Johnson Controls Shares Rally As Credit Suisse Upgrades To Outperform

Shares of Johnson Controls Inc JCI rose more than 2 percent after Credit Suisse upgraded the stock to Outperform from Neutral, saying that TYC and Adient synergies may be "free" at the current price.

"[W]e have had a number of concerns regarding the TYC merger, but we think that many of them are either now embedded in the JCI share price, and / or we feel re-assured as regards the downside risk that they pose," analyst Julian Mitchell wrote in a note.

"Our analysis suggests that at the current JCI share price, almost no value is being ascribed to the TYC deal synergies or the Adient spin-off," the analyst added.

Mitchell noted that Johnson Controls' "high service/AM content means that their downwards cyclicality was fairly muted," and the company's strong self-help attributes should drive above-average EPS growth.

"Even if the overall global economy does roll over therefore, we think JCI's business has lower downside risk than most companies," Mitchell highlighted.

The analyst also hailed the greater clarity provided by management on the overall $0.9 billion of net operational savings across the pro forma entity, as it "gives us more confidence in our prior estimate of ~$4 in medium-term EPS power."

Meanwhile, the analyst also expects the power business being de-merged, creating separate buildings and batteries pure-play companies.

Mitchell raised the price target to $50 from $45, while the stock rose 2.73 percent to $43.91 in Tuesday's afternoon session.