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Quote this valuation with its source: Fair value, Potential value and the price at analysis.
FAQ
JCI — frequently asked questions
Is Johnson Controls International plc overvalued?
In our latest published analysis dated 2026-10-02, JCI looks meaningfully overvalued. The price recorded at analysis is 152 USD versus our fair value of 86,3 USD; the high endpoint is presented separately as potential value of 115 USD. That implies roughly 43.1% downside to fair value at that date.
Our latest published report, analyzed 2026-10-02, gives JCI a fair value of 86,3 USD and a potential value of 115 USD. The conclusion is triangulated across multiple valuation models and weighted by reliability for Johnson Controls International plc's archetype; it is a dated research output, not a live price.
Should I buy JCI now?
Our latest published rating for JCI, analyzed 2026-10-02, is Sell. Johnson Controls International plc looks meaningfully overvalued at the analysis-date price of 152 USD versus fair value of 86,3 USD; potential value is 115 USD. This is research for educational purposes, not personalized investment advice.
What are the biggest risks for JCI?
The dedicated bear-case section in our report analyzed 2026-10-02 documents Johnson Controls International plc's material risks, evidence, thresholds, and thesis-invalidation conditions. Scenario-specific explanations remain in that section so the report does not repeat or decontextualize them elsewhere.
What is JCI's rating?
Our latest published rating for JCI, analyzed 2026-10-02, is Sell, with a published moat assessment of 7.2/10 (Narrow). It reflects our fair value of 86,3 USD, the potential value of 115 USD, and the price recorded at analysis (152 USD).
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§1 ZusammenfassungEN
30-Sekunden-AntwortSell
Preis im Verhältnis zum Wert
Kurs
$151.77
Fairer Wert
$86.32
Potenzialwert
$114.56
Stand
2026-10-01
Warum es funktionieren kann
The largest operational opportunity is accelerating service contract attachment and data center cooling deployments within Americas Building Solutions ($15,831M in FY2025), driving operating margin expansion from 11.99% toward peer levels like Honeywell's 20.25% and lifting intrinsic value toward our Potential value of $114.56.
Was unsere Einschätzung ändern würde
Operating cash flow conversion failing to recover, with operating cash flow to net income remaining below 0.50x and operating cash flow stagnating below $1.5B annually.
We assign Johnson Controls International plc a Sell rating, as the shares trade at a substantial premium to intrinsic business value following weak cash flow conversion and lagging operating margins.4
The house rating is Sell. For an ordinary investor, this rating means that capital is exposed to severe valuation risk at recent trading levels, indicating that investors should trim holdings, reallocate funds to higher-return industrial opportunities, and avoid new capital commitments.
The report was prepared at a price of $151.77 on October 1, 2026. This trading price sits well above the house valuation range, standing 75.8% above our Fair value of $86.32, which implies -43.1% downside return. The report-date price also sits 32.5% above our of $114.56, demonstrating that even an optimistic operating outcome fails to support the share price.
The primary risk that justifies this stance is persistent cash conversion failure and operational cost drag. Operating cash flow contracted to $1,399M in FY2025 against GAAP net income of $3,291M, resulting in a poor cash conversion ratio of 0.4251 and leaving free cash flow at $965M. If inventory build and billing friction persist, discretionary cash flow will remain suppressed, impairing debt service on $9,475M in total debt and triggering a valuation multiple contraction toward mature industrial peer levels.2,3,4,5,6
The primary path for business improvement lies in expanding high-margin service contracts across the dominant Americas Building Solutions segment, which generated $15,831M in FY2025. Accelerating demand for data center liquid cooling and building efficiency retrofits could expand operating margins from 11.99% toward peer levels like Honeywell's 20.25%, generating higher operating cash flow that could lift per-share intrinsic worth toward our Potential value of $114.56. However, this constructive outcome remains secondary to our Fair value of $86.32 and the severe downside risks of current market pricing.3,4,7
Americas Building Solutions Scale and HVAC Retrofit Tailwinds
Americas Building Solutions generated $15,831M in FY2025 (67.1% of consolidated revenue), benefiting from commercial HVAC replacement cycles and institutional energy efficiency retrofits.6,7
High switching costs in Metasys building management systems defend consolidated gross margins at 36.41% ($8,592M gross profit), on par with Honeywell at 36.51% and above Trane Technologies at 35.39%.3,6
Data Center Liquid Cooling and Mission-Critical Infrastructure Demand
Surging thermal management needs in artificial intelligence data centers expand the addressable market for York commercial chillers and specialized applied cooling equipment.
