JCI

Image source: The Motley Fool. Wednesday, July 29, 2026 at 8:30 a.m. ET Senior Director of Investor Relations - Michael Gates Chief Executive Officer - Joakim Weidemanis Chief Financial Officer - Marc Vandiepenbeeck Operator: Hello, everyone, and welcome to the Johnson Controls Q3 2026 Earnings Conference Call. My name is Ryan, and I'll be coordinating the call today. [Operator Instructions] I would now like to turn the call over to Mike Gates, Senior Director of Investor Relations to begin. Mike, please go ahead. Michael Gates: Good morning, and thank you for joining Johnson Controls Fiscal Third Quarter 2026 Earnings Conference Call. Joining me on the call today are Johnson Controls' Chief Executive Officer, Joakim Weidemanis; and Marc Vandiepenbeeck, our Chief Financial Officer. Before we begin, please note that today's discussion will include forward-looking statements regarding our future performance and financial results. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for additional information regarding these risks. We will also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures are included in our earnings release in the appendix to today's presentation both of which are available on the Investor Relations section of our website. I will now turn the call over to Joakim. Joakim Weidemanis: Thanks, Mike, and good morning, everyone. Thank you for joining us on today's call. Johnson Controls delivered another solid quarter, extending the momentum we established in the first half and reflecting continued strength across the business. Let's begin with Slide 4. Customer demand remained healthy across our portfolio. Driven by the increasing need for high-performance, precise and energy-efficient operating conditions. Order momentum sustained above 25%. Revenue grew 10%, adjusted EBIT margin expanded 260 basis points to 17%. Adjusted EPS increased 35% and backlog grew more than 30% to a record $21 billion. Based on this performance, we are raising our full year guidance. Marc will cover the numbers in detail. But before he does, I want to discuss what is driving these results and why we believe Johnson Controls is increasingly well positioned to deliver sustained profitable growth over time. The answer starts with the customers we serve and the role they play in the global economy and greater society. Every era is defined by the infrastructure of demands, and this is the age of thermal management. AI factories, advanced and biopharma manufacturing, large research hospitals and universities require thermal management solutions capable of delivering performance, precision and energy efficiency at unprecedented scale. As AI infrastructure scales, customers are increasingly focused on maximizing computing capacity from available power. Yesterday, we introduced our AI factory absorption chiller reference design guide, which demonstrates how advanced thermal management can reduce cooling electrical demand by approximately 44% by converting waste heat into productive cooling. These efficiency gains support additional AI computing capacity without increasing on-site power generation, creating the potential for billions of dollars of additional revenue over the life of a 1 gigawatt facility. While this represents a new approach for many data centers, it builds on more than 65 years of YORK absorption innovation and decades of experience deploying the technology in demanding environments. This is yet another example of how Johnson Controls is helping customers get more value from existing power infrastructure while addressing one of the most significant constraints to scaling AI capacity. It also expands our capabilities as we continue to innovate across the entire thermal management chain, enabling us to play an even greater role in next-generation AI facilities. We are winning with customers by focusing where our technology differentiation matters the most, turning manufacturing into a competitive advantage and meeting our customers' need for flawless uninterrupted operations. Our life cycle service franchise continues to benefit from the increasing importance of uptime, reliability, protection and energy efficiency. Supported by an unmatched global field presence that allows us to serve customers wherever they operate and throughout the life of their assets. Our proprietary business system that defines how we work and deliver is beginning to translate into more predictable execution, giving us an increasing confidence in our long-term potential. Let me walk you through this on Slide 5. Johnson Controls was built for this time because of two competitive advantages. For 140 years, we've shaped and protected the indoor environments where the world's most important work gets done. That track record is built on two strengths that are difficult to replicate. First, our deep proprietary technology know-how. And second, an unmatched global field presence with sales solution architects and field technicians that are roughly twice the scale of our nearest competitor. Together, those capabilities give us a differentiated position in markets where performance, precision and speed increasingly matter. We amplify these strengths through three growth accelerators. First, our strategic pillars provide clarity on where we focus our resources. Our solutions directly address the growing need for high-performance precision and energy efficiency across some of the fastest-growing areas of the economy. AI, mission-critical environments and decarbonization. By aligning our organization around these opportunities, we can direct innovation, commercial and operational resources toward the segments where we see the greatest potential to create value. Second, our proprietary business system, which we continue to embed throughout the organization. This is how we run the company. It provides a common language and methodology for how we communicate, collaborate and continuously improve. The objective is straightforward, win more customers by solving their biggest problems faster and more consistently than anyone else. That requires both winning behaviors as well as standard approaches that elevate and continuously improve the way we work. It is how we accelerate rate and speed of innovation, turn manufacturing into competitive advantage and improve execution across our commercial and field operations. And third, we bring together our strategic pillars and business system to translate these advantages into growth, productivity and shareholder value. It is about accelerating speed by limiting waste and processes, focusing resources on the highest value opportunities and driving better outcomes for customers and shareholders alike. Moving to Slide 6. On June 1, we hosted Going to Gemba Day, providing a firsthand look at how strategy is translating into execution across Johnson Controls. You heard directly from the teams closest to our customers and day-to-day operations and saw how the business system is better enabling those colleagues to deliver for customers in targeted areas of the business. Our first stop was JADEC, our advanced development engineering center and home of YORK, where 150 years of leadership in HVAC and thermal management demonstrated the increasing importance of innovation, performance and precision. You saw how our technology depth and R&D talent, combined with the business system are unlocking a new level of speed and innovation capacity. In one example, the team accelerated the speed to market on a key product by 40%. And helping us win a major customer opportunity. Second, we went to our Airside Center of Excellence, or ACE, where for more than 50 years, we have manufactured critical airside technologies. ACE is one of approximately 40 manufacturing facilities around the world, where we are turning manufacturing into a competitive advantage. At ACE, we showcased how the team applied the business system to more than quadruple capacity on the computer room air handler line without significant capital investment achieving 100% on-time delivery, reducing customer lead times by half, shrinking required manufacturing floor space by more than 30% and cutting inventory by 50%. Our final stop was our local market office in Baltimore, where for the last 100 years, the team has built deep relationship with owners, contractors and consultants. You saw how these same business system approaches and mindsets are improving customer-facing execution across system sales, system project execution, service sales and service operations. The team demonstrated how they're doubling customer-facing selling time, accelerating project engineering, improving service attachment rates and reducing non-value-added activities, helping strengthen long-term relationships across the customer life cycle. These examples demonstrate what is possible as we continue to deploy our business system across the enterprise. While scaling takes time, we are already seeing improvements in performance and the customer experience in targeted areas of business highlighting what's possible as this becomes how we work everywhere. That opportunity reinforces our confidence in the updated long-term algorithm we introduced that day. We outlined a clear path to high single-digit revenue growth, operating leverage of more than 30%, double-digit adjusted EPS growth and adjusted free cash flow conversion of approximately 95% to 100%. In summary, we are building momentum across the business. Our capabilities are critical to the high-growth sectors we serve, which are becoming more demanding, more energy-intensive and more consequential. Customers increasingly require thermal management solutions that deliver performance, precision and energy efficiency while helping them manage cost, capacity and energy usage. Our ability to meet these evolving customer requirements will be a key driver of sustainable growth. Our business system is helping us translate our competitive advantages into better customer outcomes, more predictable execution and improved productivity. Together, our technology innovation, manufacturing capability, global field presence customer relationships and business system position us to create value for customers and shareholders for years to come. With that, Marc will now walk you through the details. Marc Vandiepenbeeck: Thanks, Joakim, and good morning, everyone. We delivered another solid quarter with broad-based growth, continued margin expansion and stronger earnings. Our third quarter results reflect the momentum we have built throughout the year, supported by healthy customer demand, disciplined execution and continued productivity gains across the business. Let's turn to results on Slide 7. In organic sales increased 10% in the quarter, led by strength in applied HVAC and continued growth across both systems and service. System sales increased 11% and service increased 7% and applied HVAC delivered high-teen growth supported by data center demand. This performance drove meaningful margin expansion. Adjusted segment EBITDA margin expanded 220 basis points to 20%, while adjusted EBIT margin expanded 260 basis points to 17%. Adjusted EPS was $1.42, up 35% year-over-year and ahead of our guidance. Let's discuss our regional performance in more details on Slide 8 and 9. Orders increased 27%, extending the strong order momentum we have seen throughout fiscal 2026. Systems order grew 40%, service order increased 4%, and customer activity remained healthy across our key end markets. From a regional perspective, the Americas continued to lead our performance with orders increasing 37%, led by sustained demand from data centers and other mission-critical environments, EMEA orders increased 6% driven by high single-digit system growth. In APAC, orders grew 12%, reflecting growth across several regions, including Northeast Asia and India. Across our end markets, demand remained healthy as customers continue to invest in high-performance, reliable and energy-efficient operating environments. Turning to revenue performance by region. In the Americas, organic revenue increased 11%, led by high-teens growth in applied HVAC and solid double-digit growth in service. In EMEA, sales increased 1% despite the ongoing conflict in the Middle East. APAC grew 15%, led by 20% growth in system and continued strength in applied HVAC. Turning to margins by region. In the Americas, adjusted segment EBITDA margins expanded 260 basis points to 21%, driven by strong operating leverage on higher revenue. In EMEA, margin expanded 20 basis points to 14% as growth was largely offset by the impact of a recent divestiture. In APAC, margin expanded 180 basis points to 21%, supported by productivity