Yahoo Finance

Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.

The inverted U.S. Treasury 10-year/two-year spread widened out to the 2024 high of -48 basis points (bps) on Friday. The 10-year closed at 4.47% and the two-year at 4.95%. The curve has been inverted since July 2022 on fears of a future recession, and peaked at -108 bps in July 2023. In January, it looked like we were heading towards a positive sloping curve as the inversion closed to -14 bps on hopes for a series of six or seven rates cuts in 2024. For the next few months, it settled in between -30 bps and -40 bps. Last week's release of the Fed minutes and other speeches by Fed officials showed that some members may not be ready to lower rates, considering recent higher inflation figures. Rate cuts would lower the front-end of the curve and ease some financing issues. We are still projecting two rate cuts in 2H24 and two in early 2025, which would move rates towards a more-normal upward sloping curve.

Johnson Controls manufactures, installs, and services HVAC systems, building management systems and controls, industrial refrigeration units, and fire and security solutions. Commercial HVAC accounts for over 45% of sales, fire and security represents roughly 40% of sales, and residential HVAC, industrial refrigeration, and other solutions account for the remaining 15% of revenue. In fiscal 2023, Johnson Controls generated nearly $27 billion in revenue.

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The first-quarter earnings season has crossed the 90% mark and is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a year-over-year gain of almost 7%, according to Refinitiv. That is considerably better than the 4%-7% advance expected at the start of the earnings period. Leading the outperformance were strong gains in Communication Services earnings, up 43%, and Consumer Discretionary, up 26%. On the flipside, Healthcare and Energy, both down 24%, are performing the worst. Our analysts are always on the lookout for companies that boost outlooks during earnings season, as this is often a signal for momentum in the months ahead. Here is an initial list of BUY-rated companies in the Argus Fundamental Universe of Coverage at which management raised guidance or increased its outlook during the 1Q24 EPS reporting season.