained concerns for investors.
Is now the time to buy JCI? Find out in our full research report (it’s free).
Johnson Controls (JCI) Q2 CY2025 Highlights:
- Revenue: $6.05 billion vs analyst estimates of $6.01 billion (2.6% year-on-year growth, 0.7% beat)
- Adjusted EPS: $1.05 vs analyst estimates of $1.01 (3.6% beat)
- Adjusted EBITDA: $1.06 billion vs analyst estimates of $1.05 billion (17.4% margin, in line)
- Revenue Guidance for Q3 CY2025 is $6.40 billion at the midpoint, below analyst estimates of $6.45 billion
- Management raised its full-year Adjusted EPS guidance to $3.67 at the midpoint, a 3.2% increase
- Operating Margin: 12.9%, down from 18.6% in the same quarter last year
- Organic Revenue rose 6% year on year vs analyst estimates of 4.5% growth (154.7 basis point beat)
- Market Capitalization: $69.78 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Johnson Controls’s Q2 Earnings Call
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Amit Mehrotra (UBS) asked CEO Joakim Weidemanis about the key performance indicators he’s prioritizing and the timeline for tangible improvements, to which Weidemanis cited ongoing process improvements in HVAC sales and manufacturing as early proof points, but cautioned that broader results would take time.
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Scott Davis (Melius Research) questioned the growth potential in Fire & Security and synergies with HVAC. Weidemanis responded that while HVAC offers higher growth, Fire & Security will benefit from Lean initiatives and remains under strategic review.
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Jeffrey Sprague (Vertical Research Partners) inquired about the sustainability of free cash flow improvements. CFO Marc Vandiepenbeeck highlighted operational changes in billing and inventory management, stating, “There’s still progress to be made on every aspect of the fundamental of our free cash flow conversion.”
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Steve Tusa (JPMorgan) sought clarity on soft order growth and long-term financial targets. Management attributed weak China demand to market maturity and said detailed long-term guidance would follow the ongoing strategic review.
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Julian Mitchell (Barclays) pressed on margin headwinds in Fire & Security and the timeline for improvement. Weidemanis acknowledged product gaps, especially in fire detection, and indicated that addressing these would be a focus area for future investment and M&A.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the impact of Lean and digitization initiatives on operational efficiency and margins, (2) progress and outcomes from the ongoing strategic portfolio review, and (3) signs of sustained backlog growth in high-potential verticals such as data centers. Execution in addressing product portfolio gaps and navigating tariff headwinds will also be closely tracked.
Johnson Controls currently trades at $106.64, down from $111.56 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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