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Johnson Controls Idea Proposal (JCI)

Johnson Controls Idea Proposal (JCI)

Is Johnson Controls gaining traction with its synergies and new products from the Tyco merger?

Report Available: April 11, 2018


Blueshift’s initial research showed JCI pushing forward in its merger with Tyco where the expectation is for synergies and efficiencies to begin taking hold in the form of new products that can help the company gain share in the market. With new leadership in place and the merger a year and a half in, JCI appears poised to see the benefit of these efforts, though its fire and security business declined in the most recent quarter and questions remain about its price discipline and margins.



  1. JCI reported fiscal Q1 earnings and revenue that beat expectations. Earnings climbed 2% from the prior year and revenue grew nearly 5% from a year ago. JCI’s Building Technologies & Solutions segment saw revenue increase 2% year to year to $5.3 billion while its field backlog increased 4%. JCI had 4% organic growth across its Building segment in the quarter. It expanded its services offerings, adding to sales and technician capacity, with service growth climbing 3%. Buildings solutions in North America grew sales 3% organically, on the back of high single-digit growth in commercial HVAC and controls businesses with higher installation activity, though revenue in fire and security fell in the quarter.
  1. JCI’s Power Solutions business grew to $2.1 billion, up 12% year to year. The company is exploring alternative options for this capital-intensive unit which produces and distributes car and truck batteries so it can focus on its Buildings division, including its HVAC, access control, and fire detection systems.
  1. In September 2017, JCI named George Oliver CEO. He was CEO of Tyco when it merged with JCI, and served as President and COO of JCI where he led the integration of the two companies after the merger. He replaced the outgoing JCI CEO six months earlier than originally planned, accelerating the opportunity to achieve synergies between HVAC and security solutions across a single platform, allowing building owners and management to include sprinkler, fire detection and suppression with HVAC systems. It creates smarter buildings with efficiencies to more clearly know when to turn the air and heat on and off. It also aims to replace a standing security guard with technology-driven security products while lowering costs, leveraging data management from data-gathering sensors across a building to offer a more complete service to building owners and tenants.
  1. JCI introduced new products this quarter and has plans for a steady pace of product launches throughout the year. Of note, JCI developed its new flagship chiller product, the YZ centrifugal chiller, which it expects to become the industry standard with its efficiency, energy savings, and connected service capabilities. Other new products include variable capacity residential systems, heat recovery outdoor units, and fire protection products. JCI is, however, increasing price for these chillers.
  1. Blueshift’s March 15, 2017, report said demand for applied commercial HVAC was on the rise to start 2017, continuing Blueshift’s findings from its Aug. 5, 2016, and No 4, 2016, reports. High-rise buildings, offices, industrial and manufacturing facilities, stadiums and airports were getting the most attention. Government work had been stable at best. Bidding remained very competitive and was keeping prices relatively stable. Only three sources noted a recent price increase. JCI was keeping pace with IR’s Trane, UTX’s Carrier and Daikin Industries Ltd. (TYO:6367). The latter was making inroads with an aggressive approach. Six sources said JCI was maintaining its place in the industry, while three others said it either had taken share or was ahead of its main competitors. The Tyco acquisition was expected to strengthen JCI. However, only one source had seen any recent change in strategy or bid material that includes Tyco, noting a shift in marketing materials in trade publications. Still, JCI’s smooth integration of York was expected to be an indicator of success with its most recent acquisition.


How are JCI’s new products tracking? Are JCI’s new products gaining traction? Are they taking share? How do they compare to previous JCI products? How do they compare to competitors’ offerings? How are fire and security being bid out and integrated? How is JCI focusing on aftermarket with HVAC? How is JCI’s pricing? Is there more discipline in pricing? How are competitive dynamics evolving? Where does JCI fit? How is the overall market? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Commercial construction companies, Installers and supply chain, Architects and engineers, Large developers, Building owners, and Industry specialists.


Companies: Johnson Controls International plc (JCI), Ingersoll-Rand plc (IR), United Technologies Corp. (UTX), Daikin Industries Ltd. (TYO:6367)


Research Begins: March 26, 2018


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