Johnson Controls May Be Heading Toward A 'New Strategic Direction,' Says Bullish Analyst

Johnson Controls International PLC JCI is scheduled to report its fiscal fourth-quarter results on Dec. 10, after having delivered an earnings beat for the previous quarter.

While the company has significant exposure to data centers, among the more profitable verticals, the naming of its new CEO is likely to act as a catalyst for the stock, according to BofA Securities.

Analyst Andrew Obin upgraded the rating for Johnson Controls International from Neutral to Buy, while raising the price target from $76 to $80.

The Johnson Controls International Thesis: The company is on track to generate around $4 billion from data centers, comprising about 14% of the estimated revenues for fiscal 2024, Obin said in the upgrade note.

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"The pending divestitures of JCI’s Air Distribution Technologies and Residential & Light Commercial HVAC businesses will directionally increase JCI’s data center revenue mix further," he added.

Johnson Controls International's stock is currently trading at a discount to its US HVAC peers, the analyst stated.

The company is searching for a new CEO and is likely to make an announcement before the end of this year, which would be a "positive catalyst," Obin said. "Combined with activist investor involvement, we believe this potentially signals a new strategic direction for the company," he further wrote.

JCI Price Action: Shares of Johnson Controls International had risen by 1.9% to $69.89 at the time of publication on Tuesday.

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