improvements, favorable business mix and higher revenues. Backlog increased 32% year-over-year to a record $21 billion. The strength in backlog supports our confidence in both our near-term outlook and our ability to deliver against the long-term growth algorithm we outlined at Going to Gemba Day. Turning to our balance sheet and cash flow on Slide 10. We ended the quarter with approximately $600 million of cash on hand. Net debt declined to 1.9x, below our long-term target range. Year-to-date, adjusted free cash flow increased to $2.1 billion, driven by earnings growth and disciplined cash conversion. We are now better positioned to invest in the business, while maintaining balance sheet flexibility. Let's now discuss our fiscal fourth quarter and full year guidance on Slide 11. For the fourth quarter, we expect organic revenue growth of 9% to 10%, operating leverage of 45% to 50% and adjusted EPS of approximately $1.55. Our strong third quarter results and record backlog gives us the confidence to raise our fiscal 2026 guidance. We now expect organic revenue growth of approximately 8%, up from our previous expectation of approximately 6%. We expect full year operating leverage of 45% to 50%, consistent with our focus on profitability and disciplined execution while delivering stronger revenue growth. As a result, we are raising our adjusted EPS guidance to approximately $5.05, representing roughly 35% growth and $0.50 higher than our original guide at the beginning of the year. We continue to expect adjusted free cash flow conversion of approximately 100% for the full year, demonstrated that the higher earnings we are delivering continued to translate into strong cash flow generation. As Joakim mentioned, while we remain early in our business system journey, we are beginning to see benefits in targeted areas of the organization. As we continue to embed our business system across the enterprise, we expect further opportunity to improve productivity, execution and customer responsiveness over time. Operator, we are now ready for questions. Operator: Our first question will come from Nigel Coe with Wolfe Research. Nigel Coe: So just wanted to maybe randomly start off with supply chain, just given it seems to be a growing issue for some of the data center infrastructure suppliers. I'm just curious Joakim, how you're feeling about the resilience of the supply chain, any bottlenecks you're experiencing and confidence on sort of delivering on plan from here? Joakim Weidemanis: Yes. So the supply chain is always an issue when you're in a high-growth environment. And that's the headline. But then let's dig into that. If you remember from the Going to Gemba Day, we were talking about how our deep technological know-how spans the 5 subsystems that make up an HVAC chiller. But we also talked about the fact that we control the manufacturing and the COGS of those 5 subsystems. So we are more vertically integrated than some in our industry and in a high-growth environment. That, of course, means that we control more of our own supply chain. And so I feel very good about where we are on many of our product lines. And then, of course, we don't make every single thing. We don't dig iron ore out of the parking lot. So of course, we depend on external vendors as well. Occasionally, there are some bottlenecks. We try to get ahead of that. Very occasionally, I will have to get involved in myself personally, and that is just, I think, an element of operating in a higher growth environment. Nigel Coe: Okay. That's great. And then obviously, it's really encouraging to see the double-digit organic growth more than 10% in the fourth quarter. I know it's a little bit early for FY '27 color, but you've got really good visibility on the backlog. I'm just curious how you're thinking about kind of top line growth in FY '27? Marc Vandiepenbeeck: Yes. As you mentioned, Nigel, it's a bit too early to provide real specific fiscal year '27 guidance. But I'll tell you, we remain extremely confident in the way we've laid out the long-term algorithm at Going to Gemba Day of high single-digit growth, top line growth and at least 30% of incremental. You will see quarters that perform at or above that level over the next couple of quarters, and that's really supported by our record backlog and the fact that our pipeline continues to grow in a very healthy manner. And the business system allows us to kind of improve the execution on that backlog and position us well for the future. But we'll provide you details on how we look at '27 at the next earnings call. Operator: Our next question will come from Amit Mehrotra from UBS. Amit Mehrotra: I wanted to ask about the outlook for growth in applied HVAC. Obviously, huge step-up in the quarter from sort of high single digits to high teens growth. But orders are sort of running well ahead of that. And so I guess the question is, could you just offer any thoughts on sort of where we go? Can we further accelerate or are there just capacity or supply chain constraints and high teens is very good and sort of that's the expectation going forward? Joakim Weidemanis: Amit, well, the way we think about it, we look at our pipeline, our pipeline continues to grow at a very healthy rate. And as you would suspect, data centers is an important part of that, but the nondata center pipeline actually is growing almost double digits. So we're -- we feel very good about the continued strength there in our business from the demand side. And then from a supply chain and capacity point of view, we made a meaningful physical plant investments about 2 years ago. I think we had mentioned on a prior call earlier this year that we were ramping in those new facilities or expanded facilities. And we continue to do that, and we actually had a very good quarter. So we're ramping a little bit ahead of what we thought. And that's really the -- our proprietary business system at work, combined with some strengthening of the leadership that we have that's in charge of that part of the company. And the business system is going to continue to, as you saw, since you were there at the Go to Gemba Day (sic) [ Going to Gemba Day ] help us create more capacity in the physical space that we already have. But of course, with this kind of growth, we're also going to have to add some new physical capacity. But the business system will help us stay ahead of that. So we have some time to ramp other physical capacity expansion. So we feel pretty good at where we're at right now. Amit Mehrotra: Okay. Got it. So just -- I mean, just trying to understand what you're saying beneath the surface. It doesn't seem like there's any impediment to sort of further accelerate growth in applied HVAC. And my -- I guess my follow-up question on that is around margins and operating leverage because you have this long-term framework of 30% plus. Obviously, you're punching way above that this year as you start this business model kind of evolution. As we think about '27, '28, I mean the backlog, I assume as it converts, is accretive to margins. Do we have another year or two, where we're sort of punching above that 30% plus long-term target. How do we think about the slope of the operating leverage as we sort of further progress through this evolution? Marc Vandiepenbeeck: Yes. I mean as you see the growth accelerating beyond the mid-single digits. You've seen that we've been able to maintain this year, what I would call a very healthy operating leverage between 45% and 50%. And that incremental revenue that we see, is converting at rates that is extremely healthy, but is closer to the long-term operating leverage framework we had laid out of 30-plus percent. So dynamically, you will see still higher than 30% operating leverage over the next 12 to 18, maybe 24 months. But the way you need to think about that is that the margin that we've seen that incremental growth comes mostly from our data center revenue, which becomes a very large portion of our mix. And that means systems or systems business is growing ahead of our service business in the near term. And that creates a smaller equipment mix margin, a small headwind, I would call it, but nothing that would prevent us from continue to commit well above the 30% incremental we laid out in the Go to Gemba Day (sic) [ Going to Gemba Day ] as part of our long-term algorithm. Operator: Our next question will come from Scott Davis with Melius Research. Scott Davis: Congrats again on putting together some solid numbers here, not looking to blow sunshine up your tail, but these are good results. So anyway, I wanted to ask you guys a little bit about market share shifts and potential -- I mean, how do the hyperscalers think about working with you guys and your peers. Do they think in terms of derisking and kind of peanut butter spreading around kind of their supply base, do they think in terms of who has the best capabilities and capacity delivery and quality. I mean how are they thinking about it? And are you seeing any supply chain shifts that either benefit you guys or maybe perhaps don't benefit you guys? Joakim Weidemanis: Yes. I think the way it works, Scott, is our large data center customers, they design or architect their data centers in certain ways, they'd make certain equipment choices as part of that overall architecture. And then -- and they are engaging with vendors as they do that. So I think you've heard that many times, our large data center customers will send groups of engineers to sit with our engineers for a week, 10 days. So think of that as you're designed in, and they will really just pick one partner that they design in with. There might be more -- two, there might even be three. And then when it comes to this particular version, this architecture of a data center that they might build, let's just pick a number 10 of over the next 2 to 3 years. They will then ask for -- or sit down with these couple of vendors that they've decided to work with from a design point of view. And typically, what happens is someone will get -- no one will rarely get all of it. It's usually split, but someone will get a little more of their purchases. And even if initially you were awarded a certain amount executing better, for example, lead times, having less supply chain issues and so on, you might actually, in reality, secure more than over time than you thought initially in the dialogue with the customer. So that's kind of broadly how it works. So you need to be -- so the conclusion is you need to be very actively involved on the design side when they're architecting the overall data center. And that's a very collaborative approach. And obviously, you need to be competitive in their initial selection and then you need to execute competitively to perhaps punch a little bit beyond the initial award, if you will. Scott Davis: And is the service side of it, a similar kind of situation? Joakim Weidemanis: Yes. It's the service. A good point. So that's usually part of the initial selection is your capability to be able to support the customers in the locations where the data centers are being built. And typically, what we do is as we get closer to actual selection of equipment for a particular site, of course, we will make sure that we make the customers very well aware of our local footprint. And as I think you know, our footprint is comprehensive across the United States and many countries around the world. And because historically, we've had a focus of having our own people serve our customers. We have a few more feet on the ground than some of the other players in the industry. So we have multiple opportunities here to win. But you need to win on the design side to be -- to have a value prop that's strong. You need to, of course, part of the value prop benefits versus cost be competitive. You need to execute well from a, let's call it, supply chain and delivery side and then you need to have the ability and then later on, the proof point that you can execute on service. And so when you can orchestrate all of that together, that's when you start to see market winning growth. Scott Davis: And the question, I guess, really was our net-net -- I mean, that was a fantastic answer. But net-net, do you think you are gaining share then, Joakim? Joakim Weidemanis: We think we are for the categories that we focus on. Absolutely. Operator: Our next question will come from Andrew Obin with Bank of America . Andrew Obin: Just a question, I think you were highlighting -- at a recent industry event, you were highlighting your product together with Armada, the modular product. I was just wondering if you could comment on how much interest you're getting from the