Johnson Controls has excellent long-term growth prospects
Management thinks it's operating in a $250 billion growth market over the next decade
Lee Samaha (Johnson Controls). During its investor day presentation in September, management outlined its belief that it has a $250 billion "incremental market revenue opportunity" ahead of it over the next decade. That's on top of its existing annual addressable market of $300 billion.
Those are huge numbers, and they dwarf Johnson Controls' revenue of $23.7 billion in fiscal 2021. Still, the "incremental" opportunity indicates the kind of opportunity ahead of the company coming from three megatrends.
First, management believes its solutions help building owners to address their net-zero carbon emissions targets by decarbonizing buildings. Second, the pandemic has heightened awareness of the need to create healthy, well-ventilated buildings. Third, the explosion of digital technology and analytics capability will lead to increased adoption of smart building technology.
For reference, Johnson Controls manufactures building products, including heating, ventilation, and air conditioning (HVAC), building controls, and fire and security products, while offering services connected to them. The services part of the business, driven by its OpenBlue software platform and digital capability, is the key to its growth prospects.
Company guidance is for annual earnings growth of 18%-21% to 2024, and the recent dip in the share price is creating a compelling entry point into the stock.
