Johnson Controls Beats Q3 Earnings, Revenue Estimates - Analyst Blog

Johnson Controls, Inc. JCI reported adjusted earnings of 91 cents per share in third-quarter fiscal 2015 (ended Jun 30, 2015) that marginally surpassed the Zacks Consensus Estimate of 90 cents. However, earnings increased 15.2% from 79 cents recorded in the third quarter of fiscal 2014. Notably, the financial details of last year have been revised as the company classified its Global Workplace Solutions (“GWS”) business as a discontinued operation.

Johnson Controls Inc. - Quarterly EPS | FindTheBest

 

Including transaction and integration-related costs, Johnson Controls’ net income in third-quarter fiscal 2015 amounted to $503 million or 76 cents per share, compared with $230 million or 34 cents per share in the year-ago comparable quarter.

Operational Update

Johnson Controls reported revenues of $9.61 billion, down 2.3% year over year. However, revenues marginally surpassed the Zacks Consensus Estimate of $9.59 billion. Excluding the effect of foreign exchange, sales increased 5%.

Cost of sales decreased to $7.9 billion from $8.3 billion in the year-ago period. Gross profit increased 8% year over year to $1.7 billion from $1.6 billion.

Selling, general and administrative expenses in the third quarter totaled $975 million, up from the prior-year quarter figure of $943 million. The company reported business segment income of $848 million, up 14% from $745 million a year ago.

Segment Results

Automotive Experience: Revenues in this segment declined 6% year over year to $5.4 billion due to foreign currency fluctuations which offset the increase in global automotive production. Excluding the impact of foreign exchange, revenues rose 3%. Production in North America and China improved 2% year over year, and was consistent in Europe.

Revenues from China improved 10% to $1.9 billion, driven by higher market share. Adjusted segment income surged 19% to $342 million from $288 million in the year-ago period, primarily led by higher profit from both its Seating and Interiors businesses.

Building Efficiency: In this segment, revenues went up 5% year over year to $2.7 billion, backed by incremental revenues associated with the acquisition of Air Distribution Technologies (“ADT”) in 2014 and higher demand for systems and services in North America. Excluding the impact of foreign exchange, revenues improved 10%.

The quarter-end backlog increased 5% from the year-ago level. Orders were up 6% year over year owing to stronger demand in existing institutional buildings markets in North America. Adjusted segment income climbed 3% to $272 million in the reported quarter from $265 million in the prior-year quarter, with significant improvements related to the ADT acquisition as well as higher volumes.

Power Solutions: Revenues in the Power Solutions segment dropped 2% to $1.5 billion. Excluding the impact of foreign exchange, revenues increased 6%. Adjusted segment income was $234 million, up 22% from $192 million in the year-ago period.

Financial Position

Johnson Controls had cash and cash equivalents of $213 million as of Jun 30, 2015, indicating an increase from $160 million as of Jun 30, 2014. Total debt rose to $7.54 billion as of Jun 30, 2015 from $7.49 billion as of Jun 30, 2014.

In the first nine months of fiscal 2015, Johnson Controls’ operating cash flow was $863 million compared with $1.16 billion in the year-ago period. Meanwhile, capital expenditures decreased to $974 million from $1.99 billion in the prior-year period.

Business Update

Johnson Controls announced plans to spin off its Automotive Experience business into an independent, publicly traded company. The transaction is expected to close within a year.

On Jul 2, 2015, Johnson Controls launched Yanfeng Automotive Interiors, a global automotive interiors joint venture (“JV”), with Yanfeng Automotive Trim Systems Co., Ltd, – a wholly-owned subsidiary of Huayu Automotive Systems Co., Ltd., the component group of Shanghai Automotive Industry Corporation. The new JV is the largest automotive interiors company in the world, with annual revenues of $8.5 billion and a backlog that is expected to reach $10 billion over the next few years. Notably, Yanfeng will hold a 70% stake in the JV, while Johnson Controls will own 30%.

Outlook

The company expects earnings per share in the fourth quarter of fiscal 2015 to be in the range of $1.00–$1.03, up 5% year over year.

Johnson Controls expects better results for fiscal 2015 than fiscal 2014, based on higher profitability in all three businesses.

Johnson Controls is a supplier of automotive interiors, batteries and other control equipment. It currently carries a Zacks Rank #3 (Hold).

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