JPMorgan Weighs In on 2 Industrial Stocks

JCI and LII have had strong years on the charts

Josh Selway
Jul 8, 2019 at 9:31 AM
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J.P. Morgan Securities upgraded its view on industrial stocks Johnson Controls International PLC (NYSE:JCI) and Lennox International Inc. (NYSE:LII). Let's take a brief look at how the brokerage firm is viewing the shares of JCI and LII.

For JCI, the covering analyst Stephen Tusa, more known for his General Electric commentary, raised his rating to "neutral" from "underweight," while also lifting his price target to $35 from $31. Despite this seemingly bullish view, Tusa added that he and his colleagues are somewhat skeptical that organic growth can remain strong for the company.

To be sure, the skeptical outlook is the norm for the equity, as many on Wall Street are bearish on the outperformer. Most analysts have "hold" or worse recommendations right now, and put buying has remained more popular than call buying in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

But the security is up over 41% in 2019, currently trading right near two-year-high territory, last quoted at $41.87. As such, Johnson Controls stock could benefit from an unwinding of bearishness.

LII shares were hit with a downgrade from J.P. Morgan Securities, however, dropped to "underweight" from "neutral." Like its sector peer JCI, the stock has been strong in 2019, adding 31.6% this year to trade at $288.05, and hitting an all-time high of $288.86 on July 3.

Amazingly, just two of the 15 covering analysts recommend buying Lennox International, with three of them handing out "strong sell" ratings. Also, the average 12-month price target of $251.36 sits well below current trading levels.

And despite very limited activity in the options pits, those who have picked up LII options have been decidedly put-skewed. For instance, the security's Schaeffer's put/call open interest ratio (SOIR) comes in at 3.22, which ranks in the 94th annual percentile.


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