Hausempfehlung
We rate Johnson Controls International plc a Sell because the report-date share price of $151.77 trades 75.8% above our Fair value of $86.32, reflecting substantial overvaluation driven by an operating margin of 11.99% and depressed cash conversion.4
Unternehmensüberblick
Backlog and orders are additional metrics that are meant to provide management with a deeper level of insight into the progress of specific strategic and growth initiatives. Backlog is applicable to sales of both products and systems and services and totaled $16.6 billion at September 30, 2025. Orders provide management with a signal of customer demand for the Company's products and services, as well as an indication of future revenues and performance. The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. Generally, the Company's warranties require the repair or replacement of defective products within a specified time period from the date of sale.
The following table summarizes changes in the total product warranty liability (in millions).
§2 BärenszenarioEN
A stress scenario compounding an Americas commercial construction downturn, extended property stagnation in APAC, and pricing concessions against Trane Technologies and Honeywell would depress consolidated operating margins below 9.0% on top-line volume growth under 2.0%. Under these operating conditions, annual operating income would fall toward $2,100M-$2,300M, while elevated working capital requirements and debt service on $9,475M in total debt at an enterprise WACC of 9.8541% restrict free cash flow generation below $800M. The resulting equity de-rating toward historical industrial peer multiples (11.6x-14.8x forward P/E) confirms substantial downside vulnerability relative to the share price of $151.77.
Commercial real estate construction downturn curbs discretionary HVAC replacements and delays building automation projects.
Price competition from Trane Technologies and Honeywell compresses gross margins toward industrial baselines.
Wie diese These scheitern kann
Commercial real estate contraction and peer price competition causing operating margin collapse
FY2025 operating income of $2,828M on $23,596M revenue represents an operating margin of 11.99%, while reported historical EBIT margin was 9.70%. A commercial real estate construction downturn in the Americas ($15,831M revenue) combined with pricing competition from Trane Technologies (19.25% margin) pushes operating margin down by 300 bps below 9.0%, causing severe operating deleverage.4,
Frühwarnsignale zur Überwachung
Die fünf Entwicklungen, die unsere Anlagethese schwächen würden.
Johnson Controls International plc (JCI) possesses a narrow competitive moat underpinned by deep customer switching costs across building automation platforms and an extensive global installed base in commercial HVAC, building controls, and fire/security systems. The core commercial strength resides in the Americas Building Solutions segment, which generated $15,831M in FY2025 (67.1% of consolidated sales of $23,596M). By embedding its Metasys building management software and York chillers into commercial, healthcare, and educational facilities, JCI creates substantial friction against customer defection, as swapping core building automation architectures demands prohibitive facility disruption and capital outlay.
Pricing discipline and platform integration are demonstrated in gross margin durability. JCI delivered a 36.41% gross margin in FY2025 ($8,592M gross profit), which compares favorably to Trane Technologies at 35.39% and aligns closely with Honeywell at 36.51%. Furthermore, non-US markets contributed $10,293M (43.6% of sales), led by EMEA at $4,968M, providing international distribution scale that captures European energy decarbonization mandates.
However, JCI's moat is bounded to narrow because operating efficiency significantly trails peers. Operating income of $2,828M represents an 11.99% margin, falling well short of Honeywell's 20.25% and Trane Technologies' 19.25%. Elevated SG&A overhead of $5,764M and working capital friction (FY2025 operating cash flow fell to $1,399M) prevent JCI from translating gross pricing power into superior economic returns, bounding ROIC to 10.23% and justifying a 5-year explicit advantage followed by a 5-year competitive fade.
