Johnson Controls fourth-quarter adjusted EPS rises to $1.66 on 10% sales growth

Johnson Controls International plc (JCI) said in a filing on Tuesday that adjusted earnings per share for its fiscal fourth quarter rose to $1.66 from $1.26 a year earlier, as sales grew 10%. The quarter ended Sept. 30.

Sales for the quarter were $7,113 million, up from $6,442 million, and organic sales rose 12%. The company excludes acquisitions, divestitures and currency effects when it calculates organic sales growth.

GAAP earnings per share were $1.60 for the quarter. Income from continuing operations attributable to the company was $967 million, compared with $267 million a year earlier.

Here's how the company did:

• Adjusted EPS: $1.66 vs. $1.26 a year earlier
• GAAP EPS: $1.60 vs. $2.67 a year earlier, total diluted EPS including discontinued operations
• Sales: $7,113 million vs. $6,442 million a year earlier
• Income from continuing operations attributable to JCI: $967 million vs. $267 million a year earlier
• Adjusted net income: $1,008 million vs. $798 million a year earlier

The year-earlier GAAP figures include the Residential and Light Commercial HVAC business, which the company sold in July 2025 and reports as a discontinued operation. That business included the North America Ducted business and a joint venture with Hitachi Global Life Solutions, Inc., of which the company owned 60%.

Cash provided by operating activities from continuing operations was $1,300 million, up from $968 million. Free cash flow was $1,078 million, compared with $838 million. Adjusted free cash flow was $1,096 million, versus $710 million.

For fiscal 2026, net sales were $25,666 million, up from $23,596 million. Organic sales grew 8% for the year.

Full-year adjusted EPS was $5.16, up from $3.76. GAAP diluted EPS from continuing operations was $4.72, compared with $2.63. Total GAAP diluted EPS, including discontinued operations, was $4.68 versus $5.03.

Orders rose 44% organically in the quarter, and backlog of $23.0 billion increased 43% organically from a year earlier. The company said the orders and backlog figures cover its Solutions and Services businesses, and that backlog was restated to include a new category of equipment-only sales for longer cycle projects.

Chief Executive Officer Joakim Weidemanis said in the release: "We finished fiscal 2026 with significant momentum, delivering more than 8% organic revenue growth, double-digit adjusted EPS growth and strong free cash flow conversion."

Weidemanis also said: "With record backlog and sustained customer demand, we enter fiscal 2027 with confidence in our ability to continue creating value for customers and shareholders."

Here's how the company's segments did during the quarter:

• Americas: sales of $4,930 million, up 14%, with a segment EBIT margin of 20.1%, up 250 basis points
• EMEA: sales of $1,312 million, down 2%, with a segment EBIT margin of 15.1%, up 100 basis points
• APAC: sales of $871 million, up 12%, with a segment EBIT margin of 18.6%, up 120 basis points

Americas sales rose 14% to $4,930 million, and organic sales also rose 14%. The company said sustained demand for data centers supported orders, which rose 58% excluding acquisitions, divestitures and currency. Backlog in the region was $17.8 billion, up 54%.

In Europe, the Middle East and Africa, sales fell 2% to $1,312 million. Organic sales grew 3%, but the company cited continued pressure in the region due to the conflicts in the Middle East.

Asia Pacific sales rose 12% to $871 million, and organic sales increased 13%. Products and systems sales grew 15% organically in the region.

GAAP corporate expense fell 34% to $178 million from $269 million. The company said the decrease was primarily due to ongoing cost reduction actions across corporate functions and the timing of certain corporate expenses. Restructuring and impairment costs were $87 million, down from $400 million a year earlier.

The company initiated fiscal 2027 guidance. For the first quarter, it expects organic sales growth of 12% to 14%, operating leverage of 30% to 35%, and adjusted EPS of $1.15 to $1.20.

For the full year, the company expects organic sales growth of 11% to 12%, operating leverage of 30% or more, adjusted EPS of $6.15 to $6.30, and adjusted free cash flow conversion of about 95%. The company said it cannot reconcile the forward-looking non-GAAP measures to GAAP measures without unreasonable effort, and that the unavailable information could have an impact on its fiscal 2027 GAAP results.

During the quarter the company paid $242 million in dividends and spent $655 million on stock repurchases and retirements, compared with $5,021 million a year earlier.

Net debt was $8,659 million at Sept. 30, or 1.8 times adjusted EBITDA, compared with 2.4 times a year earlier. Net debt is total debt less cash and cash equivalents.

After adjusting for certain non-recurring items, the company's effective tax rate was about 17% for the quarter and fiscal year, compared with about 12% a year earlier.