Johnson Controls (JCI) Q1 Earnings: What's in the Cards?
Johnson Controls International plc JCI is set to report first-quarter fiscal 2018 results before the opening bell on Jan 31.
Last quarter, the company reported in-line results. Per its earnings record, it beat estimates in only one of the trailing four quarters with an average positive surprise of 0.5%.
Long-term earnings per share growth (three-five years) for the company is pegged at 13.3%.
Johnson Controls International PLC Price and EPS Surprise
Johnson Controls International PLC price-eps-surprise | Johnson Controls International PLC Quote
Let’s see, how things have shaped up for the upcoming announcement.
Factors Influencing This Quarter
For fiscal 2018, the company has provided outlook for adjusted EPS before special items within the range of $2.75-$2.85, reflecting an increase of 6-10% year over year.
Further, to boost shareholders value, Johnson Controls has raised its share repurchase authorization to $1 billion in December 2017, which adds to the previously announced share buyback authorization of $200 million. Additionally, the company’s board has approved a hike in quarterly cash dividend to 26 cents per share from the earlier payout of 25 cents. This revised dividend was paid on Jan 12, 2018 to shareholders of record as of Dec 18, 2017.
However, divesting its multiple businesses is adversely impacting the company’s profits and revenues. Notably, in October 2017, the company closed the divestiture of Scott Safety to 3M. Prior to this, in March 2017, the company had also completed the divestiture of its ADT South Africa business. Thus, these high separation costs associated with the divestitures are straining its revenues and profits.
Johnson Controls is also vulnerable to volatility in commodity prices. Examples of highly volatile commodities used in the Building Efficiency business are steel, aluminum, copper and fuel while lead is used in the Power Solutions business.
For the soon-to-be-released first-quarter fiscal 2018 results, the Zacks Consensus Estimate for total revenues of Building Technologies & Solutions segment is pegged at $5.2 billion, down from the fourth quarter’s actual total revenues of $6 billion.
Similarly, the Zacks Consensus Estimate for total revenues of the company’s Power Solutions segment stands at $2 billion, down from the first quarter’s actual net revenues of $2.1 billion.
Earnings Whispers
Our proven model does not conclusively show that Johnson Controls is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Johnson Controls has an Earnings ESP is +2.76% because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents and 51 cents, respectively. A positive ESP always indicates a likely positive earnings surprise. 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 #4 (Sell), which lowers the predictive power of ESP. Hence, this combination leaves surprise prediction inconclusive. Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks to Consider
Here are a few auto stocks worth considering from the same space comprising the right combination of elements to come up with an earnings beat this time around:
BorgWarner, Inc. BWA has an Earnings ESP of +0.66% and a Zacks Rank #3. The company’s fourth-quarter 2017 financial results are expected to be released on Feb 8. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tenneco Inc. TEN has an Earnings ESP of +2.63% and a Zacks Rank of 3. The company will report fourth-quarter 2017 financial figures on Feb 9.
Genuine Parts Company GPC has an Earnings ESP of +4.83% and is a Zacks #3 Ranked player. The company’s fourth-quarter 2017 financial numbers are supposed to be announced on Feb 20.
Price Performance
In the last six months, Johnson Controls’ shares have lost 6.6%, underperforming the 1.1 decline of the industry it belongs to.
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