customers? And what kind of TAM it represents? And also when and if it starts flowing through your revenue, is it margin accretive? Or is it margin dilutive because of pass-through? That's the first question. Joakim Weidemanis: Yes. Great. Great question, Andrew. So we believe that the future data centers are not all going to be these mega data centers, the 1 gigawatt and may be larger. We believe that -- what we have seen when other human systems leveraging new technologies have been deployed across society that there's not just one approach and that there will be a decentralization. There will be a world where there are smaller, closer to the edge -- closer to the end users, different kinds of models of data centers. And it's really in that context that we collaborate with Armada. And as you know, we also have an investment in that company. That application, it's not brand new. These are, by the way, think of them as data centers in a shipping container that we build in our factories and essentially has everything, all the products that we sell in Johnson Controls in that shipping container. And these are a couple of megawatts, and they get deployed and megawatts are increasing as we continue to innovate. And they are forward deployed. The traditional applications would -- think of oil and gas very remote locations and -- but they are also defense applications. And so we believe -- but we believe that those decentralized, close to the edge types of applications are going to continue to grow. And so we're very excited about the potential here there. The TAM, this is an earlier stage of the market. So the TAM is significant, but it's in formation. So I hesitate to throw numbers out there. There are people who speculate around very significant numbers. We're working on a number of opportunities as we speak, very meaningful ones. And I think within the next couple of quarters, we'll be able to talk a little bit more about this opportunity. But think of it as an example -- as I mentioned on the call, where we've taken a step back and we basically, as a company said, look, what's happening in human society and where can we bring our technological know-how to bear to advance human society. And so we're taking a broader look at the AI opportunity and how we can help human society accelerate the advancements there. Andrew Obin: And just a follow-up question. Where are we on sort of strategic review for some of the portions of your portfolio? Any update on timing where we could hear something from you? Joakim Weidemanis: So we continue the work on that. And as you've heard before, the guiding principle here is to create shareholder value. And -- but we continue to make progress, and we will keep you posted, but progress is good. Marc Vandiepenbeeck: And you've seen we've taken some portfolio actions in the quarter. We continue to divest our residential subscriber business around the world. Quite successfully, we have a few more to go, and we are making a lot of progress on actioning the commitment we've made in prior quarter in readjusting our portfolio adequately. Operator: Our next question will come from Chris Snyder with Morgan Stanley. . Christopher Snyder: I wanted to follow up on some of the commentary around data center. And specifically, I wanted to talk about your content within the data center. I think on the last conference call, you guys said that your net content would go higher, but there was moving parts under the service. I think you said chillers could go down, but air handling goes up and then the CDU business certainly goes up. I was just maybe hoping to get a little bit more of a magnitude of those respective moves. And really, the heart of the question is, like, is the legacy content going higher when we think about chillers and air handlers? And just first, how much of it is coming from CDU being a new product where you guys are gaining share? Joakim Weidemanis: I think broadly, as we've commented before, as rack densities increase, new chips are launched and put into use, the amount of heat generated in data centers continues to increase. And by the way, with -- there are other things that generate heat too, think the 800-volt DC and -- but not only. So the amount of heat that needs to be extracted out of a data center will continue to increase. And so therefore, thermal management becomes even more critical for the data center. And obviously, to do that, energy efficiently is essential. So we will -- we really see the speculation around the reduced demand for chillers as that's going to be a very, very nominal impact, if any. We see the need for air handling units, our Silent-Aire franchise, for example, continues to increase. The CDUs, as you pointed out, will become more important as more and more liquid cooling is implemented. And of course, we have our Alloy investment here from a couple of quarters ago that where we're making great progress in pilots and some early orders now. And then our controls. And then as you heard earlier today or the announcement we made yesterday, we now have an absorption chiller portfolio geared to the data center space that will allow our customers who generate power locally to capture a meaningful part of that excess heat and put it to use within the thermal management architecture, allowing them to reduce the power needed for thermal management by up to more than 40%. So actually, very, very meaningful value prop. So -- and we're going to continue to work on increasing our dollars per megawatt, if you will. I mean even the Armada example that Andrew was asking about, as I mentioned, that container, a data center and a container, I mean, it is loaded with everything that we make in this company. So we are going to continue to drive the dollar value up per megawatt here. That's an essential part of our strategy. Christopher Snyder: One thing that you've also talked about more is bringing a more comprehensive solution to market rather than maybe having the data centers piecemeal kind of the various equipment together. I imagine that, that would lead to better energy efficiency for the data center. Is there any like numbers or data or anything you could talk about, about the level of efficiency savings? And then maybe the second point is, do the hyperscaler customers care more about energy efficiency than they did a year ago. It's very obvious they should care given how much electricity they consume. But is there any difference between the type of customers? And is there any -- do they care more than they used to? Joakim Weidemanis: I think, Chris, they've always cared. And I think they care a little more now. I mean, you read the same news that we read, right, around the headlines we hear about the local communities being concerned about the impact on power prices and things like that. So -- which really leads the data center customers to make more careful choices about where they go build data centers. We haven't actually seen any impact on demand at all from what you see in the news. It's more a matter of where they get deployed. But the where has a lot to do with how much power is available. And there are constraints around power availability today. So of course, when they design a new data center that they're going to build 10 of over the next couple of years, it's easier to find more locations, the less power you need, right? And then obviously, the value prop of operating a data center, if you -- on thermal management, but today uses maybe think of it as 1/3 of all the power that goes into a data center. So whoever can eke out multiple percentage points of savings of energy not needed for thermal management. I mean the value prop for that for our customers is very, very meaningful. And what we're working on is well beyond a couple of percentage points, and we'll talk to you more about that when we're ready to launch some of the solutions that we're working on right now, but really exciting. It's going to be very meaningful what we're working on. Operator: Our next question will come from Jeffrey Sprague with Vertical Research. Jeffrey Sprague: Let me ask even a bigger picture one, if I can, probably just more your opinion, Joakim, as opposed to something that could be truly answered. But obviously, there's a lot of hand-wringing out here in the market and investor sentiment about whether your end customers can really earn an acceptable return on all this investment looking out a ways. And against that, obviously, you've got to commit capital and you're adding capacity and the like. Just where do you stand on kind of the sustainability of this demand? And do we have sustainable demand looking out 2 or 3 years that really supports the investments you're making and the confidence that we see apparent in the orders, et cetera? Joakim Weidemanis: Yes. So you asked for an opinion. So I'll give you an opinion. So as you know, I spent the 5-plus years before taking on this assignment in medical diagnostics. And what's holding back the acceleration of the development of new therapies, vaccines, medicines and diagnostics is our ability to make sense of all the data that exists already around human biology. And those industries are using AI already. But if you think about versus what they could be using it, how they could be using it I mean we're still in the very, very early innings of usage. So I think the demand -- and it's not just that there are more researchers, and this is a longer discussion now than there were 20 years ago doing research on human biology, but it's the availability of compute, the cost of it and so on. The economics are very different, which means that more researchers have more access to AI. So that's -- but super early innings. And then I just look at a corporation like our own for what we're using AI today, and I think we're making some good progress internally here. I mean it's part of our proprietary business system that we're rolling out. But we're still single digits percent usage versus what we could be using it for and what I anticipate we'll be using it for over the next couple of years. So I think the demand for the output of the data centers is going to continue to grow meaningfully. I mean, we're just starting to understand and many large organizations how we can really use this capability at scale. So I'm optimistic. I know there's a lot of speculation about CapEx and so on, but I think about it from a demand point of view and where it's going to be put to use and so I'm optimistic. Jeffrey Sprague: Yes, no, helpful. And then just looking at maybe another a little bit bigger picture question, but just looking at kind of the rising power demand and heat loads and the like, it would seem sort of thermal and electrical solution need to clearly work in concert, not that they're not today, but just looking at your portfolio or who you partner with on the electrical side, is there an avenue for JCI to play more on the electrical side? Or would this be sort of just a continued partnering relationship with whoever your hyperscale customer may choose to pick up that part of the equation? Joakim Weidemanis: Yes. I mean, I'd answer that. It's a good question, I'd answer that in a couple of ways. If you look at our materials from the Go to Gemba Day (sic) [ Going to Gemba Day ] where we talked about the 5 subsystems of a chiller, that we -- are part of our core proprietary technological know-how. I mean there are electrical aspects there, one of the subsystems, right? So we've clearly chosen there to own a subsystem that creates a whole system that performs at a higher level. And we have looked at that beyond the 5 subsystems that make a chiller. It's -- you could make some arguments around synergies, power and thermal, I think one has to think very carefully because -- about that because -- and we're not very interested in, let's call it, creating procurement synergies for customers. I mean that might be helpful for customers, but it's actually not going to advance how data centers perform. So the way we think about it is how can we help improve the performance of the data centers. And so we're in multiple explorations trying to see what we could do there. So it's possible that we will very surgically expand our capabilities there, and that could be through partnership or it could be surgical inorganic moves. But I think a big picture today, and I think more of the synergies from a customer point of view are probably on the procurement side and -- so we will choose to focus our efforts more on the technology development and the value prop side. Operator: Our next question will come from Joe Ritchie from Goldman Sachs. Joseph Ritchie: I was hoping you guys could