Johnson Controls 2025 Q3 Earnings Misses Targets as Net Income Falls 26%

Johnson Controls (JCI) reported its fiscal 2025 Q3 earnings on Jul 29th, 2025. The company's net income declined to $778 million, down 26% from $1.05 billion in the previous year, missing analyst expectations. However, Johnson Controls raised its full-year fiscal 2025 EPS guidance to a range of $3.65-$3.68, indicating confidence in future performance. The company also anticipates adjusted EPS for Q4 2025 to be between $1.14 and $1.17, reflecting a positive outlook for upcoming quarters.

Revenue

The total revenue for Johnson Controls in the third quarter of fiscal 2025 rose by 2.6%, reaching $6.05 billion, compared to $5.90 billion the same quarter last year. The Products and Systems segment generated $4.12 billion, illustrating solid performance, while the Services segment contributed $1.93 billion to the total sales, culminating in the overall revenue figure of $6.05 billion.

Earnings/Net Income

Johnson Controls experienced a decline in earnings per share (EPS), which fell by 26.2% from $1.45 in Q3 2024 to $1.07 in Q3 2025. Similarly, the company's net income dropped by 26% from $1.05 billion to $778 million. The EPS figures indicate a challenging quarter, showcasing a decrease in profitability compared to the previous year.

Price Action

The stock price of Johnson Controls has dropped 3.12% during the latest trading day, has dropped 4.67% during the most recent full trading week, and has edged down 1.15% month-to-date.

Post Earnings Price Action Review

The strategy of purchasing Johnson Controls shares after a quarter-over-quarter revenue increase on the earnings report release date and holding them for 30 days has proven highly successful over the past three years. This approach has yielded an overall return of 161.81%, significantly outperforming the benchmark return of 87.35%, thereby generating an excess return of 74.46%. With a compound annual growth rate (CAGR) of 21.36%, the strategy has demonstrated consistent growth throughout the 30-day holding period. Despite experiencing a maximum drawdown of 0.00%, the strategy maintained a relatively high Sharpe ratio of 0.77, indicating favorable risk-adjusted returns.

CEO Commentary

Joakim Weidemanis, Chief Executive Officer, emphasized that Johnson Controls achieved strong third-quarter results with organic sales growth of 6%, segment margins expanding 20 basis points to 17.6%, and adjusted EPS growth of 11%. He noted that customer centricity would drive accelerated growth and highlighted the importance of enhancing R&D investments to address gaps in their product portfolio. Weidemanis expressed optimism about their competitive advantage from a strong field presence and emphasized a disciplined approach to operational improvement through a new business system focused on simplification, acceleration, and scaling. He aims to build a culture that prioritizes customer needs and drives consistent results.

Guidance

Johnson Controls anticipates organic sales growth of low single digits for Q4, with adjusted segment EBITA margin expected at approximately 18.6%. The company guides for adjusted EPS in the range of $1.14 to $1.17. For the full year, adjusted EPS is projected to be between $3.65 and $3.68, representing 14% to 15% growth. Additionally, they expect to achieve over 100% free cash flow conversion, targeting the return of 100% of free cash flow to shareholders through dividends and share repurchases.

Additional News

Recently, Johnson Controls made significant executive changes to bolster its leadership team. Chris Scalia was appointed as the Executive Vice President and Chief Human Resources Officer. Scalia brings deep business transformation, talent, and change management expertise, which aligns with the company's growth strategy. Additionally, Johnson Controls has been actively returning value to shareholders, distributing $243 million in dividends and repurchasing 3.8 million shares for $310 million during the third quarter of 2025. These strategic moves reflect the company's commitment to enhancing shareholder value while strengthening its leadership to drive future growth.