Hawk Perspective: JCI’s overbought levels into the report may limit upside but the fundamental story is firmly intact and with November $120 calls in open interest, looking at September/November $120 call calendar spreads at $2.30 is a sensible trade

AI Generated

Johnson Controls (JCI) will report its fiscal Q3 2025 earnings before the market opens on Tuesday, July 29, at 8:30AM ET. Consensus estimates call for EPS of $1.01 on revenues of approximately $5.99B, both up from the prior-year quarter, with the Street forecasting 7.9% EPS growth and a 5.4% increase in topline. After a solid Q2 beat—in which JCI delivered $0.82 EPS vs. $0.77 consensus and $5.68B revenue over $5.64B estimated—the bar for continued execution remains high. Historically, JCI has a reputation for dependable beats: it exceeded consensus in four of the last five quarters, with the trailing six-quarter maximum earnings day move of 4–6%, typically skewed positive on above-consensus margin or backlog commentary. The shares have rallied over 65% in the past year, consistently posting strong reactions to above-expectation management commentary and robust backlog figures.

As a global leader in smart and sustainable building solutions, Johnson Controls derives revenue from its Building Solutions North America segment (50% of sales) and EMEA/Latin America/Asia-Pacific (other 50%). Commercial HVAC, automation systems, fire/security services, and digital “OpenBlue” solutions anchor its portfolio. Recent secular tailwinds—urbanization, demand for energy-efficient upgrades, government-backed sustainability standards—place JCI at the center of the multi-year smart infrastructure growth story. Margin drivers include a recurring-service-heavy backlog and disciplined pricing power in inflationary environments.JCI has the highest exposure in the group to data centers and has the second largest provider of thermal equipment (~15% market share), with leading market share in chillers. JCI also sells building automation systems, security, and fire protection equipment into data centers. JCI is a top name for themes like Data Centers, Reindustrialization and Near-Shoring. 

Management under CEO Joakim Weidemanis has struck a confident tone on recent calls, citing record backlogs, accelerating digital and SaaS adoption, and new wins in government/defense contracts (including a recent $378M U.S. DoD automation deal). Notably, JCI is also in the process of divesting its Residential and Light Commercial business to sharpen focus on commercial solutions. Peer reports this earnings cycle reinforce end-market strength: industrials and building tech names have consistently cited robust demand and margin expansion, while HVAC and controls specialists like Trane and Carrier reported above-consensus results, suggesting sector momentum that supports JCI’s setup this quarter.

Valuation remains elevated: JCI trades at 28–29x trailing earnings and nearly 2.6x sales, well above its 10-year historical average, with the market endorsing its above-peer growth and secular positioning. Analyst consensus EPS for 2025 has been revised upward by roughly $0.10 in the past quarter, with full-year revenue nudged higher by $150M; 2026 Street forecasts imply a forward earnings growth rate of 17% and revenue growth around 9%, outperforming most multi-industrial peers.

JCI sports an average analyst price target of $104–$113, a range that brackets the current price but still offers 8–18% perceived upside for those using high-end targets. Recent sell-side notes skew positive: Wolfe Research raised to $130 target on earnings leverage, while Jefferies and Oppenheimer have downgraded recently on valuation concerns, highlighting a market grappling with whether outperformance justifies new highs.

Institutional ownership remains robust, with 13F filings showing broad support from large asset managers and very modest net selling this quarter. For example, Diamond Hill Capital trimmed its stake recently, but there are no signs of broad liquidation. Insider trading paints a more cautious picture: over the past 12 months, insiders have sold about 3.28M shares (vs. just 510,000 bought), and the trend for the past quarter is “very negative” with $145M in net sales and no open-market purchases. 

Technically, JCI is extended: shares made a fresh all-time high at $110.59 on July 25, up nearly 66% in a year, but now show short-term overbought signals. Daily and 15-minute charts have flashed a MACD “Death Cross” and narrowing Bollinger Bands, signaling waning momentum and a risk of near-term consolidation or pullback even as the long-term uptrend remains intact. The critical support bandwidth sits near $103–$105 (50-day moving average and prior high), with AVWAP from the October 2024 low now also tracking this key zone. Resistance is uncharted above $110, with next projected levels at $115–$120 from recent call option flows and Fibonacci extensions.

The options market has turned notably bullish into earnings: the August $105, $110, and $115 calls have all been bought aggressively in recent sessions, while November $120 calls saw a major 7,350-lot opening purchase—indicating sizable bets on continued upside. At the put end, September and October $100 strikes have seen opening sales, suggesting traders are underwriting downside and expressing confidence in the new high base. Open interest in calls is up nearly 2,000% versus normal, confirming crowd focus on breakout potential. The market is pricing an implied move of approximately 4.2% for earnings, slightly above JCI’s realized average. IV30 is above its yearly mean, while the post-earnings volatility crush typically brackets -12%, granting volatility sellers a respectable edge.

Social sentiment is robustly bullish into the event: data from StockTwits and Swaggystocks shows message volume and positive mentions at 12-month highs, with prominent discussion around JCI’s “smart building” and AI-powered solutions, the U.S. defense contract win, and technical breakouts. Crowd chatter is leaning heavily toward further price upside, but some traders are beginning to highlight overextension and the risk of disappointment after such a sustained run. Notably, bearish sentiment remains historically low, consistent with options positioning and technical market structure.