What happened
Shares of Johnson Controls International (JCI 1.02%) crashed Wednesday morning and were trading as much as 9% lower as of 10:30 a.m. ET.
Johnson Controls reported solid quarterly numbers this morning including record backlog, but the markets aren't happy with the company's outlook for 2023 and are dumping the industrial stock. It's an overreaction though, as Johnson Controls' backlog is booming and it's still calling for strong revenue growth this year.
So what
Johnson Controls is one of the world's largest manufacturers of heating, ventilation, and air conditioning (HVAC) systems. It also makes building automation and controls systems, as well as other products like industrial refrigeration and fire security systems.
The company's sales jumped 8% year over year in its fiscal third quarter (Johnson Controls' financial year ends Sept. 30), driven by strong global demand for the installation and service of its HVAC and controls systems.
It reported 21% growth in adjusted earnings per share during the quarter.
The three most important takeaways from Johnson Controls' earnings report, though, are its order growth, backlog, and guidance for the rest of the year. While the company delivered in the first two areas, its outlook for 2023 may have left investors a bit confused today.
Now what
Johnson Controls' orders and backlog each grew 8% organically year over year in Q3, and its backlog even hit a record high of $12 billion in the quarter. The company is doing particularly well in North America, where backlog surged 11% to $8 billion.
Yet, Johnson Controls tweaked its guidance for the full year and now sees:
- High single-digit growth in organic revenue versus 10% growth guided earlier.
- Adjusted EPS of $3.55 per share versus previous guidance of $3.50 to $3.60 per share.
In short, it's a guidance downgrade, and the markets are dumping the stock today. However, the downgrade is certainly not meaningful enough to panic-sell shares of a company with such a strong and growing order book and backlog.