help level set embedded in your guidance -- your revenue guidance for the year, how much is embedded for data center revenues this year? And then also as kind of as you think about the backlog build and the visibility that you have for FY '27, how much of -- how much is already guaranteed that you would expect to kind of ship in the FY '27 time frame? Marc Vandiepenbeeck: Yes. So data center revenue is probably going to land in the high teens as a mix of percentage of revenue for fiscal year or fiscal year '26. We continue to see that subsegment grow much faster than the rest of the portfolio, very healthy double digits for some subsegment even higher than that in terms of growth. As we shape out the following years and as we discussed that at Going to Gemba, we see that mix over the next 3 to 5 years, becoming 1/3 of the company from a revenue standpoint. And continue to be extremely accretive to the overall enterprise. I think Joakim mentioned it a little bit earlier on another question, as we continue to expand our installed base because of the system growth we've seen in the last couple of years, and we're going to see the next 3 or 4 years. We continue to improve our service attachment rate and that installed base will generate a very nice service growth mix over the next few years that will continue to fuel that data center mix and do it very, very profitably. Joseph Ritchie: That's helpful. Thanks, Marc. And then I guess just a follow-on maybe sticking with data centers. How big is your CDU backlog today? And then have you guys gotten through some of the key like final milestones in terms of testing and validation to start shipping your CDUs? Marc Vandiepenbeeck: Yes. We are going to start shipping actually this quarter. Most of the testing and validation is through. We are still working through some of the hyperscaler validation. The pipeline for that business is well beyond the hundreds of millions and has now reached $1 billion. We think the opportunity here is enormous. Again, it's allowing JCI to continue to expand the total addressable market we have per megawatt and it will continue to do so, part of a bigger, broader solutioning for thermal management in the data center. Joakim Weidemanis: Yes. And we had the recent NVIDIA certification as well just a little while ago. So good progress here. Operator: Our next question will come from Nicole DeBlase with Deutsche Bank. Nicole DeBlase: Just wanted to start on if you guys could talk a little bit about what you're seeing with respect to the Middle East? And how much of an impact that had on the third quarter? And I guess, what you've embedded from a fourth quarter perspective for EMEA growth and maybe when that business can return to more material growth? Joakim Weidemanis: Yes. Great. So we can't predict the Middle East any better than you can, I think. It's about 10% of our EMEA business. And as you can imagine, it's very challenging the business environment in the Middle East right now. But building pent-up demand for sure. So we have assumed that there will be no material change here in the next quarters to what we've seen here in the recent quarters. Marc Vandiepenbeeck: And buildup in our guidance, you'll see EMEA land in very low single digit to flat in Q4. And that's a couple of points of pressure vis-a-vis a normal run rate if the Middle East would have returned to normal, which I think we know for this quarter is not going to happen, this fourth quarter it's not going to happen. But beyond it's sort of about crystal ball. Nicole DeBlase: Sure. Yes, it makes total sense. And then APAC came in above your expectations pretty significantly in 3Q, I think, both revenue and margins pretty robust. I guess can you dive into what drove that? And any thoughts on if that's sustainable into the fourth quarter? Joakim Weidemanis: Yes. I think there are a number of markets -- geographical markets that are quite healthy, India in particular, but not only. And there are some data center markets, but also significant investments. And for example, what we call referred to as advanced manufacturing. biopharma, semicon, et cetera. And so even a country like Japan that you think is more a slow-growing market is actually very strong right now on the back of investments in more advanced industries beyond data centers. And then we've made some good progress. We've been able to -- fortunate to strengthen our team in Asia Pac. And so we're seeing, I think, some traction here from these very talented leaders who we're super happy to have on board now, who are doing a good job. And I think we're still in the early innings of that. Operator: Our next question -- final question will come from Andy Kaplowitz with Citi Group. Andrew Kaplowitz: So service at plus 7% revenue growth and orders at plus 4% in Q3, I think were both slightly better than Q2. But I'm sure you think Johnson Controls, could still do better than that 4% orders in North America that you have. So maybe just update us on where you are on your initiatives to improve service particularly in areas such as security, which you talked to us about before? And should we expect a bigger turn in service growth as you go into '27? Marc Vandiepenbeeck: No. You're right. We remain very confident in kind of the long-term service opportunity and how profitable that business has been returning to mid- to higher single-digit growth is the focus. HVAC and Fire are performing well within that range. But as you mentioned, it we saw a bit of a decline in the American service backlog mostly associated with the security business. It's not at all a profitability issue. It has to do really with a pivoting towards growth and the dynamic of price in that market. And as you know, our security business, a little bit less differentiated than, for example, our HVAC business, and that has created a little bit of a competitive volume pressure, and we are taking very targeted action. You saw an improvement in the quarter, and you're going to continue to see improvement in the performance as we drive a little bit of greater consistency across the business, both in Americas and EMEA. We still think there's a large opportunity to continue to drive our installed base, especially when you see the system growth being in the double digit. And one of the big priority we talked about at Going to Gemba Day is the productization of our service offering and doing a better job at taking a differentiated go-to-market approach to be able to drive really better value proposition for our customers. So it's a small bump right now, but we think we've seen an inflection point. Andrew Kaplowitz: Very helpful, Marc. And maybe I could just double click on Fire and Security then like it's flat, I think, in revenue in Q3. Is that kind of sort of your targeted initiatives that you're doing? What's the underlying market doing? And again, what's embedded in the expectations for Q4 and beyond? Marc Vandiepenbeeck: Yes. We're keeping up with market, right? So the underlying market globally is flat the way we have been. We intend to do better than the market. And so a refocus of that organization both from fire detection, fire suppression as well as our core security businesses. As we pivot into next year, it's going to be a core focus to kind of lift up the growth of that business. Now, in all transparency, this is not going to be a high-single-digit or double-digit growth market, but we think we can drive performance in that business in a more high single-digit to mid-single-digit kind of level over time. Operator: This concludes our Q&A session. I will now hand the call back to Joakim Weidemanis for any closing comments. Joakim Weidemanis: Thank you. Thank you for all your questions today. We delivered another strong quarter, driven by sustained order momentum, broad-based growth and continued margin expansion. The combination of our differentiated technology, unmatched field presence and the early proof points we're seeing from our proprietary business system reinforced our confidence in the opportunities ahead. I want to thank our more than 90,000 colleagues around the world for their dedication to our customers and for embracing new ways of working that help us serve them better every day. I look forward to continuing my conversations with all of our stakeholders. Thank you for joining us today. Operator: This now concludes today's call. Thank you all for joining. You may now disconnect your lines. Before you buy stock in Johnson Controls International, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Johnson Controls International wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Johnson Controls International. The Motley Fool has a disclosure policy. Johnson Controls (JCI) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

Modine Manufacturing Company MOD reported adjusted earnings of $1.53 per share for the first quarter of fiscal 2027, up 44% year over year. The figure beat the Zacks Consensus Estimate of $1.27 by 20.47%. Net sales increased 28% year over year to $874.1 million but missed the consensus estimate of $876 million by 0.17%. Data Centers sales surged 90%, while three consecutive quarters of record order intake pushed backlog to nearly twice the year-ago level. MOD currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Modine Manufacturing Company price-consensus-eps-surprise-chart | Modine Manufacturing Company Quote Gross profit rose 10% year over year to $182 million. However, gross margin contracted 340 basis points to 20.8%, reflecting lower margins across all three operating segments. Adjusted EBITDA increased 5% to $106.5 million, while the corresponding margin declined 270 basis points to 12.2%. Operating income slipped 1% to $74.8 million as higher gross profit was offset by increased expenses supporting growth and the planned Performance Technologies separation. Data Centers revenues jumped to $348.6 million from $183.7 million a year earlier, primarily driven by higher sales to hyperscale customers in North America. Americas sales grew 112%, while EMEA sales advanced 18%. The segment's adjusted EBITDA rose 27% to $51.7 million, though adjusted EBITDA margin fell to 14.8% from 22.1%. Supply shortages limited production and caused labor inefficiencies and weak overhead absorption. Management estimated that excess labor and under-absorbed overhead reduced the margin by 450-550 basis points. Commercial HVAC sales increased 22% to $261.6 million. Growth reflected higher coil sales to data center customers and $19.7 million of incremental revenues from acquired businesses. Organic sales increased 6%. Adjusted EBITDA advanced 7% to $41.6 million, while the margin declined to 15.9% from 18.1%. Profitability was affected by acquisition-related business mix, manufacturing consolidation inefficiencies and a greater proportion of lower-margin coil sales. Management expects the segment's margin to improve sequentially through fiscal 2027. Performance Technologies revenues declined 3% to $277.8 million. Weak automotive and commercial vehicle demand more than offset higher sales to power-generation customers. Organic sales decreased 4%. Adjusted EBITDA fell 3% to $36.2 million, while the margin edged down 10 basis points to 13%. Higher material and tariff costs pressured results, with contractual recoveries lagging cost increases. A $2 million reduction in selling, general and administrative expenses partly mitigated these headwinds. Selling, general and administrative expenses rose 22% to $103.3 million, driven by Data Centers investments, acquired Commercial HVAC operations, incentive compensation and separation-related spending. As a percentage of sales, however, SG&A expenses decreased to 11.8%. The quarter included $3.9 million of restructuring expenses and $7.1 million of costs tied to the planned Performance Technologies spin-off and merger with Gentherm. The transaction remained on schedule for completion in the fourth quarter of calendar 2026, subject to approvals and closing conditions. Net cash provided by operating activities increased to $41.4 million from $27.7 million. Free cash flow was negative $5 million compared with positive $0.2 million a year earlier, mainly because capital expenditures rose to $46.4 million as the company expanded Data Centers production capacity. MOD ended the quarter with $95.3 million in cash and cash equivalents and total debt of $528.2 million. Net debt increased to $432.9 million from $362.8 million at the end of fiscal 2026, largely due to treasury-stock purchases associated with employee equity awards. Modine maintained its fiscal 2027 guidance for net sales growth of 20-35% and adjusted EBITDA of $650-$680 