Ökonomischer Gewinn
JCI generates modest economic profit, with its return on invested capital of 10.23% clearing the enterprise cost of capital (WACC of 9.8541%) by 38 basis points. While pricing discipline supports gross margins at 36.41% ($8,592M gross profit on $23,596M revenue), corporate SG&A outlays of $5,764M restrict operating income to $2,828M, keeping economic profit generation narrow compared to specialized building peers.2,4,6
7.2/ 10
Narrow
Sources of advantage
01Switching Costs and Platform Integration in Building Automation — JCI's Metasys building automation platform and integrated building management systems connect HVAC, lighting, fire, and security systems into enterprise infrastructure. Replacing these integrated controls requires extensive re-cabling, hardware swapping, and facility downtime, locking in institutional clients and securing recurring high-margin service agreements that anchor Americas Building Solutions ($15,831M in FY2025).Wide
02Installed Base Scale and Established Equipment Brands — Proprietary equipment brands including York commercial chillers, Metasys controls, and SimplexGrinnell fire/security systems provide strong brand equity and an expansive global field service network. This installed base generated $23,596M in FY2025 revenue and defended a consolidated gross margin of 36.41% ($8,592M ), matching Honeywell's 36.51% and exceeding Trane Technologies' 35.39%.
Bekannte Bedrohungen für den Wettbewerbsvorteil
Bedrohung
Schweregrad
Zeitrahmen
Minderung
Aggressive chiller technology expansion and applied HVAC market share gains by Trane Technologies (19.25% operating margin).
medium
12-24 months
Expanding turnkey integrated offerings spanning chillers, Metasys controls, and fire/security to differentiate against single-discipline HVAC providers.
The highlighted cell is Fair value when every assumption sits at its base level ($86.32). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $2.3B after modeled reinvestment of $503.4M, with terminal value at 73.4% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to revenue, reinvestment, or gross margin resets materially.
Americas Building Solutions maintains steady commercial HVAC replacement volume and institutional retrofit demand.
Gross margins remain resilient against peer competition, but operating margin expansion is bounded by restructuring outlays.
European energy transition tailwinds counterbalance property market headwinds across Asian markets.
Under the modal base case, commercial HVAC replacement demand and energy efficiency retrofits sustain mid-single-digit organic growth in the Americas, while European decarbonization directives counterbalance sluggish Asian commercial construction. Operating margins improve steadily through corporate simplification, but remain below peer leaders. The base scenario aligns with house Fair value of $86.32 against $151.77 (as of 2026-10-01) of $151.77, reflecting an implied return of -43.1% with an estimated probability of 60.0%.
Americas Building Solutions expands through commercial building decarbonization and mission-critical cooling demand.
Gross margins hold steady while corporate overhead reductions move operating margins closer to diversified industrial peer benchmarks.
§7 Entscheidungsbaum für ErgebnisseEN
Übertroffen
Upgrade the rating; Re-evaluate position weighting and confirm whether margin expansion reflects durable SG&A reduction or temporary price execution before revising exposure.
Americas Building Solutions organic revenue growth exceeds consensus expectations, driven by higher institutional retrofit volumes and accelerated data center cooling demand, lifting operating margin closer to diversified industrial peer benchmarks while operating cash conversion rebounds.
Im Plan
Maintain Sell; Maintain current positioning, verify quarterly working capital progression, and refrain from additional capital commitment.
Results track consensus expectations with modest top-line expansion and steady gross margins, but operating margin conversion remains bounded by corporate overhead and cash flow conversion does not demonstrate structural improvement.
Verfehlt
Maintain Sell; Review portfolio risk allocations, monitor debt covenant room, and evaluate potential further downside.
Auslöser: Operating margin contracting year-over-year alongside organic revenue contraction in commercial building systems.
Non-residential commercial replacement cycles soften in the Americas, APAC construction distress deepens, or price competition compresses gross margins, causing operating deleverage and suppressing cash flow conversion.
