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Will Johnson Controls (JCI) Beat Earnings on Operating Strength?

Zacks Equity Research

We expect Johnson Controls Inc. (JCI) to beat expectations when it reports third-quarter fiscal 2014 results on Jul 18, 2014. Last quarter, it posted a negative surprise of 1.54%. Let us see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Johnson Controls is likely to beat earnings because it has the right combination of two key components.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.22%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. 

The combination of Johnson Controls’ Zacks Rank #3 and positive ESP makes us confident of an earnings beat on Jul 18.

What is Driving the Better-Than-Expected Earnings?

Johnson Controls has been winning strategic contracts, which are aiding its business expansion. The company is also actively undertaking acquisitions to provide customers world-class technologies. Johnson Controls’ leading market position in core businesses and strong overall performance is also helping in boosting sales and earnings.

The positive trend is seen in the trailing four-quarter average surprise of 1.17%. This was on the back of Johnson Controls’ efforts to increase revenues and control expenses.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter: 

Gentex Corp. (GNTX) has Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy). Gentex will be reporting second-quarter 2014 earnings on Jul 24, 2014.

Meritor, Inc. (MTOR) has Earnings ESP of +6.67% and a Zacks Rank #1. Meritor will be reporting second-quarter earnings on Jul 31, 2014.

Dana Holding Corporation (DAN) has Earnings ESP of +5.77% and a Zacks Rank #2 (Buy). The company will be post second-quarter earnings on Jul 24, 2014.

Read the Full Research Report on JCI
Read the Full Research Report on GNTX
Read the Full Research Report on MTOR
Read the Full Research Report on DAN


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