Understanding Johnson Controls’ Newly Added Risk Factors


Ireland-based Johnson Controls (JCI) is a multinational building technology company focused on delivering smart and sustainable solutions. The company was recently awarded the Terra Carta Seal by The Prince of Wales. The seal recognizes pioneering sustainability companies.

With this in mind, let us take a look at the company’s fourth-quarter financial results and understand its newly added risk factors. (See Insiders’ Hot Stocks on TipRanks)

Q4 Financial Results

Johnson Controls reported revenue of $6.39 billion for the fourth-quarter ended September 30, 2021, which surpassed the consensus estimate of $5.52 billion. The company had posted revenue of $5.95 billion in the same quarter last year. Meanwhile, adjusted EPS of $0.88 per share beat the consensus estimate of $0.76 per share. The company had reported adjusted EPS of $0.76 per share in the same quarter last year.

Johnson Controls returned $306 million to its shareholders through share repurchases during the quarter. It made $1.3 billion in share repurchases during the full-year period. The company ended the year with $1.3 billion in cash.

Johnson Controls ended the fourth quarter with $6.5 billion in order backlog, which CEO George Oliver said positions it well for Fiscal Year 2022. For the first quarter of Fiscal Year 2022, the company anticipates adjusted EPS in the range of $0.52 to $0.54. It expects adjusted earnings in the band of $3.22 per share to $3.32 per share for full Fiscal Year 2022. (See Johnson Controls stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, JCI’s main risk categories are Legal and Regulatory and Production, which account for 38% and 18%, respectively, of the total 39 risks identified for the stock. It recently updated its risk profile with three new risks.

In its newly added Tech and Innovation risk factor, Johnson Controls has informed investors that an increasing number of its solutions rely on interconnected device networks. This presents security and safety risks that could result in regulatory fines, theft of intellectual property, and damage to the company’s reputation.

Under the Legal and Regulatory risk factor, the compamy cautions investors that its effective tax rate may increase and adversely impact its financials. It warns that changes in tax laws in the U.S. or other countries could drive up its expenses.

Under the Production risk category, the company highlights supply chain challenges. Johnson Controls tells investors that it relies on numerous suppliers from around the world for raw material and components. It says that the suppliers may experience challenges pertaining to labor shortages and shipment delays. The company says that due to this its manufacturing may get disrupted and adversely impact its business and financial condition.

Most of Johnson Controls’ risk factors fall under the Legal and Regulatory category, with 38% of the risk factors, which is above the sector average of 17%. Shares of the company have increased about 72% year-to-date.

Analysts’ Take

Following the company’s fourth quarter earnings report, Wells Fargo analyst Joseph O’Dea maintained a Buy rating on the stock and raised the price target to $83 from $82. O’Dea’s new price target suggests 3.31% upside potential.

Consensus among analysts is a Strong Buy based on 9 Buys and 3 Holds. The average Johnson Controls price target of $83.42 implies 3.83% upside potential to current levels.

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