Morgan Stanley Upgrades Johnson Controls On Commercial Buildings Potential

Over the past six years, Johnson Controls International PLC’s JCI exposure to commercial buildings has risen from less than 25% to 80% and this segment seems poised for an “upgrade supercycle,” according to Morgan Stanley.

The Johnson Controls Analyst: Joshua Pokrzywinski upgraded the rating for Johnson Controls from Equal Weight to Overweight, while raising the price target from $52 to $73.

The Johnson Controls Thesis: While the company has invested in building modernization and energy efficiency offerings, its fundamentals, like order momentum, operating leverage and free cash flow conversion are improving, Pokrzywinski said in the upgrade note.

“We believe the limited earnings growth and share price appreciation over the past several years represent a focus on being in the right markets (i.e., selling auto exposure and adding buildings) rather than focusing within those markets. We believe the past 12-18 months of fundamental performance demonstrate that JCI is starting to catch up,” he added.

“We see upgrade supercycle for commercial buildings to improve energy efficiency driven by short paybacks, sustainability efforts, and legislation. We believe the market is underestimating how much retrofits can accelerate growth for the foreseeable future,” the analyst wrote.

See also: How to Invest in Real Estate Online

JCI Price Action: Shares of Johnson Controls International had risen by 0.77% to $60.45 at the time of publication Monday.

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(Photo: Johnson Controls)