Analyst Note| Brian Bernard, CFA, CPA |
Johnson Controls reported strong fiscal fourth-quarter results that largely met our expectations. Reported revenue increased approximately 7% (5% organic growth) to $6.4 billion as the firm realized broad-based growth across its product portfolio. The commercial heating, ventilation, and air-conditioning business (41% of 2021 sales) increased revenue by a high-single-digit percentage compared with the prior-year quarter. North American residential HVAC demand remained resilient (mid-single-digit organic growth) despite a very tough prior-year comparison (above 30% growth during fourth quarter 2020). North American residential HVAC demand surged during the pandemic, but we think sales will continue to moderate against difficult comps and normalizing demand patterns. That said, residential HVAC represents a small portion of consolidated revenue (global residential HVAC is 13% of sales and North America represents just 4%). On the other hand, we expect continued strong demand for commercial HVAC products driven by a handful of factors, such as strengthening non-residential construction and more demand for healthy building solutions (for example, indoor air quality).