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Last update on 2024-06-06

Johnson Controls (JCI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Johnson Controls (JCI) scores 7/9 in Piotroski F-Score 2023, indicating strong profitability and operating efficiency. Comprehensive financial analysis inside.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running Johnson Controls (JCI) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

We looked at Johnson Controls (JCI) using the Piotroski Score, which figures out how strong and financially healthy a company is based on 9 different criteria. The score ranges from 0 to 9, and JCI scored a 7, meaning it's in pretty good shape. Here's a breakdown of how they did in several areas: - **Profitability:** JCI showed positive net income and operating cash flow, and both of these numbers have been moving in the right direction. Their return on assets (ROA) also increased, even if it's still below the industry average. Their operating cash flow was higher than their net income, which is good news. - **Liquidity:** Unfortunately, JCI's leverage (debt compared to equity) actually went up, which is not a great sign. Their current ratio, which shows if they could cover short-term debts with short-term assets, fell below 1 for the first time in years, making it a bit concerning. - **Operating Efficiency:** The company’s gross margin slightly improved, reflecting better cost management. The asset turnover ratio, which shows how well they are using their assets to generate sales, also got better. Lastly, they reduced the number of outstanding shares, which is good for shareholders. In summary, JCI is doing well in terms of profitability and operating efficiency, but has some concerns in the liquidity area.

Insights for Value Investors Seeking Stable Income

Johnson Controls (JCI) has a strong Piotroski Score of 7, which means it's generally a solid investment. They’re doing well in making profits and using their assets smartly. But, keep an eye on their rising debt levels and declining liquidity, because these can be risky. Overall, if you're thinking about investing, JCI looks worthwhile but continue to monitor their financial health.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Johnson Controls (JCI)

Company has a positive net income?

Net income refers to a company's total earnings or profit. It is a crucial measure of a company's profitability over a period.

Historical Net Income of Johnson Controls (JCI)

Johnson Controls (JCI) posted a net income of $1.849 billion in 2023, indicating a prosperous year, especially when compared to certain past years where the net income was negative, such as -$338 million in 2009 and -$868 million in 2017. This positive net income scores 1 point in the Piotroski analysis. Observing the trend over the past 20 years, it is notable that Johnson Controls had significant fluctuations, with remarkable highs in 2019 ($5.674 billion). Continuous positive net income over the past four years (including an increase from $1.532 billion in 2022) shows resilience and improving profitability. This positive trend enhances shareholder confidence and underscores the firm’s ability for sustainable growth.

Company has a positive cash flow?

This criterion assesses whether the cash flow from operations (CFO) is positive, indicating the company's basic operating efficiency and financial health.

Historical Operating Cash Flow of Johnson Controls (JCI)

The Cash Flow from Operations (CFO) for Johnson Controls (JCI) in 2023 is reported to be $2,221,000,000, which is indeed positive. This aligns well with the trend observed over the past 20 years, where JCI has experienced several peaks and troughs but mostly maintained positive operational cash flow. For instance, historical figures show $2,686,000,000 in 2013 and an even higher $2,513,000,000 in 2018. A notable dip occurred in 2017 with only $12,000,000, but the steady recovery thereafter (e.g. $2,197,000,000 in 2020, $1,986,000,000 in 2021) indicates strong resilience. With the current year's CFO being positive, it grants JCI an additional point in the Piotroski Analysis, signaling good operational health.

Return on Assets (ROA) are growing?

The Change in ROA criterion assesses whether Johnson Controls has managed to improve its Return on Assets (ROA) over the specified period. It is an important indicator of profitability and operational efficiency.

Historical change in Return on Assets (ROA) of Johnson Controls (JCI)

For Johnson Controls, the ROA increased from 0.0365 in 2022 to 0.0438 in 2023. This positive change indicates that the company has improved its ability to generate profit from its assets, warranting an addition of 1 point. Over the last two decades, JCI's operating cash flow has seen significant fluctuation, peaking at 2.68 billion in 2013 and dropping to a mere 12 million in 2017. Meanwhile, comparing industry medians, JCI's ROA still lags behind the industry median, which stood at 0.2389 in 2023. While this trend is favorable, JCI has room for improvement to match or surpass industry standards.

Operating Cashflow are higher than Netincome?

This criterion checks if the company's operating cash flow is higher than its net income, highlighting the quality of earnings. A higher operating cash flow relative to net income suggests that the earnings are cash-based and not reliant on non-cash accounting adjustments.

