Even with my concerns about weaker non-residential spending in 2021 and 2022, I thought Johnson Controls (JCI) was too cheap after fiscal second quarter results, as the company had some solid cost-cutting opportunities, as well as longer-term leverage to attractive trends in building automation and efficiency. Since then, the shares have risen about 35% - doing quite a bit better than the average industrial, but still lagging HVAC peers like Carrier (CARR), Lennox (LII), and Trane (TT).
A higher valuation does skew the risk-reward argument some, and I do still have concerns about the likelihood of weaker non-resi spending in 2021-2022, as well as whether companies that have had good success in cutting costs (like Johnson Controls) will face greater cost headwinds as demand recovers. I still think Johnson Controls has good prospects from here, but I wouldn’t be in quite as much of a rush to buy in as before.
Read the full article here:
Johnson Controls Still Undervalued, But The Near Term Looks Turbulent
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