Johnson Controls Q1 results “Solid,” growth in service-based businesses

CORK, Ireland – Johnson Controls is off to a strong start in the initial quarter of 2023 according to its first earnings call of the year on Feb. 1.

The company highlighted a strong performance in its service orders, EBIT Margin Expansion, and adjusted EPS growth. At a glance the company achieved a 9 percent increase in organic sales growth, with sales in the quarter of $6.1 billion increased 4 percent over the prior year. The company showed an EBIT of $237 million with a margin of 3.9 percent and an adjusted EBIT of $646 million with an adjusted EBIT margin of 10.6 percent.

"During the quarter, we accelerated growth across our service-based businesses, drove higher margins and delivered profitability at the high end of our adjusted EPS guidance range," Chairman and CEO John Oliver said. "Overall, organic revenue grew at a healthy pace and our $11.3 billion backlog remains resilient, growing 11 percent year over year. Our service strength was resilient and remains a key competitive differentiator."  

Olivier Leonetti, Johnson Controls executive vice president and chief financial officer, shared a similar message in regard to performance in foreign markets. "Sales in EMEALA (Europe, Middle East, Africa, Latin America) grew 12 percent organically, with strong performance in applied commercial HVAC and fire and security,” he said. “Our service-based business was strong in the quarter growing mid-teens year over year with recurring revenue contributing low double digit growth. Orders were up 5 percent, led by over 20 percent growth across our fire and security platforms, which was partially offset by declines in HVAC and industrial refrigeration."

While recurring revenue continues to be a lucrative portion of industry growth to be captured, Johnson Controls also signaled its interest in continuing to develop the company through innovation and acquisition. "We recently announced our plans to enhance our growing industrial heat pump portfolio with the acquisition of Hybrid Energy,” Oliver said. “Acquisitions are an integral part of our growth strategy and by investing in Hybrid’s patented high temperature heat pump technology, we are continuing to strengthen our leading global product portfolio and provide our customers with the most efficient, sustainable building solutions."

He added, “We are well positioned to capitalize on large growth opportunities across our dynamic product portfolio and field business. Through our integrated domain expertise, global coverage and scale, we are leading the way towards smart, healthy and sustainable buildings for our customers."

Johnson Controls did address one caller’s question with regard to problems in the pipeline for the Asia Pacific region. Installations had bottlenecked in the region largely due to supply chain issues brought on by real-world events, like China’s recent COVID-19 lockdowns, the company said. Answering another caller's concern the company also pointed to a warehouse fire the company had in one of its fire suppression businesses. While the company did make efforts to adjust for the quarter, ultimately, incidents like those affected its growth rate by several percent.

In the end Oliver still feels good about what’s to come in 2023. “I’m very confident in our ability to execute and continue the momentum in the coming quarters as we step, you know, really step into the next phase of our digital transformation journey,” he said.

You can listen to the full presentation online at https://investors.johnsoncontrols.com/news-and-events/events-and-presentations.