million. The outlook includes Performance Technologies for the full fiscal year and implies adjusted EBITDA growth exceeding 40%. Data Centers sales are projected to increase 60-80%, while Commercial HVAC revenues are expected to grow 5-10%. Management expects companywide margins to improve sequentially, including a 200-250-basis-point increase in the second quarter, as component availability, production throughput and cost recovery improve. Johnson Controls International plc JCI reported third-quarter fiscal 2026 (ended June 2026) adjusted earnings of $1.42 per share, which beat the Zacks Consensus Estimate of $1.32. The bottom line increased 35.2% year over year. Total revenues (continuing operations) of $6.61 billion surpassed the consensus estimate of $6.43 billion in the quarter. The top line increased 9.3% year over year, whereas organic revenues increased 10%. Johnson Controls anticipates fiscal 2026 organic revenue growth to be about 8% from the prior-year level. Operating leverage is expected to be 45-50%. It expects adjusted earnings per share to be approximately $5.05 and adjusted free cash flow conversion of about 100%. Vertiv Holdings VRT delivered second-quarter 2026 adjusted earnings of $1.52 per share, up 60% year over year. The results beat the Zacks Consensus Estimate by 6.29%, supported by higher sales volume, operating productivity and margin expansion. Net sales increased 24.1% year over year to $3.27 billion but missed the consensus estimate by 3.41%. Organic sales rose 18%, while acquisitions and favorable foreign exchange contributed 5% and 1%, respectively. For 2026, Vertiv forecasts net sales in the range of $13.8 billion to $14.2 billion. Adjusted earnings are projected to be in the range of $6.65 to $6.75 per share, while adjusted operating profit is expected to be between $3.29 billion and $3.37 billion. Lennox International LII came out with second-quarter 2026 adjusted quarterly earnings of $7.72 per share, beating the Zacks Consensus Estimate of $7.63 per share. This compares to earnings of $7.82 per share a year ago. Revenues were $1.55 billion, up 3% over the same period last year but missing the Zacks Consensus Estimate of $1.56 billion. For 2026, the company expects its revenue growth to be approximately 8%, reflecting a 5% contribution from completed acquisitions. Earnings per share are forecast in the range of $23-$24, and free cash flow is guided in the range of $750-$850 million for the year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Modine Manufacturing Company (MOD) : Free Stock Analysis Report Johnson Controls International plc (JCI) : Free Stock Analysis Report Lennox International, Inc. (LII) : Free Stock Analysis Report Vertiv Holdings Co. (VRT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. Johnson Controls International (JCI) is back on investors’ radar after its third quarter earnings release for the period ended June 30, 2026, highlighted fresh revenue and earnings figures across its building solutions portfolio. The company reported third quarter revenue of US$6.61b compared to US$6.05b a year earlier, with net income of US$749m compared to US$701m. Basic and diluted earnings per share from continuing operations were US$1.23 versus US$0.94. For the first nine months of the fiscal year, Johnson Controls International recorded revenue of US$18.55b compared to US$17.15b a year ago. Net income was US$1.89b compared to US$1.60b, with basic earnings per share from continuing operations at US$3.13 versus US$2.21 and diluted earnings per share from continuing operations at US$3.12 versus US$2.20. See our latest analysis for Johnson Controls International. Johnson Controls International’s latest earnings release has arrived with the wind already at its back, with a year to date share price return of 19.91% and a 1 year total shareholder return of 39.52% pointing to momentum that has been supported by its recent Q3 report and earlier updates on its building and data driven solutions. If you are looking to broaden your watchlist beyond Johnson Controls International, this is a good moment to scan for other power grid and electrification plays using our 35 power grid technology and infrastructure stocks The recent share price climb puts Johnson Controls International at an interesting crossroads. Are investors mainly responding to stronger reported earnings and data center exposure, or has sentiment simply swung in its favor ahead of a valuation check? Johnson Controls International's most followed narrative places fair value at $155.21 per share compared to the last close of $146.66. This frames the recent Q3 strength against a higher long term target built on data center demand and profitability shifts. Read the complete narrative. Want to see what sits behind that margin story? The narrative leans heavily on steady revenue expansion, higher margins, and a richer earnings profile. This raises the question of how those pieces add up to the fair value line. The narrative applies a 9.37% discount rate to future cash flows, alongside expectations for faster revenue growth, higher profit margins, and a stronger return on equity profile than today. It also assumes that Johnson Controls International trades on a future earnings multiple above the current sector level, which is a key swing factor in reaching the $155.21 figure. Result: Fair Value of $155.21 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, the Johnson Controls International narrative still hinges on smooth execution of its restructuring, as well as on data center demand holding up without fiercer competitive pressure. Find out about the key risks to this Johnson Controls International narrative. The narrative points to a fair value of US$155.21 per share, while the SWS DCF model indicates a value slightly below the current share price at US$143.91. That suggests Johnson Controls International is trading a touch rich on a cash flow basis. Which set of assumptions do you find more convincing? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Johnson Controls International for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. If this Johnson Controls International story feels mixed to you, that is a useful signal to pause and check the underlying data yourself so you are comfortable with the balance between opportunity and concern. To see a concise snapshot of both sides in one place, take a moment to review the 2 key rewards and 2 important warning signs Once you have formed a view on Johnson Controls International, do not stop there. Broaden your opportunity set now so you are not relying on a single story. Target potential mispricing by scanning for quality companies trading below their estimated worth using the 55 high quality undervalued stocks. Strengthen your income stream by focusing on businesses that combine higher yields with resilience through the 9 dividend fortresses. Prioritise resilience first by filtering for companies that score well on financial strength using the 81 resilient stocks with low risk scores. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include JCI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Carrier Global Corporation CARR has a better earnings setup after management raised its 2026 sales, adjusted operating profit and adjusted earnings outlook.The stock’s risk-reward profile looks constructive but not clean. Improving demand, backlog and cash flow support the bull case, while valuation, margin pressure and debt limit the deep-value argument. Carrier reported second-quarter 2026 adjusted earnings of 86 cents per share, beating the Zacks Consensus Estimate by 3.6%.Net sales came in at $6.35 billion, topping expectations by 5.5%. Revenues rose 4% year over year, although adjusted earnings declined 7%, showing that sales growth has not yet translated cleanly into earnings expansion. Management raised its 2026 outlook to approximately $23 billion in sales, roughly $3.5 billion in adjusted operating profit and about $2.90 in adjusted earnings per share.The increase reflects stronger commercial heating, ventilation and air conditioning demand, recovering residential markets and higher data center activity. Data center sales are now expected to reach about $2 billion in 2026, up from the prior $1.5 billion view. Carrier Global Corporation price-consensus-chart | Carrier Global Corporation Quote CARR trades at 20.48X forward 12-month earnings. That is below the industry multiple of 24.31X.Still, the multiple is close to Carrier’s five-year median of 20.11X. The discount to peers helps, but the stock is not trading far below its own historical norm.Trane Technologies plc TT and Johnson Controls International plc JCI are useful peer references because both are exposed to commercial building efficiency, heating and cooling demand, and connected building systems. Carrier generated second-quarter free cash flow of $810 million. Management still expects about $2 billion of free cash flow for 2026.That cash generation supports dividends, buybacks and investments in higher-growth climate and digital offerings. The company also expects $1.5 billion of share repurchases in 2026. The main concern is earnings conversion. Adjusted operating margin fell 190 basis points year over year to 17.2%.The decline reflected increased input costs and unfavorable business mix. Tariffs began early in the second quarter, while price increases started later, creating a timing gap.Leverage is another constraint. Carrier ended the second quarter with roughly $10.6 billion in net debt, based on total debt less cash and cash equivalents. If weaker end markets persist or cost actions take longer, margin recovery and financial flexibility could remain limited. The bottom line is that CARR looks more attractive for earnings momentum than for valuation or broad-based factor strength.Carrier currently carries a Zacks Rank #1 (Strong Buy), supported by favorable short-term estimate revisions. It also has a Momentum Score of B, indicating better relative momentum characteristics. You can see the complete list of today’s Zacks #1 Rank stocks here.The offset is the stock’s weaker Value Score of D, Growth Score of F and VGM Score of F. Those scores suggest that CARR’s appeal rests more on improving expectations and business momentum than on a broadly attractive value-growth profile. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carrier Global Corporation (CARR) : Free Stock Analysis Report Johnson Controls International plc (JCI) : Free Stock Analysis Report Trane Technologies plc (TT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Johnson Controls International plc? Here are five stocks we like better. Strong fiscal Q3 performance: Organic sales rose 10%, adjusted EBIT margin expanded 260 basis points to 17%, and adjusted EPS increased 35% to $1.42. Orders grew 27%, while backlog reached a record $21 billion, up more than 30%. Data centers remain a major growth engine: Demand for thermal-management systems drove strong Applied HVAC growth, and data-center revenue is expected to reach the high-teens percentage of fiscal 2026 sales. Johnson Controls’ CDU pipeline has surpassed $1 billion, and the company recently received NVIDIA certification. Fiscal 2026 outlook raised: The company now expects approximately 8% organic revenue growth and adjusted EPS of about $5.05, representing roughly 35% growth. Management maintained its expectation for 100% free-cash-flow conversion and reported net debt below its long-term target range. 3 Industrial Names That Will Benefit from Rising CapEx in 2026 Johnson Controls International (NYSE:JCI) reported fiscal third-quarter results marked by double-digit organic sales growth, expanding margins and record backlog, as demand for data-center and other mission-critical thermal-management systems remained strong. Chief Executive Officer Joakim Weidemanis said the company extended momentum from the first half of the fiscal year, with order growth above 25%, revenue up 10%, adjusted EBIT margin expanding 260 basis points to 17%, and adjusted earnings per share rising 35%. Backlog increased more than 30% to a record $21 billion. → Refiner Stocks Are Near Record Highs—Can Iran-Driven Margins Keep Them There? Forget the Chips: 4 Industrial Plays for the AI Rebound “Customer demand remained healthy across our portfolio,” Weidemanis said, citing demand for high-performance, precise and energy-efficient operating conditions in AI infrastructure, advanced manufacturing, biopharma, hospitals and universities. Chief Financial Officer Marc Vandiepenbeeck said organic sales increased 10% in the quarter, led by high-teens growth in Applied HVAC. Systems sales increased 11%, while service revenue grew 7%. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now An AI Play Hiding in Plain Sight: A Look at Johnson Controls Adjusted segment EBITDA margin rose 220 basis points to 20%, and adjusted EBIT margin rose 260 basis points to 17%. Adjusted EPS was $1.42, an increase of 35% from the prior year and ahead of the company’s guidance, Vandiepenbeeck said. Orders increased 27% year over year. Systems orders grew 40%, while service orders rose 4%. Americas orders increased 37%, supported by data-center and other mission-critical demand. EMEA orders increased 6%, driven by high-single-digit systems growth. APAC orders rose 12%, with growth in Northeast Asia and India. By region, Americas organic revenue increased 11%, including high-teens Applied HVAC growth and double-digit service growth. EMEA revenue rose 1%, with the company citing the ongoing Middle East conflict. APAC revenue increased 15%, including 20% growth in systems and continued Applied HVAC strength. → AMD’s AI Bubble Could Burst Into Explosive Upside Adjusted segment EBITDA margins reached 21% in both the Americas and APAC, expanding 260 basis points and 180 basis points, respectively. EMEA margin expanded 20 basis points to 14%, as growth was largely offset by the effect of a recent divestiture. Management repeatedly pointed to data centers as a major contributor to growth. Vandiepenbeeck said data-center revenue is expected to represent a high-teens percentage of fiscal 2026 revenue and could account for roughly one-third of company revenue over the next three to five years. Weidemanis said the company sees growing thermal-management needs as computing density and heat generation rise. He said Johnson Controls does not expect a meaningful reduction in chiller demand, while demand for air-handling equipment, cooling distribution units, controls and other cooling technologies is increasing. The company introduced an AI-factory absorption chiller reference design guide that, according to Weidemanis, shows how advanced thermal management can reduce cooling electrical demand by approximately 44% by converting waste heat into cooling. He said the approach could allow customers to support additional computing capacity without adding on-site power generation. Johnson Controls expects to begin shipping cooling distribution units, or CDUs, during the current quarter. Vandiepenbeeck said testing and validation are largely complete, though the company is continuing work on certain hyperscaler validations. The CDU pipeline has surpassed $1 billion, he said, and the company recently received an NVIDIA certification. Weidemanis also discussed the company’s collaboration and investment in Armada, which develops modular data centers housed in shipping-container-like units. He said the market remains in an earlier stage and the company is working on meaningful opportunities, but he did not provide a market-size estimate. Addressing supply-chain conditions, Weidemanis said supply chain remains an issue in a high-growth environment, but the company controls manufacturing and key components across five HVAC chiller subsystems. While Johnson Controls relies on outside suppliers for some inputs and can encounter occasional bottlenecks, he said management feels “very good” about supply conditions for many product lines. The company has been ramping investments in new or expanded physical plants made about two years ago. Weidemanis said the ramp is progressing ahead of expectations and that its proprietary business system is helping create additional capacity in existing facilities while the company evaluates further capacity additions. Management also said the business system is intended to improve execution across innovation, manufacturing, project delivery and service operations. During its June “Going to Gemba Day,” Johnson Controls highlighted efforts including a 40% reduction in time to market for a product, more than quadrupling capacity on a computer-room air-handler line without significant capital investment, and reductions in lead times, inventory and floor-space requirements. For the fiscal fourth quarter, Johnson Controls expects organic revenue growth of 9% to 10%, operating leverage of 45% to 50%, and adjusted EPS of approximately $1.55. The company raised its fiscal 2026 outlook, now expecting approximately 8% organic revenue growth, compared with its prior expectation of about 6%. It maintained its expectation for 45% to 50% operating leverage and raised adjusted EPS guidance to approximately $5.05, which management said would represent roughly 35% growth and is $0.50 above the company’s original annual guidance. Johnson Controls continues to expect adjusted free-cash-flow conversion of about 100% for the full year. Through the first nine months, adjusted free cash flow totaled $2.1 billion, while net debt declined to 1.9 times, below the company’s long-term target range. On service, Vandiepenbeeck said the company remains focused on returning the business to mid- to high-single-digit growth. HVAC and fire service are performing within that range, while the security business has faced competitive volume pressure related to pricing and lower differentiation. Management said it has seen an early improvement and is taking targeted actions in the Americas and EMEA. For EMEA, the company expects fourth-quarter revenue to be flat to up low single digits, reflecting continued weakness in the Middle East, which represents about 10% of the region’s business. Management said it has assumed no material improvement in conditions there during coming quarters. Johnson Controls International plc is a global diversified technology and multi‑industrial company that develops products, services and solutions for buildings and energy storage. The company's core focus is on improving building efficiency, safety and sustainability through a combination of HVAC equipment, building controls and automation, fire and security systems, and related services. Johnson Controls traces its roots to 1885, when inventor Warren S. Johnson developed an electric room thermostat; over its long history the company has expanded from controls into a broad set of building‑related technologies and, through corporate transactions, into a global provider of integrated building solutions. Johnson Controls' product and service portfolio includes heating, ventilation and air‑conditioning equipment, chillers, air handlers and related mechanical systems, together with building automation and control platforms that monitor and manage energy use, indoor environmental quality and security. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Johnson Controls International Q3 Earnings Call Highlights" was originally published by MarketBeat. 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Q3 sales increased 9% and organic sales increased 10%* Q3 GAAP EPS of $1.23; Q3 Adjusted EPS* of $1.42 Q3 orders +27% organically year-over-year Backlog of $21.0 billion increased 32% organically year-over-year * This earnings release contains non-GAAP financial measures. Definitions and reconciliations of the non-GAAP financial measures can be found in the attached footnotes. Non-GAAP measures should be considered in addition to, and not as replacements for, the most comparable GAAP measures. CORK, Ireland, July 29, 2026 /PRNewswire/ -- Johnson Controls International plc (NYSE: JCI), a global leader in thermal management, mission-critical building systems, energy efficiency, and decarbonization, is proud to announce fiscal third quarter 2026 GAAP earnings per share ("EPS") of $1.23. Adjusted EPS was $1.42. Q3 sales increased 9% to $6.6 billion and organic sales increased 10%. For the quarter, GAAP net income from continuing operations attributable to JCI was $749 million and adjusted net income from continuing operations was $868 million. "We delivered another strong quarter, highlighted by 10% organic revenue growth, sustained order momentum, and continued margin expansion," said Joakim Weidemanis, Chief Executive Officer of Johnson Controls. "While we remain early in our journey deploying our proprietary business system, the progress we are seeing demonstrates the potential to further improve execution, productivity and customer outcomes. Our third-quarter performance and continued momentum give us confidence in our raised full-year outlook." FISCAL Q3 SEGMENT RESULTS The financial highlights presented in the tables below exclude discontinued operations and are in accordance with GAAP, unless otherwise indicated. All comparisons are to the third quarter of fiscal 2025. Orders and backlog metrics included in the release relate to the Company's Solutions and Services businesses. Orders prior to Q1 2026 exclude certain equipment-only sales for longer cycle projects. Backlog has been restated to include this new category. A slide presentation to accompany the results can be found in the Investor Relations section of Johnson Controls' website at http://investors.johnsoncontrols.com. Americas Sales in the quarter of $4.5 billion increased 11% over the prior year. Organic sales also increased 11% led by continued strength across Applied HVAC. Products and Systems sales increased 12% and Services increased 10%. Excluding acquisitions and divestitures and adjusted for foreign currency, orders increased 37% year-over-year and backlog of $15.9 billion increased 40% year-over-year. The increase in orders and backlog was supported by sustained demand from data centers and other mission-critical environments. Segment EBIT margin and adjusted Segment EBITA margin increased 260 bp compared to the prior year. The increases were primarily driven by strong operating leverage on higher revenue. Adjusted Segment EBITA in both Q3 2026 and Q3 2025 excludes transformation costs. EMEA (Europe, Middle East, Africa) Sales in the quarter of approximately $1.3 billion decreased 1% over the prior year. Organic sales increased 1% versus the prior year quarter; constrained by continued pressure in the region due to the conflicts in the Middle East. Both Products and Systems and Services grew 1% organically. Excluding acquisitions and divestitures and adjusted for foreign currency, orders increased 6% year-over-year and backlog of $3.1 billion increased 14% year-over-year. Segment EBIT margin increased 110 bp and adjusted Segment EBITA margin increased 20 bp compared to the prior year. The increases were primarily driven by favorable pricing and productivity improvements, partially offset by the impact of business divestitures. Adjusted Segment EBITA in Q3 2026 and Q3 2025 excludes transformation costs. APAC (Asia Pacific) Sales in the quarter of $846 million increased 15% versus the prior year. Organic sales increased 15% versus the prior year quarter, led by 20% growth in Product and Systems and continued strength in Applied HVAC. Excluding acquisitions and divestitures and adjusted for foreign currency, orders increased 12% and backlog of $2.0 billion increased 12% year-over-year. Segment EBIT margin increased 130 bp and adjusted Segment EBITA margin increased 180 bp compared to the prior year, primarily driven by productivity improvements, favorable business mix and higher revenues. Adjusted Segment EBITA in Q3 2026 excludes transformation costs. Corporate Adjusted Corporate expense in both Q3 2026 and Q3 2025 excludes certain transaction/separation costs and transformation costs. The increase year-over-year is primarily due to increased corporate accruals related to incentive compensation and the timing of certain corporate expenses. OTHER Q3 ITEMS Cash provided by operating activities was $1,289 million. Free cash flow was $1,194 million and adjusted free cash flow was $1,179 million. The Company paid dividends of $245 million. GUIDANCE The following forward-looking statements are non-GAAP financial measures. These non-GAAP financial measures are derived by excluding certain amounts from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts excluded is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period and the high variability of certain amounts, such as mark-to-market adjustments. Organic revenue growth excludes the effect of acquisitions, divestitures and foreign currency. The Company is unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to its most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort or expense. The unavailable information could have a significant impact on the Company's fiscal 2026 fourth quarter and full year GAAP financial results. The Company initiated fiscal 2026 fourth quarter continuing operations guidance: Organic sales growth of 9% to 10% Operating leverage of 45% to 50% Adjusted EPS of ~$1.55 The