Analyst Downgrades: Allegion and Johnson Controls Face Market Challenges Analyst Downgrades: Allegion and Johnson Controls Face Market Challenges

Published On: February 23, 2024 1:39 pm

Analyst’s Perspective

Mizuho Securities analyst Brett Linzey recently downgraded both Allegion Plc (ALLE) and Johnson Controls International Plc (JCI) to Neutral, shifting from Buy recommendations.

Allegion’s Performance

Allegion reported a fourth-quarter adjusted EPS that surpassed expectations at $1.68, although sales of $897.40 million fell short of the consensus estimate of $902.10 million. Linzey downgraded ALLE due to its recent strong stock performance and a perceived balanced risk/reward scenario moving forward.

Expectations for the non-residential markets are mixed, with steady performance in institutional sectors offset by softening commercial segments. Linzey anticipates a challenging year in 2024, with tough comparables in the first quarter and a shift in electronics/software performance trends.

While favorable price/cost/productivity dynamics are projected to bolster FY24 margins, concerns about non-residential markets persist. The analyst now forecasts adjusted EPS of $7.07 for FY24 and $7.50 for FY25.

Johnson Controls’ Outlook

In contrast, Johnson Controls reported first-quarter revenues of $6.094 billion, missing analyst estimates, while adjusted EPS of $0.51 met expectations. Linzey highlighted the company’s inconsistent quarterly performance and lack of confidence in sustained execution and cash generation improvement.

A challenging demand environment, particularly in China, and backlog execution issues led to a downgrade in the FY24 adjusted EPS outlook. Linzey’s estimates for FY24 stand at $3.63 per share, expecting a slight improvement to $3.97 in FY25.