Ergebnisqualität
Earnings quality exhibits divergence between reported GAAP accounting net income and cash flow generation. While gross profit durability reflects sound commercial pricing, operating cash flow conversion has lagged reported profitability due to inventory accumulation, contract billing milestone delays, and operational transformation expenses. Sustaining high earnings quality will require consistent conversion of operating income into operating cash flow and a reduction in working capital intensity as supply chains stabilize.
Wichtige Kennzahlen vor dem Bericht
01
Kennzahl:
Americas Building Solutions Organic Growth
AktuellSustained by institutional facility retrofits, data center cooling demand, and commercial HVAC replacement cycles.
Warum es wichtig ist
Americas accounts for two-thirds of consolidated sales, making volume in this segment the primary determinant of operating leverage and earnings stability.
Operating cash flow contracted sharply in FY2025 to $1,399M from $2,098M in FY2024 and $2,221M in FY2023. Relative to reported GAAP net income of $3,291M, the FY2025 cash conversion ratio was subdued at 0.4251, driven by working capital outlays and restructuring expenses. Deducting capital expenditures of $434M yielded free cash flow of $965M, down from $1,604M in FY2024 and $1,775M in FY2023. The compression in free cash flow highlights working capital friction that must normalize to support enterprise value.4,5,6
Historical EBIT margins have fluctuated from 5.63% in FY2020 to 12.81% in FY2021 and 9.70% in FY2025. Over the explicit forecast horizon, operating margins are modeled to expand from 12.2% in FY2026 to 13.8% in FY2030, supported by gross margin stability and ongoing operational simplification, driving gradual ROIC expansion.
Current ROIC of 10.23% modestly exceeds computed enterprise WACC of 9.8541% by 38 basis points, confirming narrow economic profit generation that is expected to widen as operating margins approach normalized target levels.
Americas Building Solutions Dominance Anchors Consolidated Volume
Jüngster Umsatz23,6 Mrd. $Umsatz-CAGR +0,4 %
Betriebsmarge12,0 %9 Geschäftsjahresperioden
Jüngster freier Cashflow965 Mio. $FY2025
Nettoverschuldung8,8 Mrd. $FY2025
Aufschlüsselung der Gewinn- und VerlustrechnungWie sich die Unternehmensgröße in ausgewiesenen Gewinn übersetzt.30. Juni 2026
Johnson Controls International plc (JCI) trades at 23.9x forward earnings against a peer median of 21.3x. Its EV/EBITDA of 23.3x compares with a peer median of 14.2x. The comparison uses 4 peers: Trane Technologies plc, United Parcel Service Inc., Illinois Tool Works Inc. and Honeywell International Inc., as of 2026-10-02.
§10 Branche & ZyklusEN
Zyklusphase
Peak
Industrial sector benchmark capex-to-revenue stands at 0.028 (2.8%) and capex-to-depreciation is 1.09, indicating disciplined industry-wide asset reinvestment roughly matching depreciation without speculative capacity expansion. JCI's FY2025 capex of $434M against depreciation of $865M represents a 0.50x ratio, reflecting capital discipline and asset-light assembly operations.
Bullenzyklus
The cyclical upcycle in commercial building infrastructure is propelled by institutional facility modernization, indoor air quality standards, regulatory energy efficiency directives, and surging thermal management requirements from artificial intelligence data centers. Building owners accelerate capital deployment into high-efficiency chillers, building automation software, and integrated fire/security infrastructure to comply with emissions mandates and lower operating costs.
Bärenzyklus
A cyclical downcycle in commercial building solutions is triggered by elevated interest rates, commercial office vacancies, and tighter credit standards for commercial real estate developers. In this environment, property owners defer discretionary HVAC replacements, postpone building automation overhauls, and negotiate aggressive equipment pricing, putting pressure on manufacturing utilization and service margins across the industry.
Säkulare Trends
Trend
Auswirkung
Hinweis
Commercial Building Decarbonization and Energy Efficiency Standards
positive
Global decarbonization directives and corporate net-zero commitments require commercial building owners to upgrade legacy heating and cooling systems to high-efficiency heat pumps and chillers, driving durable replacement demand across the Americas ($15,831M) and EMEA ($4,968M).
