Johnson Controls Earnings: Organic Growth to Accelerate in Fourth Quarter; CEO Oliver to Retire

Shares of Johnson Controls moved higher on July 31 after the firm released its fiscal third-quarter earnings and announced that CEO George Oliver will retire. Oliver came to Johnson Controls with the 2016 Tyco merger and has seen the firm through significant change, including most recently the announced sale of the residential and light commercial heating, ventilation, and air-conditioning businesses (see our July 24 analyst note). Considering that, in our view, Johnson Controls’ transformation will mostly be over with this divestiture, and the involvement of an activist investor (Elliot Investment Management), we weren’t overly surprised that Oliver decided to step down. With Johnson Controls’ transformation mostly behind it, we think strong execution and a continued focus on delivering differentiated service and product offerings will be key for the company’s next phase of growth. We’ve maintained our $72 per share fair value estimate as we don’t expect to materially change our near- or long-term forecasts.