Assessing Johnson Controls’ Strategic Divestiture and Hold Rating: Kaplowitz’s Analysis

Johnson Controls (JCI – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Andrew Kaplowitz from Citi maintained a Hold rating on the stock and has a $76.00 price target.

Andrew Kaplowitz’s rating is based on the comprehensive assessment of Johnson Controls’ strategic moves, particularly the potential sale of its ADT alarms business. This divestiture is part of a larger plan to shed non-core businesses that represent approximately 25% of the company’s sales. The sale of the ADT alarms segment, which operates mainly in Europe and Latin America, is seen as the final significant step in refocusing the company on its core operations. The ADT alarms business is considered non-essential to Johnson Controls’ future direction, which may explain the Hold rating given by Kaplowitz.

The valuation of the ADT alarms business, potentially around $2 billion, implies an enterprise value to sales ratio of approximately 1.5 times, considering the business could contribute around $1.4 billion in revenues. This comes in contrast to the higher valuation multiple of a U.S.-based comparable company. The divestiture, along with previous sales of other non-core segments, supports Johnson Controls’ strategic realignment. However, Kaplowitz remains cautious, as the sale is not confirmed and is in the early stages, which could introduce uncertainty. Additionally, the expected share price return is slightly negative, which further substantiates the Hold rating.

In another report released today, Barclays also maintained a Hold rating on the stock with a $64.00 price target.

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Johnson Controls (JCI) Company Description:

Johnson Controls International plc is a diversified technology and multi-industrial company. The company’s operations include creation of intelligent buildings, air systems, HVAC controls, security and fire safety solutions, providing efficient energy solutions, integrated infrastructure, and next-generation transportation systems that work seamlessly together to deliver on the promise of smart cities and communities.