Data Center Thermal Management and Liquid Cooling Infrastructure
positive
Rapid expansion of AI data centers demands advanced liquid cooling solutions and precision chiller architectures, expanding the addressable market for mission-critical thermal management systems.
Commercial Office Real Estate Structural Headwinds
negative
Elevated vacancy rates in metropolitan commercial office buildings limit new office construction starts, deferring new building automation installations and concentrating revenue on replacement and service of existing footprints.
Positionierung
JCI occupies a prominent global position with $23,596M in FY2025 revenue, maintaining strong multi-system breadth across HVAC, controls, and fire/security. However, its operating margin of 11.99% significantly lags Trane Technologies' 19.25% and Honeywell's 20.25%. JCI's valuation multiple (forward P/E of 23.87x) sits close to Trane Technologies (26.06x) and above Honeywell (21.51x), despite delivering lower operating profitability and weaker cash conversion, creating valuation vulnerability.3,4,6
§11 PositionsmanagementEN
Positionsgröße
0%
The committee has assigned a Sell rating to JCI. With the share price at $151.77 compared to house Fair value of $86.32, the stock carries an implied return of -43.12% and trades at a 75.82% premium to intrinsic value. Consequently, zero long allocation is warranted.4
Risiko
Risk management mandate: In accordance with the Sell rating, investors should eliminate long exposure and avoid speculative position building. Monitor macroeconomic commercial construction trends, credit conditions in the commercial property sector, and quarterly peer filings from Trane Technologies and Honeywell for indications of market share shifts or margin compression.
Einstiegstranchen
Niveau
Aktion
Warum
$151.77
Observe / No Long Entry
Shares trade at a 75.82% premium to house Fair value ($86.32), offering an unfavorable risk-reward profile.
< $86.32
Re-underwrite and Evaluate Long Allocation
Price convergence toward house Fair value ($86.32) would eliminate the valuation deficit, provided operating cash conversion recovers above historical baselines.
Ausstiegstranchen
Niveau
Aktion
$151.77
Liquidate remaining long holdings at prevailing market prices.
$157.06
Complete total position exit on any secondary bounce toward 52-week highs.
Re-evaluate revenue growth expectations and reduce terminal margin assumptions if commercial retrofit volumes decelerate.7
§12 Investoren-PerspektivenEN
Total Return / Core Growth Investors
Avoid
With shares trading at $151.77 against our Fair value of $86.32 (-43.1% upside), forward capital appreciation potential is negative and does not compensate for commercial real estate cycle risk.4
Income / Dividend Investors
Avoid
Although JCI pays an annual dividend of $1.60 per share, operating cash flow fell to $1,399M in FY2025, leaving free cash flow of $965M and weakening dividend coverage relative to total debt of $9,475M.2,4,5
We recommend selling or reducing positions in Johnson Controls International plc. At the report-date price of $151.77 on October 1, 2026, shares trade at a 75.8% premium to our Fair value of $86.32, leaving investors exposed to severe negative return potential (-43.1%). Subdued operating margins of 11.99% and low cash conversion (0.4251 in FY2025) fail to justify the elevated forward P/E multiple of 23.87x.4
While Americas Building Solutions provides a stable installed base foundation ($15,831M in FY2025) and defends gross margins at 36.41%, corporate overhead and $9,475M in total debt limit equity returns under an enterprise WACC of 9.8541%. Even our Potential value of $114.56 sits 24.5% below current trading prices, making risk-adjusted returns unfavorable.
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Sources
The records this analysis drew on, as they stood when it was run.
Analyst consensusData as of 2026-10-02 · Published 2026-10-02 · Provider-adjusted · cited for 2 figuresCited in Wettbewerbsgraben, Bärenszenario
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Operating cash flow conversion remains depressed by inventory accumulation and operational friction.
The downside scenario contemplates a prolonged commercial real estate slowdown across North America combined with entrenched property distress in Asia, curbing system replacement and retrofit outlays. Aggressive pricing bids from commercial chiller and automation peers compress gross margins, while operational restructuring costs and working capital drag restrict operating cash generation. This path leads to substantial operating deleverage and a contraction in equity valuation multiples toward mature industrial troughs.
