Johnson Controls’s (NYSE:JCI) Q2 Sales Beat Estimates

Building operations company Johnson Controls (NYSE:JCI) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.6% year on year to $6.05 billion. On the other hand, next quarter’s revenue guidance of $6.40 billion was less impressive, coming in 0.7% below analysts’ estimates. Its non-GAAP profit of $1.05 per share was 3.6% above analysts’ consensus estimates.

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"As we celebrate 140 years of innovation and customer commitment, our strong third quarter results and record backlog reflect the momentum we've built and the opportunities ahead," said Joakim Weidemanis, CEO.

Company Overview

Founded after patenting the electric room thermostat, Johnson Controls (NYSE:JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Johnson Controls’s sales grew at a mediocre 7.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Johnson Controls’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Johnson Controls’s organic revenue averaged 4.8% year-on-year growth. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline results.

This quarter, Johnson Controls reported modest year-on-year revenue growth of 2.6% but beat Wall Street’s estimates by 0.7%. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Johnson Controls’s operating margin has risen over the last 12 months and averaged 9.1% over the last five years. Its profitability was higher than the broader industrials sector, showing it did a decent job managing its expenses.

Analyzing the trend in its profitability, Johnson Controls’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, Johnson Controls generated an operating margin profit margin of 13.7%, down 4.9 percentage points year on year. Conversely, its revenue and gross margin actually rose, so we can assume it was less efficient because its operating expenses like marketing, R&D, and administrative overhead grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Johnson Controls’s EPS grew at a solid 10.8% compounded annual growth rate over the last five years, higher than its 7.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Johnson Controls’s earnings quality to better understand the drivers of its performance. A five-year view shows that Johnson Controls has repurchased its stock, shrinking its share count by 11.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Johnson Controls, its two-year annual EPS growth of 5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q2, Johnson Controls reported EPS at $1.05, down from $1.14 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.6%. Over the next 12 months, Wall Street expects Johnson Controls’s full-year EPS of $3.79 to grow 10.5%.

Key Takeaways from Johnson Controls’s Q2 Results

We enjoyed seeing Johnson Controls beat analysts’ organic revenue expectations this quarter. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA missed and its revenue guidance for next quarter fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter, and the stock traded down 1.9% to $109.40 immediately following the results.

So do we think Johnson Controls is an attractive buy at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.