On Wednesday, Citi reaffirmed its Neutral rating on Johnson Controls (NYSE:JCI) International plc (NYSE:JCI) with a consistent price target of $76.00. The move comes in light of recent developments where Johnson Controls has initiated the sale process for its ADT alarms segment, a transaction that might assign the division a value of approximately $2 billion.
Johnson Controls has been in the process of divesting non-essential businesses, which account for about 25% of its sales. This strategy has already seen the sale of its Air Distribution Technologies and Residential and Light Commercial HVAC businesses. The potential sale of the ADT alarms business is likely the last major step in the company's plan to concentrate on its primary operations.
The ADT alarms business, which is believed to function in Europe and Latin America, has not been a focal point for Johnson Controls, and thus its sale aligns with the company's strategy to streamline its portfolio. The lack of detailed information on the ADT alarms division over time has led to expectations that it would be classified as non-core to Johnson Controls' future business direction.
Citi's position reflects an analysis of the company's strategic moves to shed less integral parts of its business. The anticipated sale of the ADT alarms business suggests Johnson Controls is nearing the completion of its portfolio optimization, aiming to enhance focus on its key operations moving forward.
In other recent news, Johnson Controls International has announced a regular quarterly dividend of $0.37 per share, maintaining its long-standing tradition of dividend payments. The company reported a third-quarter organic sales growth of 3% and a segment margin of 17.9%, along with a 10% increase in its backlog, reaching $12.9 billion. Johnson Controls is also undergoing a leadership transition with the retirement of CEO George Oliver and the appointment of Patrick Decker, former CEO of Xylem (NYSE:XYL), to its Board of Directors.
In the realm of analyst notes, Morgan Stanley initiated coverage on Johnson Controls with an Overweight rating and a price target of $85.00, while RBC Capital upgraded its rating to Sector Perform and increased the price target to $69. Oppenheimer maintained an Outperform rating and increased the price target to $79.
These developments come as Johnson Controls continues its transformation, focusing on becoming a pure-play provider for commercial building solutions, particularly data centers, and has announced the divestiture of its Residential and Light Commercial HVAC and Air Distribution Technologies businesses.
InvestingPro Insights
As Johnson Controls International plc (NYSE:JCI) continues its strategic divestment of non-core businesses, recent InvestingPro data provides additional context to the company's financial position and market performance. With a market capitalization of $51.31 billion, JCI has demonstrated strong market performance, with a 50.04% price total return over the past year and a 35.42% return year-to-date.
InvestingPro Tips highlight that JCI is trading near its 52-week high, with the current price at 98.18% of its peak. This aligns with the company's strategic moves to focus on core operations, which seem to be well-received by the market. Additionally, JCI has maintained dividend payments for 54 consecutive years, showcasing its commitment to shareholder returns even as it reshapes its business portfolio.
The company's P/E ratio (adjusted) of 22.33 for the last twelve months suggests that investors are willing to pay a premium for JCI's earnings, possibly due to its strategic realignment and strong market position. This is further supported by another InvestingPro Tip indicating that JCI is a prominent player in the Building Products industry.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide deeper insights into Johnson Controls' financial health and market prospects.
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