Prolonged commercial HVAC equipment demand stagnation and international project deferrals
The house forecast models 8.18% revenue growth in Year 1-2 to reach consensus revenue of $27,614M. If non-residential commercial office replacement cycles stall and APAC property weakness ($2,797M FY2025 revenue) persists, top-line growth would decelerate by over 5 percentage points to below 2.0% annually, invalidating earnings leverage.1,7
FV impact
-6.9%
Revenue and EPS growth 5 points lower for five years
JCI trades at a forward P/E of 23.87x against an authored terminal P/E of 18.5x. Persistent working capital drag and cash conversion failure (operating cash flow was $1,399M in FY2025 against GAAP net income of $3,291M, leaving free cash flow at $965M) will force equity multiple de-rating toward mature industrial peers such as UPS at 11.64x forward P/E, driving a 20% multiple contraction below 14.8x.3,4,5,6
Price concessions in applied chillers and commercial controls to defend share against Trane Technologies and Honeywell erode gross margins below 34.0%.
Deepening commercial property distress across APAC and European project deferrals drive Non-US revenue down by 8% or more, impairing international diversification.
Aktuell:$10,293M in FY2025 (43.6% of consolidated sales)
03Direct Branch Distribution and Technical Service Network — A direct branch network across the Americas ($15,831M revenue) and EMEA ($4,968M revenue) pairs equipment sales with local certified technicians, creating an execution barrier for smaller competitors lacking global field service infrastructure.Moderate
Honeywell's expansion in smart building software platforms and IoT automation, backed by 20.25% operating margins and 19% consensus growth expectations.
medium
18-36 months
Continuous investment in Metasys digital architectures and OpenBlue cloud connectivity to protect the installed software footprint.
Persistent commercial property stagnation in China and broader APAC markets ($2,797M FY2025 revenue) dampening new building system deployments.
low
12-24 months
Reorienting sales resources toward mission-critical infrastructure, cleanrooms, and data center thermal applications to offset commercial office weakness.
Discounted forecast-period cash flows (16,47 $) plus discounted terminal value (45,50 $) minus signed per current share (14,55 $) equals the 47,42 $ lens value shown above. Negative net debt is , so subtracting it raises value.
In the bull case, accelerated non-residential building modernization, data center liquid cooling adoption, and heightened service attach rates expand operating margins toward peer benchmarks. Consolidated revenue tracks the upper end of analyst expectations, while normalized working capital restores free cash flow conversion. The bull scenario targets Potential value of $114.56 compared to $151.77 (as of 2026-10-01) of $151.77, implying an expected return of -24.5% with a probability of 15.0%.
AktuellSubdued relative to historical levels due to operational outlays and working capital requirements.
Warum es wichtig ist
Cash conversion dictates discretionary capital available for debt retirement and share repurchases after meeting capital reinvestment obligations.
Capital allocation has prioritized equity retirements over balance-sheet deleveraging. In FY2025, JCI allocated $5,991M to share repurchases and paid $976M in common dividends, while capital expenditures were disciplined at $434M. This aggressive share repurchase program lowered shares outstanding to 654.1M. However, total debt stands at $9,475M against cash of $379M, resulting in substantial net debt. With a computed enterprise WACC of 9.8541% and pre-tax cost of debt of 5.80%, debt service requires consistent operating cash flow, limiting discretionary capital deployment going forward.
Americas Building Solutions contributed $15,831M in FY2025 revenue out of $23,596M total, representing 67.1% of consolidated business.
Consolidated financial performance is heavily concentrated in North American commercial building activity, making the company reliant on domestic retrofit spending.
JCI maintained a gross margin of 36.41% ($8,592M gross profit), matching Honeywell (36.51%) and ahead of Trane Technologies (35.39%), but its operating margin of 11.99% lagged both Honeywell (20.25%) and Trane Technologies (19.25%).
Gross pricing power is preserved through equipment and service integration, but corporate overhead and SG&A expenses ($5,764M in FY2025) create operational drag that bounds operating profitability.
