QS Research · Michael Burry's Scion Capital analyst template · 2006
Johnson Controls International plc (JCI)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case -10% · downside -39% · upside 0%
Section 13's FY27-guided EPS base is not the right base for a cyclical: TTM revenue of $25.00B is above the FY2020-FY2025 average of $22.59B, so I use normalized EBITDA of about $3.15B (average revenue x 13.96% TTM EBITDA margin) and show TTM EBITDA of $3.49B beside it. At today's 23.5x EV/EBITDA, normalized EBITDA is worth about $122 per share, about -10% from $135.03, while 16x gives about $83 and 26x gives about $135. The business is not broken: Q4 FY26 (quarter ended Sept 2026, 8-K item 2.02 filed 2026-10-27) beat with adjusted EPS of $1.66, revenue of $7.11B up 10.4%, organic orders +44% and a record $23.0B backlog, and FY27 guidance is for 11%-12% organic growth and $6.15-$6.30 adjusted EPS. But the stock already discounts a premium multiple, so this is a watch: not enough margin of safety to buy, and the normalized base is not low enough to make it a short under the rule.
Key numbers
- Share price: $135.03
- Market cap: $81.79B
- Latest financial period: TTM to Jun 30, 2026
- Revenue (TTM): $25.00B
- EV / EBITDA (TTM): 23.5x
- P/E (TTM): 22.9x
- Price / book: 6.07x
The 15 boxes
- ✓ 1. Long-form business notes
JCI is a buildings-technology company (commercial HVAC, controls, fire/security, industrial refrigeration) plus technical services, sold mainly through its own field offices with distributors on the side; in FY2025 products and systems were about 68% of continuing-operations sales and services 32%. The portfolio has been shrunk twice in the comparison window - Power Solutions sold in 2019, then the Residential & Light Commercial HVAC business divested to Bosch on July 31, 2025 - and reporting moved from four segments (FY2020) to three regional segments effective April 1, 2025. Cyclically, revenue peaked at $23.67B in FY2021, fell to $20.64B in FY2022 (-13%) and rebuilt to $23.60B in FY2025, but FY2025 net income of $3.29B sits above pre-tax income of $1.97B, so it is not a clean read on operating earnings.
- ✓ 2. Competitive advantage
JCI's filings describe a business won contract by contract on price, design and reputation, with no single contract or customer material and no single patent critical — so the moat claimed is portfolio breadth, installed base and service attachment rather than lock-in. The margin record supports pricing/scale better than it supports pure cost leadership: gross margin climbed every year from 33.2% in FY2020 to 36.4% in FY2025 and held at 34.3% through the FY2022 revenue drop. Reported net income is not clean evidence of that advantage — FY2025 net income of $3.29B exceeds pre-tax income of $1.97B, so a non-operating benefit the data does not identify sits inside it. Competition is against much larger diversified names (Honeywell, Siemens, Schneider, Carrier, Trane, Vertiv, Daikin) plus a fragmented services field and new digital entrants.
- ✓ 3. 10-Q takeaways
The Q3 FY2026 10-Q (quarter ended June 30, 2026, filed 2026-07-29) shows sales up 9% to $6,614M with 10% organic growth, gross margin 37.4% (+30 bp), and orders +27% / backlog +32% organically to $21.0B. Cash generation was strong (nine-month operating cash flow $2,572M vs $1,586M; Q3 free cash flow $1,194M) and net debt fell to $8,834M from $9,501M. Reported profit was helped by items outside operations — $16M of AFFF insurance recoveries in Q3 SG&A and, for the nine months, $135M of AFFF recoveries plus a $70M ADT Mexico divestiture gain — so GAAP EPS of $1.23 sits below adjusted EPS of $1.42. Guidance in the same-quarter release is numeric and raised: FY26 organic sales ~8% (was ~6%) and adjusted EPS ~$5.05 (was ~$4.85).
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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