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What's in Store for Johnson Controls (JCI) in Q4 Earnings?

Zacks Equity Research

Johnson Controls International plc JCI is set to report fourth-quarter and full-year 2017 results on Nov 9, before market open.

Last quarter, the company reported in-line results. In fact, the company beat earnings estimates in two of the trailing four quarters, with an average positive surprise of 5.14%.

The long-term earnings per share growth (three-five years) for the company is currently pegged at 13.3%.

Johnson Controls’ shares have lost 0.2% year to date, underperforming the 5.4% rise of the industry it belongs to.

Let’s see how things have shaped up for the forthcoming announcement.

Johnson Controls International PLC Price and EPS Surprise

Johnson Controls International PLC Price and EPS Surprise | Johnson Controls International PLC Quote

Factors Influencing This Quarter

In fiscal 2017, Johnson Controls expects to post strong earnings on integration and productivity savings and cost benefits from mergers. Johnson Controls trimmed the upper end of its adjusted earnings per share range to $2.60-$2.62 for fiscal 2017 from the prior band of $2.60-$2.68. This new guidance represents a year-over-year increase of 13-16%.

The company has raised the revenue guidance for fiscal 2017 to $30.1-$30.2 billion, up from the prior guidance of $30.0-$30.2 billion. The company also guided fourth-quarter fiscal 2017 earnings per share range of 86 cents-88 cents, reflecting an increase of 13-16% year over year.

Deconsolidation of the automotive interiors business and negative foreign currency translation is affecting Johnson Controls’ results. This too is likely to negatively impact the company’s fourth-quarter results.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Johnson Controls this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Johnson Controls has an Earnings ESP is -0.44% because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 86 cents and 87 cents, respectively.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Johnson Controls carries a Zacks Rank #3, which increases the predictive power of ESP. However, the stock’s negative ESP doesn’t make us confident of a positive earnings surprise.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks that Warrant a Look

A few companies with the right combination of elements to come up with an earnings beat this quarter are:

Meritor, Inc. MTOR has an Earnings ESP of +4.26% and a Zacks Rank of 1. The company is expected to release fourth-quarter 2017 results on Nov 15. You can see the complete list of today’s Zacks #1 Rank stocks here.

Calumet Specialty Products Partners, L.P. CLMT has an Earnings ESP of +80.95% and a Zacks Rank of 3. The company is expected to release upcoming results on Nov 10.

Adaptimmune Therapeutics PLC ADAP has an Earnings ESP of +1.50% and a Zacks Rank of 2. The company is expected to release upcoming results on Dec 3.

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