Sign in

You're signed outSign in or to get full access.

JC

Johnson Controls International plc (JCI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid execution: sales $5.676B (+1% reported, +7% organic), adjusted EPS $0.82, consolidated adjusted segment EBITA margin expanded to 16.7%; Building Solutions backlog reached a record $14.0B (+12% YoY) .
  • Bold: Adjusted EPS beat internal guidance, exceeding the high end of the $0.77–$0.79 range set in Q1; margin also ran above prior Q2 guidance (~16.5%) to 16.7% .
  • Segment performance mixed: Global Products margins expanded sharply to 30.3% with Applied HVAC >20% growth (ex-divestitures); EMEALA margin +410 bps; APAC margin +360 bps; BSNA margin -20 bps as Systems outpaced Service .
  • FY25 guidance raised: adjusted EPS to ~$3.60 (from ~$3.50–$3.60) and adjusted FCF conversion to ~100% (from 90%+); Q3 guide set at organic MSD growth, ~17.5% adjusted segment margin, and $0.97–$1.00 adjusted EPS .
  • Narrative catalysts: tariff mitigation playbook (exposure ~2% of sales/~3% COGS), CEO’s lean/customer-centric operating model, and sustained data center demand supporting Applied HVAC growth .

What Went Well and What Went Wrong

What Went Well

  • “Organic sales grew 7%. Segment margins expanded 180 basis points to 16.7% and adjusted EPS increased 19%.” — CEO Joakim Weidemanis, underscoring execution and demand strength .
  • Global Products margin expansion to 30.3% (+600 bps) on operational efficiencies and volumes; Applied HVAC grew >20% ex-divestitures, with strong double-digits in North America and EMEALA .
  • Free cash flow strength: Q2 adjusted FCF $463M; YTD adjusted FCF $1.066B, enabling FY25 FCF conversion uplift to ~100% — CFO highlighted sustained working capital improvement .

What Went Wrong

  • BSNA margin fell 20 bps YoY to 13.4% as Systems growth outpaced Service, pressuring mix .
  • Tariffs are dampening near‑term margin-rate expansion in H2 despite pass‑through; management will recover cost $1-for-$1 but not take incremental margin on that portion .
  • APAC orders were flat as JCI prioritizes profitable projects (upfront payments) in China; though service orders were strong, the Systems business remains a watch item .

Financial Results

MetricQ4 2024 (oldest)Q1 2025Q2 2025 (newest)
Revenue ($USD Billions)$6.248 $5.426 $5.676
GAAP Diluted EPS (Continuing Ops)$0.80 $0.55 $0.71
Adjusted Diluted EPS$1.28 $0.64 $0.82
SegmentQ4 2024 Sales ($MM)Q4 2024 Adj EBITA Margin %Q1 2025 Sales ($MM)Q1 2025 Adj EBITA Margin %Q2 2025 Sales ($MM)Q2 2025 Adj EBITA Margin %
Building Solutions North America$3,223 15.0% $2,744 12.1% $2,916 13.4%
Building Solutions EMEALA$1,113 11.5% $1,073 10.1% $1,085 12.5%
Building Solutions Asia Pacific$664 14.2% $527 9.3% $542 14.6%
Global Products$2,394 28.0% $1,082 30.1% $1,133 30.3%
KPIQ4 2024Q1 2025Q2 2025
Orders Organic Growth+8% (BS) +16% +5%
Building Solutions Backlog ($USD Billions)$13.1 $13.2 $14.0
Cash from Ops (Continuing) ($MM)$1,352 $249 $550
Free Cash Flow ($MM)$1,318 (total) $133 $456
Adjusted Free Cash Flow ($MM)$1,087 (total) $603 $463
Share Repurchases ($MM)$370 $330 $330
Dividend Paid ($MM)$247 $245 $245
Net Debt / Adjusted EBITDA2.0x (FY) 2.3x 2.4x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Sales GrowthFY25Mid-single digits Mid-single digits Maintained
Adjusted Segment EBITA Margin ImprovementFY25>80 bps YoY ~90 bps YoY Raised
Adjusted EPSFY25~$3.50–$3.60 ~$3.60 Raised (toward upper end)
Adjusted FCF ConversionFY25~90%+ ~100% Raised
Adjusted EPSQ3 2025—~$0.97–$1.00 Initiated
Adjusted Segment EBITA MarginQ3 2025—~17.5% Initiated
Organic Sales GrowthQ3 2025—Mid-single digits Initiated
Additional FY25 items (Corp Exp/Amort/NFC/Tax/Shares)FY25—Corp ~$435M; Amort ~$470M; NFC ~$330M; Tax ~12%; Shares ~660M Disclosed
DividendOngoing$0.37/quarter (prior practice)$0.37/quarter (approved Jun 11, 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Lean execution, SKU simplificationPortfolio simplification noted (Q4); execution emphasis (Q1) CEO pushing lean, value-stream mapping; targeting SKU reduction and process speed Intensifying operational focus
Tariffs & macroQ4: macro/geopolitical risks cited Tariff exposure ~2% of sales/~3% COGS; pass-through without margin; mitigations (regional sourcing, pricing, change orders) Managed headwind; dampens margin rate in H2
Data centers & Applied HVACQ4: Applied >20% growth (NA) Sustained demand; York chiller differentiation; investing in field competencies; >20% Applied growth ex-divestitures Strengthening growth driver
Service attachment & field productivityQ4/Q1: service growth and margin mix Focus on raising attachment; lean in service; response-time as competitive edge Structural uplift targeted
Regional trendsQ4: APAC Systems weakness; EMEALA strength EMEALA margin +410 bps; APAC orders flat (China prioritization); BSNA margin -20 bps due to mix EMEALA improving; APAC selective; BSNA mixed
Regulatory/legal (AFFF)FY24 settlement and insurance recoveries Continued adjustments reflected in FCF reconciliation; disclosures maintained Legacy tail managed

