Market Overview

Johnson Controls Has 'Persistently Underwhelming' Growth, Cash Generation, RBC Says In Bearish Turn

Johnson Controls Has 'Persistently Underwhelming' Growth, Cash Generation, RBC Says In Bearish Turn

Johnson Controls International (NYSE: JCI)’s fiscal 2018 cash flow pressures and cuts to 2020 targets drove RBC Capital Markets to downgrade the stock on Thursday.

The Analyst

Deane Dray of RBC Capital Markets downgraded Johnson Controls from Sector Perform to Underperform and lowered the stock’s price target from $37 to $31.

The Thesis

The company's recent comments revealed second-quarter softness in Power Solutions, its automotive battery business, and could create incremental risk to 2018 cash flow targets, Dray said in a Thursday note. (See the analyst's track record here.) 

The company's growth and cash generation are "persistently underwhelming," and its business is highly cyclical, the analyst said.

Johnson Controls is exploring strategic alternatives for Power Solutions, but a divestiture is unlikely to unlock meaningful upside, the analyst said. 

“In our view, there are few natural buyers for a capital-intensive automotive battery business tied predominantly to [internal combustion engines].”

While the company’s 2016 merger with Tyco raised hopes of multiple expansion, cost synergies and productivity savings have “run out of steam," Dray said. 

The buildings platform — the centerpiece of Johnson Control's 2016 meger with Tyco — is unimpressive, with "tepid installation growth and [a] low-margin project backlog," Dray said. 

Price Action

Johnson Controls shares were down more than 1 percent at $34.62 at the time of publication Thursday. 

Related Links:

Is Johnson Controls A 'Value Trap'? Goldman Downgrades

Benzinga's Top Upgrades, Downgrades For April 5, 2018

Latest Ratings for JCI

Oct 2019MaintainsNeutral
Jul 2019UpgradesUnderweightNeutral
Jun 2019ReinstatesEqual-Weight

View More Analyst Ratings for JCI
View the Latest Analyst Ratings

Posted-In: Deane Dray Power Solutions RBC Capital Markets TYCOAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (JCI)

View Comments and Join the Discussion!

Latest Ratings

ELMDDougherty & Co.Initiates Coverage On12.0
MRNSCantor FitzgeraldAssumes7.0
MNRLCapital One FinancialInitiates Coverage On23.0
SONVertical GroupUpgrades
UNPMorgan StanleyMaintains136.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

8 Biotech Stocks With Clinical Trial Outcomes In April

CarMax's Story Can Only Get 'Better From Here,' Analyst Says After Q4 Print