Johnson Controls Reports Strong Q4 Results for Fiscal 2024

Johnson Controls (NYSE:JCI), a global leader in smart, healthy, and sustainable buildings, reported robust fourth-quarter results for fiscal 2024, with a 7% increase in orders and a notable 22% year-over-year rise in adjusted earnings per share (EPS) to $1.28. The company, which trades under the ticker JCI, anticipates continued growth in fiscal 2025, projecting an adjusted EPS of $3.40 to $3.50 and mid-single-digit organic sales growth. The earnings call detailed the company's plan to sell its Residential & Light Commercial segment to Bosch (NS:BOSH) in Q4 2024 and outlined a $400 million restructuring plan aimed at achieving $500 million in annual cost savings.

Key Takeaways

• Johnson Controls reports double-digit organic revenue growth and a record backlog of $13.1 billion.
• Adjusted EPS rose 22% year-over-year to $1.28, driven by data center demand.
• Fiscal 2025 guidance includes mid-single-digit organic sales growth and adjusted EPS of $3.40 to $3.50.
• The company plans to divest its Residential & Light Commercial segment to Bosch and initiate a $400 million restructuring plan.
• Free cash flow conversion is expected to be 85% or higher, with a commitment to return 100% of free cash flow to shareholders.

Company Outlook

• Adjusted segment EBITA margin expansion of over 100 basis points to approximately 14.5% in Q1.
• Full-year adjusted segment EBITA margins to expand over 50 basis points.
• Strong backlog and growth anticipated across segments, especially in Asia Pacific (APAC).

Bearish Highlights

• North America Building Solutions margins may face temporary pressure from ongoing large projects.
• Free cash flow conversion could be pressured by tax rate discrepancies in fiscal 2025.

Bullish Highlights

• Global Products segment expected to improve margins due to operational efficiencies.
• Proactive reinvestment in product development for next-gen data centers.
• Evolving market strategy and product differentiation expected to enhance margins.

Misses

• No capital deployment from the Residential & Light Commercial segment sale included in the fiscal 2025 outlook.
• Restructuring plan execution depends on the timing of the divestiture.

Q&A Highlights

• A $500 million cost-reduction initiative will reflect in fiscal year 2025 free cash flow guidance.
• Global Products margins improved due to structural changes, with a pro forma margin of around 20% expected for fiscal 2025.
• Effective tax rate anticipated to rise to 12% in fiscal 2025.
• 100% free cash flow return to shareholders is a goal, not conversion, with a long-term target exceeding 85%.

Johnson Controls is entering fiscal 2025 with a strong foundation, including a significant backlog and a focus on growth across various segments. The company is committed to enhancing its operating model and customer experience through restructuring and efficient resource allocation.

InvestingPro Insights

Johnson Controls' robust fourth-quarter results and optimistic outlook for fiscal 2025 are reflected in several key metrics, including a market capitalization of $54.36 billion and a year-to-date price total return of 31.98%.

The company's strong financial history includes maintaining dividend payments for 54 consecutive years and a P/E Ratio (Adjusted) of 23.69 for the last twelve months.

Full Transcript – Johnson Controls Q4 2024:

Operator

Good morning, and welcome to the Johnson Controls Fourth Quarter 2024 Earnings Conference Call. Today all participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions.

[Operator Instructions] Please note that today’s event is being recorded. I would now like to turn the conference over to Jim Lucas, Vice President, Investor Relations. Please go ahead.

Jim Lucas

Good morning, and thank you for joining our conference call to discuss Johnson Controls fiscal fourth quarter 2024 results. The press release and related tables that were issued earlier this morning as well as the conference call slide presentation can be found on the Investor Relations portion of our website at johnsoncontrols.com. Joining me on the call today are Johnson Controls' Chairman and Chief Executive Officer, George Oliver and Chief Financial Officer, Marc Vandiepenbeeck.

Before we begin, let me remind you that during our presentation today, we will make forward-looking statements. Actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainties. Please refer to our SEC filings for detailed discussion of these risks and uncertainties, in addition to the inherent limitations of such forward-looking statements.

We will also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are contained in the schedules attached to our press release and in the appendix to this presentation, both of which can be found on the Investor Relations section of Johnson Controls’ website. I will now turn the call over to George.

George Oliver

Thanks, Jim, and good morning, everyone. Thank you for joining us on the call today. I would like to start today's call by acknowledging and thanking all of our employees for their contributions in delivering strong quarterly results. We also made significant progress in simplifying our portfolio and becoming a pure-play provider of comprehensive solutions for commercial buildings. Today, we are a faster-growing, more profitable, simpler company.

As part of our transformation, we’ve ended fiscal 2024 with momentum, delivering robust margin expansion and adjusted free cash flow conversion of 96%. Orders reflected a 7% increase, primarily led by data center demand, contributing to our record backlog of $13.1 billion.

We believe we are positioned well moving forward to deliver long-term shareholder value, benefiting from consistent and predictable performance. As we look ahead to fiscal 2025, we are introducing guidance of an adjusted EPS in the range of $3.40 to $3.50. We expect strong ongoing demand for our innovative solutions tailored to enhance efficiency and sustainability in commercial buildings.

With that, I'll turn it over to Marc.

Marc Vandiepenbeeck

Thanks, George, and good morning, everyone. Thank you for joining the call. Our performance in the fourth quarter reflects continued execution across our portfolio. Our single end-to-end operating model provides the visibility needed to drive results. Organic revenue grew 10%, and segment margin expanded by 260 basis points leading to an adjusted EPS of $1.28, up 22% year-over-year.

In conclusion, we are entering fiscal 2025 with strong momentum. We will continue to optimize our portfolio and improve our operations while remaining committed to delivering shareholder value and driving growth across key sectors.

Operator

Thank you. The conference has now concluded. You may now disconnect.