Johnson Controls International Plc Q2 FY2026 earnings call

Joakim mentioned entering the year with strong momentum, demand for products, solutions and services remains strong led by data centers. The proprietary business system is beginning to strengthen execution. The business system is built on 3 pillars: simplify, accelerate, amplify. Approximately 1,400 colleagues are actively engaged in the business system work and about 1,000 leaders have been trained. Andrew noted solid execution, organic revenue grew 6%, segment margin increased 180 basis points, EBIT margins expanded 310 basis points, adjusted EPS increased 45% and exceeded guidance, record backlog grew over 25% to $20 billion.

Orders increased 30% this quarter. Revenue grew 6%. Adjusted EBIT margin expanded 310 basis points to 15.5%. Adjusted EPS was up 45%. Backlog grew 26% to a record $20 billion. By region, in Americas, orders grew 40%, organic revenue increased 7%, adjusted segment EBITDA margin improved 100 basis points to 19.5%; in EMEA, orders increased 11%, sales increased 1%, margins expanded 370 basis points to 14.9%; in APAC, orders grew 4%, organic revenue grew 13%, margin expanded 350 basis points to 19.8%.

Anticipates organic sales growth of approximately 6% in third quarter, operating leverage of approximately 45% and adjusted EPS of approximately $1.28. For full year, expects organic sales growth of approximately 6%, operating leverage of approximately 50%, raises adjusted EPS guidance to approximately $4.85, expects adjusted free cash flow conversion of approximately 100% for full year.

Ongoing conflict and complex geopolitical environment in the Middle East affecting local colleagues, potential impact of Section 232 changes on certain businesses, power and electrical infrastructure issues affecting delivery timelines of data center customers.

Q: Scott Davis asked about sluggish service orders.

A: Joakim said service fundamentals solid but security service was weaker due to unbalanced price and volume in security business.

Q: Amit Mehrotra asked if orders are at peak.

A: Joakim said orders growing at strong rates, pipelines remain strong.

Q: Joseph O'Dea asked about business system implementation timeline.

A: Joakim said in very early stages, more meaningful results on P&L to be seen over next year and two years.

Q: Christopher Snyder asked about June quarter margins.

A: Marc said volume and growth in third quarter similar to second quarter, so no big sequential margin step-up.

Q: Julian Mitchell asked about Americas operating leverage and Section 232 impact.

A: Marc said margin improvement in Americas due to growth and leverage, 232 impact minimal.

Q: Andrew Obin asked about fire and control business initiatives.

A: Joakim said applying business system approach to controls and fire detection, same opportunities as in HVAC.

Q: Patrick Baumann asked about EMEA margin trajectory and backlog shape.

A: Marc said EMEA margin progression will slow but remain strong, 70% of backlog expected to be delivered over next 12 months with some pushed due to infrastructure.

Q: Andrew Kaplowitz asked about capacity for big data center orders.

A: Joakim said has capacity for next 12-18 months with ongoing effort to add more capacity.

Q: Nicole DeBlase asked about Asia Pac margins.

A: Marc said Asia Pac margin will improve to high 18% type for full year.