What happened
Shares in building controls and heating, ventilation, and air-conditioning (HVAC) company Johnson Controls (JCI +0.77%) were up by 1.8% by midday today. The move comes after its peer Trane Technologies (TT +0.91%) reported conditions similar to what Johnson Controls reported earlier in the week.
That gave investors the confidence that Johnson Controls might hit the guidance its management gave earlier in the week.
So what
The company issued its first-quarter 2023 earnings on Wednesday and was promptly met by a sell-off by as much as 7%. The reason wasn't its earnings or even its guidance -- management raised its full-year adjusted earnings-per-share guidance to a range of $3.30 to $3.60 compared with a prior range of $3.20 to $3.60. Instead, the market was troubled by mere 1% growth in field orders in the quarter. It suggests that growth is about to slow down considerably.
NYSE: JCI
Key Data Points
CEO George Oliver put it down to "order timing, supply chain realization, and China" lockdowns but also said, "we are seeing incremental improvements in order momentum heading into Q2." However, the market decided to take a skeptical view.
That said, HVAC peer Trane reported the next day and reported similar weakness in HVAC orders in China in its quarter, but its management also expects continued strong growth in commercial HVAC in North America and is "optimistic" as the China economy reopens.
In other words, it was a similar outlook to that of Johnson Controls, only that Trane is guiding to a calendar quarter further out, as Trane's earnings report was for its fourth-quarter 2022. That encouraged the market to believe that Johnson Controls' order weakness did come down to timing issues and lockdowns in China -- issues that should resolve in 2023.
Now what
Trane's earnings and outlook give confidence in the market environment, meaning Johnson Controls might be more likely to hit its numbers in its financial 2023. Given that management raised earnings guidance on its earnings call, that's no bad thing.
