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Johnson Controls (JCI) Meets Q2 Earnings, Trims Guidance
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Johnson Controls International plc (JCI - Free Report) posted adjusted earnings of 50 cents per share in second-quarter fiscal 2017 (ended Mar 31, 2017), meeting the Zacks Consensus Estimate. Moreover, earnings increased 11% from 45 cents recorded in second-quarter fiscal 2016.
Operational Update
Johnson Controls reported revenues of $7.27 billion, significantly up from $4.73 billion. Revenues surpassed the Zacks Consensus Estimate of $7.05 billion. Revenues benefited from organic sales growth and higher lead pass-through, partly offset by the negative impact of foreign currency translation, net acquisition and divestiture activity.
Cost of sales increased to $4.99 billion from $3.45 billion recorded in the year-ago quarter. Gross profit rose to $2.3 billion from $1.3 billion recorded a year ago.
Johnson Controls International PLC Price, Consensus and EPS Surprise
Selling, general and administrative expenses in the fiscal second quarter totaled $1.73 billion, up from the prior-year quarter figure of $899 million.
Segment Results
Building Efficiency: In this segment, revenues came in at $5.57 billion, surging 77% from the year-ago level. Excluding incremental revenue associated with M&A and foreign currency impact, organic sales increased 3%, driven by growth in field sales.
The quarter-end backlog increased 6% year over year. Orders, excluding M&A and adjusted for foreign exchange, were up 2% year over year, led by an increase in field orders partially offset by decline in product orders.
Segment EBITA edged down 1% to $628 million in the reported quarter from $635 million in the prior-year quarter.
Power Solutions: Revenues at the Power Solutions segment advanced 7% to $1.7 billion. Excluding the impact of foreign exchange and higher lead pass-through costs, organic sales descended 1%. Segment EBITA came in at $303 million, up 7% from the year-ago quarter on favorable product mix, as well as productivity savings, partly offset by lower volumes.
Financial Position
Johnson Controls had cash and cash equivalents of $412 million as of Mar 31, 2017, indicating a decrease from $579 million as of Sep 30, 2016. Total debt rose to $13.5 billion in the quarter from $12.8 billion as of Sep 30, 2016.
In the fiscal first half, Johnson Controls recorded cash used from operations of $1.5 billion compared with cash inflow of $621 million in the year-ago period. Meanwhile, capital expenditures increased to $634 million from $543 million in the prior-year period.
During the quarter, the company repurchased $119 million shares and expanded its share repurchase program by $500 million. Johnson Controls now expects to complete up to $750 million of share repurchases during fiscal 2017.
On Mar 15, 2017, Johnson Controls announced a definitive agreement to sell its Scott Safety business to 3M for approximately $2 billion. Net cash proceeds from the transaction are expected to be roughly $1.8–$1.9 billion and will be used to repay a portion of Tyco International Holding Sarl's $4 billion of merger-related debt. The transaction is likely to close in the second half of calendar year 2017, subject to customary closing conditions, including required regulatory approvals.
On the same date, Johnson Controls completed its previously announced divestiture of the ADT South Africa business. Proceeds from the transaction of nearly $130 million will be used to repay a portion of the TSarl merger-related debt.
Guidance
Johnson Controls trimmed the upper end of its adjusted earnings per share (EPS) range to $2.60–$2.68 for fiscal 2017 from the prior band of $2.60–$2.75. This new guidance represents a year-over-year increase of 13–16%. The company also guided third-quarter fiscal 2017 adjusted earnings per share range of 70–73 cents, an increase of 15–20% year over year.
Price Performance
Johnson Controls underperformed the Zacks categorized Industrial Products-Services industry in the past one year. During this period, the company’s shares gained 4.3%, while the industry recorded growth of 15.9%.
Zacks Rank & Key Picks
Johnson Controls currently carries a Zacks Rank #3 (Hold).
Oshkosh has an expected long-term growth rate of 10.6%.
Fox Factory has an expected long-term growth rate of around 16.1%.
The expected long-term growth rate for Lear is pegged at 8.9%.