Management Commentary

  • “Organic sales grew 7%. Segment margins expanded 180 basis points to 16.7% and adjusted EPS increased 19%… record backlog grew 12% to $14 billion.” — CEO Joakim Weidemanis .
  • “For Q3, we anticipate organic sales growth of mid-single digits, adjusted EBITDA margin of approximately 17.5% and adjusted EPS in the range of $0.97 to $1.00… For the full year… adjusted EPS to approximate $3.60… free cash flow conversion ~100%.” — CFO Marc Vandiepenbeeck .
  • “Tariff exposure… is approximately 2% of sales or 3% of cost of goods sold… we have activated many levers… regionalized manufacturing, local sourcing, pricing action, and change orders.” — CFO .
  • “We have… a differentiated high-performance York chiller platform… not off-the-shelf; application-specific modules… higher performance.” — CEO on data center cooling .
  • “We will recover $1-for-$1 tariff impacts without applying margin on top… maintaining perceived fairness for multi-decade customer relationships.” — CFO .

Q&A Highlights

  • Lean deployment and SKU reduction: Management will start with prioritized value streams; early work underway; opportunity across factories, field, and back office .
  • Margin “entitlement”: CEO sees ample headroom in field margins via process, digital tools; no structural ceiling vs peers .
  • Capital allocation: Strategy work underway; exploring tech‑angle differentiation; returns to shareholders continue while evaluating acquisitive opportunities .
  • Pricing & backlog under inflation/tariffs: Strong contractual terms and improved execution on change orders support pricing recovery and backlog integrity .
  • Installation vs service attach: Pragmatic portfolio approach to where installation drives competitiveness, financials, and attach; not one-size-fits-all .

Estimates Context

  • S&P Global consensus for Q2 2025 EPS/revenue and Q3 2025 forward estimates was unavailable through our data interface at the time of analysis; comparisons to Street estimates cannot be provided.
  • However, relative to internal guidance set in Q1 for Q2 (adjusted EPS ~$0.77–$0.79; margin ~16.5%), Q2 adjusted EPS of $0.82 and margin of 16.7% represented a clear beat and upside to margin targets .

Key Takeaways for Investors

  • Beat vs prior Q2 guidance and FY25 raise indicate operational momentum and confidence; watch for further lean-driven margin uplift and service mix benefits .
  • Global Products margin strength (30%+) and Applied HVAC growth (>20% ex-divestitures) should continue to underpin consolidated profitability; monitor for sustainability as volumes/mix evolve .
  • Americas/BSNA mix (Systems > Service) modestly pressured BSNA margin this quarter; service attachment and lean deployment are levers to restore margin cadence .
  • Tariff headwinds are managed via pass-through and supply chain localization, but margin rate expansion may be dampened near term; expect offset over time as operating model simplification takes hold .
  • Cash generation is robust: YTD adjusted FCF $1.066B and FY25 conversion raised to ~100%; supports continued buybacks/dividends ($0.37/share) and strategic flexibility .
  • Backlog and orders remain resilient (BS backlog $14B, +12% YoY), providing H2 revenue visibility; watch APAC Systems selectivity in China and continued EMEALA productivity gains .
  • New CEO’s lean/business-system orientation and potential portfolio optimization could be medium-term catalysts; expect updates as strategy work matures .