QS Research · Michael Burry's Scion Capital analyst template · 2006
Johnson Controls International plc (JCI)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case -8% · downside -27% · upside +27%
The market is not missing the turnaround: Q4 FY26 (quarter ended 2026-09-30) adjusted EPS was $1.66, revenue $7.11B (+10.4%), organic orders +44% and backlog $23.0B (+43% organic), and FY27 guidance is 11-12% organic growth with adjusted EPS $6.15-$6.30 and ~95% adjusted FCF conversion. What it is debating is the multiple: at $135.03 the stock is about 21.7x the FY27 adjusted EPS midpoint (135.03 / 6.225), not deep value, while the clean TTM figures are stale (TTM to 2026-03-31 EBITDA $3.31B, EBIT $2.51B, net income $3.53B, with net income above EBIT). Section 13's ~$2.34B normalized EBITDA base is the wrong one because it averages FY2020-FY2025, including the divested R&LC HVAC business, and ignores the post-divestiture backlog and FY27 guide; I use FY27 adjusted EPS $6.15-$6.30 as the single base. On 20x midpoint I get $124.50 (-7.8%), 16x low end $98.40 (-27.1%) and 27.3x high end $171.99 (+27.4%), so neither the long nor short rule is met; watch, not yet a deep-value buy.
Key numbers
- Share price: $135.03
- Market cap: $82.38B
- Latest financial period: TTM to Mar 31, 2026
- Revenue (TTM): $24.43B
- EV / EBITDA (TTM): 25.0x
- P/E (TTM): 23.3x
- Price / book: 6.09x
The 15 boxes
- ✓ 1. Long-form business notes
JCI is a commercial-building products and services company. After the July 31, 2025 R&LC HVAC divestiture, FY2025 revenue was $23.60B and services were 32% of continuing sales. It sells through direct offices and distributors and monetizes the installed base through service, retrofit and replacement, with $16.6B backlog at September 30, 2025. The portfolio shifted from four segments including residential HVAC in FY2020 to three regional commercial segments in FY2025; revenue is cyclical and FY2025 net income is not an operating measure.
- ✓ 2. Competitive advantage
FY2025 (year ended 9/30/2025) shows scale but only thin proof of advantage: revenue $23.60B, gross profit $8.59B (36.4% gross margin, the best of the six years shown) and $16.6B backlog at 9/30/2025, yet revenue is essentially flat versus FY2021's $23.67B and FY2025 pre-tax margin of 8.3% sits below FY2021's 11.0%. The 10-K describes a contract-by-contract, highly fragmented market against Honeywell, Siemens, Schneider, Carrier, Trane, Vertiv, API and Daikin, plus start-ups in digital services/IoT, and says no single patent is critical to the business. The advantage actually claimed is installed base and field position feeding service, retrofit and replacement attachment — a switching-cost/service-annuity story, not a brand or IP moat.
- ✓ 3. 10-Q takeaways
The newest report (Q3 FY2026, quarter ended 2026-06-30, filed 2026-07-29) shows an accelerating top line: net sales $6,614M, +9% (+10% excluding FX and divestitures), with gross margin 37.4% (+30 bp) and orders +27% / backlog +32% year over year. Segment EBIT rose to $1,190M from $952M and nine-month operating cash flow rose to $2,572M from $1,586M, but reported earnings quality is helped by one-offs that must be stripped out: $135M of AFFF insurance recoveries and a $70M ADT Mexico divestiture gain in nine-month SG&A, plus $224M of nine-month restructuring and impairment. Capital return is heavy — $5.0B to buy back 43,693,817 shares at an average $114.43, with $3.9B left on the authorization at June 30, 2026 — while net debt fell to $8,834M from $9,501M at September 30, 2025.
- ✓ 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
- ○ 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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