Critical Analysis: Johnson Controls International (NYSE:JCI) and Watts Water Technologies (NYSE:WTS)

Johnson Controls International (NYSE:JCI) and Watts Water Technologies (NYSE:WTS) are both large-cap industrials companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, earnings, valuation, risk and analyst recommendations.

Profitability

This table compares Johnson Controls International and Watts Water Technologies’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Johnson Controls International	14.32%	22.11%	7.69%
Watts Water Technologies	14.34%	19.16%	13.78%

Risk and Volatility

Johnson Controls International has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500. Comparatively, Watts Water Technologies has a beta of 1.15, meaning that its stock price is 15% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Johnson Controls International and Watts Water Technologies, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Johnson Controls International	1	9	13	1	2.58
Watts Water Technologies	0	6	4	1	2.55

Johnson Controls International currently has a consensus target price of $161.05, indicating a potential upside of 2.30%. Watts Water Technologies has a consensus target price of $367.70, indicating a potential upside of 4.11%. Given Watts Water Technologies’ higher possible upside, analysts plainly believe Watts Water Technologies is more favorable than Johnson Controls International.

Insider & Institutional Ownership

90.0% of Johnson Controls International shares are owned by institutional investors. Comparatively, 95.0% of Watts Water Technologies shares are owned by institutional investors. 0.3% of Johnson Controls International shares are owned by insiders. Comparatively, 1.0% of Watts Water Technologies shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Johnson Controls International and Watts Water Technologies”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Johnson Controls International	$23.60 billion	4.04	$3.29 billion	$5.75	27.38
Watts Water Technologies	$2.44 billion	4.83	$340.80 million	$11.45	30.84

Johnson Controls International has higher revenue and earnings than Watts Water Technologies. Johnson Controls International is trading at a lower price-to-earnings ratio than Watts Water Technologies, indicating that it is currently the more affordable of the two stocks.

Dividends

Johnson Controls International pays an annual dividend of $1.60 per share and has a dividend yield of 1.0%. Watts Water Technologies pays an annual dividend of $2.52 per share and has a dividend yield of 0.7%. Johnson Controls International pays out 27.8% of its earnings in the form of a dividend. Watts Water Technologies pays out 22.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Johnson Controls International has increased its dividend for 4 consecutive years and Watts Water Technologies has increased its dividend for 13 consecutive years.

Summary

Watts Water Technologies beats Johnson Controls International on 10 of the 17 factors compared between the two stocks.

About Johnson Controls International

Johnson Controls International plc, together with its subsidiaries, engages in engineering, manufacturing, commissioning, and retrofitting building products and systems in the United States, Europe, the Asia Pacific, and internationally. It operates in four segments: Building Solutions North America, Building Solutions EMEA/LA, Building Solutions Asia Pacific, and Global Products. The company designs, sells, installs, and services heating, ventilating, air conditioning, controls, building management, refrigeration, integrated electronic security, integrated fire detection and suppression systems, and fire protection and security products for commercial, industrial, retail, small business, institutional, and governmental customers. It also provides energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems, as well as data-driven smart building solutions to non-residential building and industrial applications. In addition, the company offers control software and software services for residential and commercial applications. Johnson Controls International plc was incorporated in 1885 and is headquartered in Cork, Ireland.

About Watts Water Technologies

Watts Water Technologies, Inc., together with its subsidiaries, supplies products and solutions that manage and conserve the flow of fluids and energy into, through, and out of buildings in the commercial, industrial, and residential markets in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa. The company offers residential and commercial flow control and protection products, including backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions, and emergency safety products and equipment for plumbing and hot water applications. It also provides heating, ventilation, and air conditioning and gas products comprising commercial boilers; water heaters and heating solutions; hydronic and electric heating systems for under-floor radiant applications; custom heat and hot water solutions; hydronic pump groups for boiler manufacturers and alternative energy control packages; and flexible stainless-steel connectors for natural and liquid propane gas in commercial food service and residential applications. In addition, the company offers drainage and water re-use products, such as drainage products, engineered rainwater harvesting solutions for commercial, industrial, marine, and residential applications; connected roof drain systems; and water quality products that include point-of-use and point-of-entry water filtration, conditioning, and scale prevention systems for commercial, marine, and residential applications. The company sells its products to plumbing, heating, and mechanical wholesale distributors and dealers; original equipment manufacturers; specialty product distributors; and do-it-yourself and retail chains, as well as wholesalers and private label accounts. Watts Water Technologies, Inc. was founded in 1874 and is headquartered in North Andover, Massachusetts.