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Johnson Controls (JCI) Meets Q2 Earnings, Trims Guidance
Johnson Controls International plc (JCI - Free Report) posted adjusted earnings of 50 cents per share in second-quarter fiscal 2017 (ended Mar 31, 2017), meeting the Zacks Consensus Estimate. Moreover, earnings increased 11% from 45 cents recorded in second-quarter fiscal 2016.
Operational Update
Johnson Controls reported revenues of $7.27 billion, significantly up from $4.73 billion. Revenues surpassed the Zacks Consensus Estimate of $7.05 billion. Revenues benefited from organic sales growth and higher lead pass-through, partly offset by the negative impact of foreign currency translation, net acquisition and divestiture activity.
Cost of sales increased to $4.99 billion from $3.45 billion recorded in the year-ago quarter. Gross profit rose to $2.3 billion from $1.3 billion recorded a year ago.
Johnson Controls International PLC Price, Consensus and EPS Surprise
Johnson Controls International PLC Price, Consensus and EPS Surprise | Johnson Controls International PLC Quote
Selling, general and administrative expenses in the fiscal second quarter totaled $1.73 billion, up from the prior-year quarter figure of $899 million.
Segment Results
Building Efficiency: In this segment, revenues came in at $5.57 billion, surging 77% from the year-ago level. Excluding incremental revenue associated with M&A and foreign currency impact, organic sales increased 3%, driven by growth in field sales.
The quarter-end backlog increased 6% year over year. Orders, excluding M&A and adjusted for foreign exchange, were up 2% year over year, led by an increase in field orders partially offset by decline in product orders.
Segment EBITA edged down 1% to $628 million in the reported quarter from $635 million in the prior-year quarter.
Power Solutions: Revenues at the Power Solutions segment advanced 7% to $1.7 billion. Excluding the impact of foreign exchange and higher lead pass-through costs, organic sales descended 1%. Segment EBITA came in at $303 million, up 7% from the year-ago quarter on favorable product mix, as well as productivity savings, partly offset by lower volumes.
Financial Position
Johnson Controls had cash and cash equivalents of $412 million as of Mar 31, 2017, indicating a decrease from $579 million as of Sep 30, 2016. Total debt rose to $13.5 billion in the quarter from $12.8 billion as of Sep 30, 2016.
In the fiscal first half, Johnson Controls recorded cash used from operations of $1.5 billion compared with cash inflow of $621 million in the year-ago period. Meanwhile, capital expenditures increased to $634 million from $543 million in the prior-year period.
During the quarter, the company repurchased $119 million shares and expanded its share repurchase program by $500 million. Johnson Controls now expects to complete up to $750 million of share repurchases during fiscal 2017.
On Mar 15, 2017, Johnson Controls announced a definitive agreement to sell its Scott Safety business to 3M for approximately $2 billion. Net cash proceeds from the transaction are expected to be roughly $1.8–$1.9 billion and will be used to repay a portion of Tyco International Holding Sarl's $4 billion of merger-related debt. The transaction is likely to close in the second half of calendar year 2017, subject to customary closing conditions, including required regulatory approvals.
On the same date, Johnson Controls completed its previously announced divestiture of the ADT South Africa business. Proceeds from the transaction of nearly $130 million will be used to repay a portion of the TSarl merger-related debt.
Guidance
Johnson Controls trimmed the upper end of its adjusted earnings per share (EPS) range to $2.60–$2.68 for fiscal 2017 from the prior band of $2.60–$2.75. This new guidance represents a year-over-year increase of 13–16%. The company also guided third-quarter fiscal 2017 adjusted earnings per share range of 70–73 cents, an increase of 15–20% year over year.
Price Performance
Johnson Controls underperformed the Zacks categorized Industrial Products-Services industry in the past one year. During this period, the company’s shares gained 4.3%, while the industry recorded growth of 15.9%.
Zacks Rank & Key Picks
Johnson Controls currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the auto space include Oshkosh Corporation (OSK - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and Lear Corporation (LEA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Oshkosh has an expected long-term growth rate of 10.6%.
Fox Factory has an expected long-term growth rate of around 16.1%.
The expected long-term growth rate for Lear is pegged at 8.9%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>