What happened

Shares in building technology and heating, ventilation, and air conditioning (HVAC) company Johnson Controls (JCI -1.36%) rose by 17.5% in October, according to data provided by S&P Global Market Intelligence. 

The move comes as part of a general rise in the S&P 500 index in the month (up 8%) and a growing realization among investors that Johnson Controls is heading for a strong year. That optimism is built on the company's exposure to positive secular (noneconomically aligned) growth trends. 

These trends include increasing awareness of the need to create healthy, clean buildings in the wake of the COVID-19 pandemic. In addition, Johnson Controls' solutions help building owners increase building efficiency and meet their net-zero carbon emissions goals. 

So what

The market was right to be optimistic. A look across the sector, comparing the results of peers and competitors such as Siemens, Honeywell, and Carrier, shows just how strong the orders momentum is in the industry. Indeed, later in the month, Carrier would report 8% organic sales growth in its third quarter and its seventh consecutive quarter of double-digit commercial HVAC orders growth.

Honeywell expects its building technologies sales to grow by double digits this year, with more growth to come in 2023. 

Moreover, the recent results from Johnson Controls confirmed investors' optimism, with its fourth-quarter sales up 10% on an organic basis, backed by 9% growth in orders in the fourth quarter. For reference, the company's financial year runs to the end of September.

Now what

After a difficult spring -- management cut its full-year guidance in May after it had underestimated the scale of supply chain disruptions on its business -- Johnson Controls has made a solid comeback and is well positioned for 2023. 

Its long-term earnings drivers remain in place, and there's an opportunity for more margin expansion as the supply chain normalizes -- something management expects to happen in the middle of 2023.

That said, there are some uncertainties around the economic outlook for 2023, which is reflected in the wide range of outcomes implied in management's guidance for adjusted earnings per share (EPS) of $3.20 to $3.60 in 2023. Still, the low end of the range would mean 7% growth on 2022, and that's a pretty good result in a "worst-case" scenario.