Company's fiscal 2026 full year continuing operations guidance is as follows: Organic sales growth of ~8% (previously up ~6%) Operating leverage of 45% to 50% (previously ~50%) Adjusted EPS of ~$5.05 (previously ~$4.85) Adjusted free cash flow conversion of ~100% (unchanged) CONFERENCE CALL & WEBCAST INFO Johnson Controls will host a conference call to discuss this quarter's results at 8:30 a.m. ET today, which can be accessed via webcast at https://johnson-controls-q3-2026-earnings.open-exchange.net. A slide presentation will accompany the prepared remarks and has been posted on the investor relations section of the Johnson Controls website at https://investors.johnsoncontrols.com/news-and-events/events-and-presentations. A replay will be made available approximately two hours following the conclusion of the conference call. ABOUT JOHNSON CONTROLS Johnson Controls, a global leader in thermal management, mission-critical building systems, energy efficiency, and decarbonization, helps customers use energy more productively, reduce carbon emissions, and operate with the precision and resilience required in rapidly expanding industries such as data centers, healthcare, pharmaceuticals, advanced manufacturing, and higher education. For more than 140 years, Johnson Controls has delivered performance where it really matters. Backed by advanced technology, lifecycle services and an industry-leading field organization, we elevate customer performance, turn goals into real-world results and help move society forward. Visit johnsoncontrols.com for more information and follow @Johnsoncontrols on social platforms. JOHNSON CONTROLS CONTACTS: ### JOHNSON CONTROLS INTERNATIONAL PLC CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Johnson Controls International plc (the "Company") has made statements in this document that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document other than statements of historical fact are, or could be, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding the Company's future financial position, sales, costs, earnings, cash flows, other measures of results of operations, synergies and integration opportunities, capital expenditures, debt levels and market outlook are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" and terms of similar meaning are also generally intended to identify forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. The Company cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the Company's control, that could cause the Company's actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to: the ability to develop or acquire new products and technologies that achieve market acceptance and meet applicable quality and regulatory requirements; the ability to manage general economic, business and capital market conditions, including the impacts of trade restrictions, recessions, economic downturns and global price inflation; the ability to manage macroeconomic and geopolitical volatility, including changes to laws or policies governing foreign trade, including tariffs, economic sanctions, foreign exchange and capital controls, import/export controls or other trade restrictions as well as any associated supply chain disruptions; the ability to execute on the Company's operating model and drive organizational improvement; the ability to innovate and adapt to emerging technologies, ideas and trends in the marketplace, including the incorporation of technologies such as artificial intelligence; fluctuations in the cost and availability of public and private financing for customers; the ability to manage disruptions caused by international conflicts, including Russia and Ukraine and the ongoing conflicts in the Middle East; the ability to successfully execute and complete portfolio simplification actions, as well as the possibility that the expected benefits of such actions will not be realized or will not be realized within the expected time frame; managing the risks and impacts of potential and actual security breaches, cyberattacks, privacy breaches or data breaches, maintaining and improving the capacity, reliability and security of the Company's enterprise information technology infrastructure; the ability to manage the lifecycle cybersecurity risk in the development, deployment and operation of the Company's digital platforms and services; fluctuations in currency exchange rates; the ability to hire and retain senior management and other key personnel; changes or uncertainty in laws, regulations, rates, policies, or interpretations that impact business operations or tax status; the ability to adapt to global climate change, climate change regulation and successfully meet the Company's public sustainability commitments; the outcome of litigation and governmental proceedings; the risk of infringement or expiration of intellectual property rights; the ability to manage disruptions caused by catastrophic or geopolitical events, such as natural disasters, armed conflict, political change, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments; any delay or inability of the Company to realize the expected benefits and synergies of recent portfolio transactions; the tax treatment of recent portfolio transactions; significant transaction costs and/or unknown liabilities associated with such transactions; labor shortages, work stoppages, union negotiations, labor disputes and other matters associated with the labor force; and the cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Johnson Controls' business is included in the section entitled "Risk Factors" in Johnson Controls' Annual Report on Form 10-K for the year ended September 30, 2025 filed with the United States Securities and Exchange Commission ("SEC") on November 14, 2025, which is available at www.sec.gov and www.johnsoncontrols.com under the "Investors" tab. The description of certain of these risks is supplemented in Item 1A of Part II of Johnson Controls subsequently filed Quarterly Reports on Form 10-Q. The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified, and, except as required by law, Johnson Controls assumes no obligation, and disclaims any obligation, to update such statements to reflect events or circumstances occurring after the date of this document. Operating Activities of Continuing Operations Income from continuing operations:Attributable to Johnson Controls$ 749$ 618$ 1,913$ 1,454Attributable to noncontrolling interests3—7—Total7526181,9201,454Adjustments to reconcile net income to cash provided by operating activities of continuing operations:Depreciation and amortization162190495585Pension and postretirement benefits(11)(15)(39)(52)Deferred income taxes(61)(39)(58)(146)Noncash restructuring and impairment charges562316056Equity-based compensation294895107(Gain) loss on business divestiture(13)—(86)6Other - net(23)(24)22Changes in assets and liabilities:Accounts receivable(368)(172)(757)(79)Inventories(26)(52)(166)(79)Other assets(35)(76)62(289)Restructuring reserves15(25)2Accounts payable and accrued liabilities70125876431Accrued income taxes12523205(12)Cash provided by operating activities from continuing operations1,2897872,5721,586Investing Activities of Continuing OperationsCapital expenditures(95)(94)(243)(304)Acquisitions of businesses, net of cash acquired(291)(1)(291)(9)Divestitures of businesses, net of cash divested12213312Other - net(12)9(32)9Cash used by investing activities from continuing operations(276)(85)(235)(302)Financing Activities of Continuing OperationsNet proceeds (payments) from borrowings with maturities less than three months(259)(75)(194)283Proceeds from debt229—5451,369Repayments of debt——(639)(1,096)Stock repurchases and retirements(635)(310)(850)(970)Payment of cash dividends(245)(243)(734)(733)Employee equity-based compensation withholding taxes(2)(2)(62)(33)Other - net(4)(7)(12)69Cash used by financing activities from continuing operations(916)(637)(1,946)(1,111)Discontinued OperationsCash (used) provided by operating activities—208(98)255Cash used by investing activities(155)(25)(155)(52)Cash used by financing activities—(109)—(174)Cash (used) provided by discontinued operations(155)74(253)29Effect of exchange rate changes on cash, cash equivalents and restricted cash(1)(201)122(216)Change in cash, cash equivalents and restricted cash held for sale4——3Increase (decrease) in cash, cash equivalents and restricted cash(55)(62)260(11)Cash, cash equivalents and restricted cash at beginning of period713818398767Cash, cash equivalents and restricted cash at end of period658756658756Less: Restricted cash17251725Cash and cash equivalents at end of period$ 641$ 731$ 641$ 731 FOOTNOTES 1. Sale of Residential and Light Commercial HVAC Business In July 2025, the Company sold its Residential and Light Commercial ("R&LC") HVAC business, including the North America Ducted business and the global Residential joint venture with Hitachi Global Life Solutions, Inc. ("Hitachi"), of which Johnson Controls owned 60% and Hitachi owned 40%. The R&LC HVAC business met the criteria to be classified as a discontinued operation and, as a result, its historical financial results are reflected in the consolidated financial statements as a discontinued operation. 2. Non-GAAP Measures The Company reports various non-GAAP measures in this earnings release and the related earnings presentation. Non-GAAP measures should be considered in addition to, and not as replacements for, the most comparable GAAP measures. Refer to the following footnotes for further information on the calculations of the non-GAAP measures and reconciliations of the non-GAAP measures to the most comparable GAAP measures. Organic sales Organic sales growth excludes the impact of acquisitions, divestitures and foreign currency. Management believes organic sales growth is useful to investors in understanding period-over-period sales results and trends. Cash flow Management believes free cash flow and adjusted free cash flow measures are useful to investors in understanding the strength of the Company and its ability to generate cash. These non-GAAP measures can also be used to evaluate the Company's ability to generate cash flow from operations and the impact that this cash flow has on its liquidity. Management also believes adjusted free cash flows are useful to investors in understanding period-over-period cash flows, cash trends and ongoing cash flows of the Company. Adjusted free cash flow and adjusted free cash flow conversion are non-GAAP measures which exclude the impacts of the following: JC Capital cash flows primarily include activity associated with finance/notes receivables and inventory and/or capital expenditures related to lease arrangements. JC Capital net income is primarily related to interest income on the finance/notes receivable and profit recognized on arrangements with sales-type lease components. The impact of the accounts receivables factoring program which was discontinued in March 2024. Cash payments related to the water systems AFFF settlement and cash receipts for AFFF-related insurance recoveries. Prepayment of royalty fees associated with certain IP licensed to divested businesses. Discrete tax payments are non-recurring tax settlements for certain non-US jurisdictions. Adjusted financial measures Adjusted financial measures are non-GAAP measures that are derived by excluding certain amounts from the corresponding financial measures determined in accordance with GAAP. The determination of the excluded amounts is a matter of management judgment and depends upon the nature and variability of the underlying expense or income amounts and other factors. As detailed in the tables included in footnotes four through seven, the following items were excluded from certain financial measures: Net mark-to-market adjustments are the result of adjusting restricted asbestos investments and pension and postretirement plan assets to their current market value. These adjustments may have a favorable or unfavorable impact on results. Restructuring and impairment costs represents restructuring costs attributable to Johnson Controls including costs associated with exit plans or other restructuring plans that will have a more significant impact on the underlying cost structure of the organization. Impairment costs primarily relate to write-downs of goodwill, intangible assets and assets held for sale to their fair value. Water systems AFFF settlement and insurance recoveries include amounts related to a settlement with a nationwide class of public water systems concerning the use of AFFF manufactured and sold by a subsidiary of the Company, and AFFF-related insurance recoveries. Transaction/separation costs include