Historical accruals of Johnson Controls (JCI)

With an operating cash flow of $2,221,000,000 and a net income of $1,849,000,000 in 2023, Johnson Controls scores positively on this criterion, adding 1 point. The operating cash flow exceeding net income signifies strong earnings quality and operational efficiency. Examining historical data, Johnson Controls has frequently demonstrated this trend, although notable exceptions occurred in 2009 and 2016, where net income dipped into negative territory. Overall, the cashflow performance highlights resilience and growth; in the past two decades, operating cash flow has trended generally upwards, punctuated by occasional dips.

Liquidity of Johnson Controls (JCI)

Leverage is declining?

Leverage refers to the ratio of a company's debt to its equity and is crucial for assessing its financial health

Historical leverage of Johnson Controls (JCI)

In 2022, Johnson Controls had a leverage ratio of 0.1761, which increased to 0.1851 in 2023. This trend indicates a higher reliance on debt financing in 2023, which raises concerns regarding financial risk. Additionally, historical data over the last 20 years shows significant fluctuations, with leverage peaking at 0.2309 in 2016 before gradually declining. The recent increase, however, reverses the favorable trend observed since 2016. Therefore, no point is added in this criterion due to the increased leverage.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. It is an essential indicator of liquidity and operating efficiency.

Historical Current Ratio of Johnson Controls (JCI)

For Johnson Controls (JCI), the Current Ratio has decreased from 1.0397 in 2022 to 0.9687 in 2023, indicating a deterioration in liquidity and short-term financial strength. While a Current Ratio above 1 is generally favorable, the declining trend could signal potential issues in managing short-term obligations or shrinking working capital. Additionally, the 2023 figure of 0.9687 is significantly below the industry median of 1.2511, suggesting that JCI may be underperforming its peers in liquidity. Historically, JCI's Current Ratio has fluctuated but has now reached below 1 for the first time since at least 2003, which further supports concerns about its current financial health. Thus, no point is awarded based on Piotroski analysis (0 points).

Number of shares not diluted?

This criterion examines changes in the number of outstanding shares, reflecting shareholder dilution or concentration.

Historical outstanding shares of Johnson Controls (JCI)

In 2023, Johnson Controls (JCI) has 684,300,000 outstanding shares compared to 696,100,000 in 2022. This true decrease is beneficial, showing JCI has reduced outstanding shares by 11,800,000 or 1.69%, which means a lower dilution of shareholder value. By reducing the total number of shares, the company could be focusing on improving shareholder value by repurchasing shares. This action is often perceived positively as it can potentially increase earnings per share (EPS) and signal company confidence in its long-term prospects. Therefore, JCI earns 1 point in this criterion.

Operating of Johnson Controls (JCI)

Cross Margin is growing?

Gross Margin reflects a company's core profitability by measuring the proportion of revenue left after incurring the direct costs of producing goods and services. A higher margin indicates efficient cost management and pricing strategy.

Historical gross margin of Johnson Controls (JCI)

Comparing Johnson Controls' Gross Margin in 2023 (0.3348) with 2022 (0.3298), we observe an increase of 0.005. This slight uptick indicates a positive trend, suggesting improved cost management and perhaps some operational efficiencies. Historically, gross margins have drastically improved since 2003 (0.1422) and surpass industry medians like in 2023 where the industry median was 0.2389. This continued upward trajectory strengthens Johnson Controls' competitive positioning and underscores its strategic prowess in maintaining cost controls while possibly benefiting from favorable market conditions. Therefore, we assign 1 point for this criterion.

Asset Turnover Ratio is growing?

Changes in asset turnover ratio are a clear indicator of how efficiently a company uses its assets to generate sales. An increase suggests improved efficiency.

Historical asset turnover ratio of Johnson Controls (JCI)

The asset turnover ratio for Johnson Controls (JCI) increased from 0.602 in 2022 to 0.6349 in 2023. This indicates that JCI has become more efficient in utilizing its assets to generate revenue, adding a positive point to its financial health. Historical data over the last 20 years reflect significant fluctuation, peaking in early 2000s before experiencing a progressive decline. The recent uptrend is a positive sign, especially post the 2009 financial crisis and the dip in 2020 likely due to the COVID-19 pandemic. This uptick reaffirms JCI’s stabilization and improvement in asset management.


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