costs associated with significant mergers and acquisitions. Transformation costs represent incremental expenses incurred in association with strategic growth initiatives and cost saving opportunities in order to realize the benefits of portfolio simplification and the Company's lifecycle solutions strategy. ERP asset - accelerated depreciation represents a change in ERP strategy within the EMEA segment, which led to certain assets being abandoned and the useful lives reduced. Loss (gain) on divestiture relates to the sale of the ADT Mexico Security and ADTi businesses. EMEA joint venture loss relates to certain non-recurring losses associated with the equity method accounting of a joint venture company. Discrete tax items, net includes the net impact of discrete tax items within the period, including the following types of items: changes in estimates associated with valuation allowances, changes in estimates associated with reserves for uncertain tax positions, withholding taxes recorded upon changes in indefinite re-investment assertions for businesses to be disposed of and impacts from statutory rate changes. Related tax impact includes the tax impact of the various excluded items. Management believes the exclusion of these items is useful to investors due to the unusual nature and/or magnitude of the amounts. When considered together with unadjusted amounts, adjusted financial measures are useful to investors in understanding period-over-period operating results, business trends and ongoing operations of the Company. Management may also use these metrics as guides in forecasting, budgeting and long-term planning processes and for compensation purposes. Operating leverage Operating leverage is defined as the ratio of the change in adjusted EBIT for the period, divided by the corresponding change in net revenues. Management believes operating leverage is a useful metric to reflect enterprise value creation, capturing the impact of scale and cost discipline across the organization. Debt ratios Management believes that net debt to adjusted EBITDA, a non-GAAP measure, is useful to understanding the Company's financial condition as the ratio provides an overview of the extent to which the Company relies on external debt financing for its funding and also is a measure of risk to its shareholders. 3. Sales The following tables detail the changes in sales from continuing operations attributable to organic growth, foreign currency, acquisitions, divestitures and other (unaudited): 4. Cash Flow, Free Cash Flow and Free Cash Flow Conversion The following table includes operating cash flow conversion, free cash flow and free cash flow conversion (unaudited): The following table includes adjusted free cash flow and adjusted free cash flow conversion (unaudited): 5. EBIT, Segment Profitability and Corporate Expense The following table reconciles income from continuing operations before income taxes to EBIT and adjusted EBIT. The following tables reconcile Segment EBIT to Segment EBITA (non-GAAP) as reported and reconcile Segment EBIT and Segment EBITA (non-GAAP) as reported to adjusted Segment EBIT and Segment EBITA (non-GAAP) and adjusted Segment EBIT and Segment EBITA (non-GAAP) margin (unaudited): The following table reconciles adjusted Segment EBITA (non-GAAP) to adjusted Segment EBITA margin (non-GAAP) (unaudited): The following table reconciles Corporate expense from continuing operations as reported to the comparable adjusted amounts (unaudited): 6. Net Income and Diluted Earnings Per Share The following tables reconcile net income from continuing operations attributable to JCI and diluted earnings per share from continuing operations as reported to the comparable adjusted amounts (unaudited): The following table reconciles the denominators used to calculate basic and diluted earnings per share (in millions; unaudited): 7. Debt Ratios The following table includes continuing operations and details net debt to income before income taxes and net debt to adjusted EBITDA (unaudited): The following table reconciles income from continuing operations to adjusted EBIT and adjusted EBITDA (unaudited): 8. Income Taxes After adjusting for certain non-recurring items, the Company's effective tax rate for continuing operations was approximately 17% for the three and nine months ending June 30, 2026 and approximately 12% for the three and nine months ending June 30, 2025. 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Johnson Controls International plc JCI reported third-quarter fiscal 2026 (ended June 2026) adjusted earnings of $1.42 per share, which beat the Zacks Consensus Estimate of $1.32. The bottom line increased 35.2% year over year.Total revenues (continuing operations) of $6.61 billion surpassed the consensus estimate of $6.43 billion in the quarter. The top line increased 9.3% year over year, whereas organic revenues increased 10%. Effective from the third quarter of fiscal 2025, the company started reporting under three segments, namely Americas, EMEA and APAC.Americas: Revenues were $4.50 billion, up 11% year over year. The Zacks Consensus Estimate was pegged at $4.34 billion.Organic sales also increased 11%, driven by continued strength across the applied heating, ventilation and air conditioning (HVAC) business. Adjusted segment EBITA increased 27% year over year to $951 million.EMEA: Revenues totaled $1.26 billion, down 1% year over year. The Zacks Consensus Estimate was pegged at $1.25 billion.Organic sales rose 1%, with both products and systems and services increasing 1%. Adjusted EBITA was $181 million, up 1% year over year.APAC: Revenues increased 15% to $846 million. The Zacks Consensus Estimate was pegged at $777 million.Sales rose 15% organically, driven by 20% growth in products and systems and continued strength in the applied HVAC business. Adjusted EBITA was $179 million, up 25% year over year. Johnson Controls International plc price-consensus-eps-surprise-chart | Johnson Controls International plc Quote In the fiscal third quarter, Johnson Controls’ cost of sales increased 8.8% year over year to approximately $4.14 billion. Gross profit increased 10.2% year over year to $2.47 billion and the margin rose 30 basis points (bps) to 37.4%. Selling, general and administrative expenses were $1.41 billion, down 0.7% year over year. Johnson Controls had cash and cash equivalents of $641 million as of June 30, 2026, compared with $379 million at the end of fiscal 2025 (ended Sept. 30, 2025). Long-term debt was $8.30 billion compared with $8.59 billion at the end of fiscal 2025.In the first nine months of fiscal 2026, the company generated net cash of $2.57 billion from operating activities compared with $1.59 billion in the year-ago period. It reported adjusted free cash flow of $2.13 billion in the same period compared with $1.79 billion in the prior-year period.The company paid dividends worth $734 million and repurchased shares worth $850 million in the first nine months of fiscal 2026. Johnson Controls anticipates organic revenue growth of 9-10% from the year-ago level. Operating leverage is estimated to be 45-50%. It expects adjusted earnings to be about $1.55 per share. Johnson Controls currently anticipates organic revenue growth to be about 8% from the prior-year level compared with approximately 6% expected earlier. Operating leverage is expected to be 45-50% compared with approximately 50% projected previously. It expects adjusted earnings per share to be approximately $5.05, higher than $4.85 projected previously. It expects adjusted free cash flow conversion of about 100%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Constellium SE CSTM came out with quarterly earnings of $1.04 per share in the second quarter of 2026, beating the Zacks Consensus Estimate of $0.91 per share. This compares with earnings of $0.25 per share a year ago.Constellium posted revenues of $2.75 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 3.5%. This compares with year-ago revenues of $2.1 billion.Generac Holdings Inc. GNRC came out with quarterly earnings of $2.91 per share in the second quarter of 2026, beating the Zacks Consensus Estimate of $1.95 per share. This compares with earnings of $1.65 per share a year ago.Generac Holdings posted revenues of $1.17 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 0.37%. This compares with year-ago revenues of $1.06 billion.Graco Inc. GGG reported second-quarter 2026 adjusted earnings of 91 cents per share, up 17% from 78 cents in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of 81 cents by 12.4%.The company’s net sales rose 3% year over year to $590.6 million but lagged the consensus estimate of $609 million by 3%. Organic order backlog (excluding acquisitions) rose 28% from the end of 2025. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Johnson Controls International plc (JCI) : Free Stock Analysis Report Graco Inc. (GGG) : Free Stock Analysis Report Generac Holdings Inc. (GNRC) : Free Stock Analysis Report Constellium SE (CSTM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: July 29, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Johnson Controls International PLC (NYSE:JCI) reported a 10% revenue growth and a 35% increase in adjusted EPS, showcasing strong financial performance. The company's order momentum sustained above 25%, and backlog grew more than 30% to a record $21 billion, indicating robust demand. JCI's adjusted EBIT margin expanded by 260 basis points to 17%, reflecting improved operational efficiency. The company introduced an AI Factory Absorption Chiller Reference Design Guide, which can reduce cooling electrical demand by approximately 44%, enhancing energy efficiency. JCI's proprietary business system is translating into more predictable execution and improved productivity, supporting long-term growth potential. Supply chain challenges persist, particularly in a high-growth environment, which may impact JCI's ability to meet demand. Despite strong performance in the Americas, EMEA sales only increased by 1% due to ongoing geopolitical conflicts, indicating regional vulnerabilities. The company faces occasional bottlenecks with external vendors, which could affect product delivery timelines. JCI's growth in applied HVAC is heavily reliant on data center demand, which may pose risks if this sector experiences a downturn. The ongoing strategic review of certain portfolio segments suggests potential divestitures, which could lead to short-term disruptions. Warning! GuruFocus has detected 6 Warning Signs with QUAD. Is JCI fairly valued? Test your thesis with our free DCF calculator. Q: How is Johnson Controls managing supply chain challenges, especially in the high-growth data center sector? A: Joachim Widemenes, CEO, explained that while supply chain issues are common in high-growth environments, Johnson Controls is more vertically integrated than many competitors, which helps control more of their supply chain. Occasionally, external vendor bottlenecks occur, but they try to anticipate and address these proactively. Q: With the strong backlog and current growth, what is the outlook for FY27? A: Mark van Diepenbeek, CFO, stated that while it's early to provide specific FY27 guidance, they are confident in achieving high single-digit top-line growth and at least 30% incremental operating leverage, supported by a strong backlog and pipeline. Q: Can you discuss the growth potential and capacity constraints in the applied HVAC sector? A: Joachim Widemenes noted that the pipeline is growing healthily, with significant demand from data centers. They have made meaningful investments in capacity and are ramping up ahead of schedule, aided by their proprietary business system, which helps create more capacity within existing facilities. Q: Are there any market share shifts in the data center sector, and how does Johnson Controls position itself? A: Joachim Widemenes explained that large data center customers typically engage with vendors during the design phase, and Johnson Controls focuses on being actively involved in this process. They aim to be competitive in initial selections and execute well to potentially secure more business over time. Q: What is the interest level and potential market size for the modular data center product developed with Armada? A: Joachim Widemenes highlighted that the modular data center product is gaining interest, especially for decentralized and edge applications. While the total addressable market is still forming, they are working on meaningful opportunities and expect to provide more details in the coming quarters. For the complete transcript of the earnings call, please refer to the full earnings call transcript.