Johnson Controls (JCI) Barely Misses

Johnson Controls Inc. (JCI) showed a profit that more than doubled to $367 million or 54 cents per share in the third quarter of its fiscal 2010 ended June 30, 2010 from $154 million or 25 cents per share in the year-ago quarter (all excluding non-recurring items). But the company just missed the Zacks Consensus Estimate by 1 cent per share.

The improvement in earnings was attributable to higher sales in each of its segments, driven by a recovery in the global markets. Net sales in the quarter rose 22% to $8.54 billion, exactly meeting the Zacks Consensus Estimate.

Segment Results

Revenues in the Automotive Experience segment surged 43% to $4.2 billion, driven by higher production volumes and new program launches. Revenues in North America rose 76% to $1.7 billion, Europe increased 19% to $2 billion and Asia grew 68% to $440 million.

The segment reported an income of $171 million versus a loss of $14 million in the previous year due to higher volumes, operational efficiencies and higher profitability of the company’s joint ventures.

Revenues in the Building Efficiency segment inched up 2% to $3.2 billion. The modest growth was attributable to poor sales in Europe and North America that more than offset the sales growth of the company’s Global Workplace Solutions and heating, ventilating and air conditioning (HVAC) products.

In the quarter, the company’s orders in the segment increased by 9% globally. The backlog of uncompleted contracts went up 1% to $4.4 billion. The segment recorded a flat income of $190 million compared to the year-ago level due to the same factors outlined above.

Revenues in the Power Solutions segment escalated 30% to $1.1 billion. This was attributable to a 9% increase in aftermarket unit shipments and a rise of 36% in original equipment battery shipments, as well as to the positive impact of higher lead prices. The segment income grew 27% to $135 million from $106 million in the third quarter of 2009, mainly due to the higher volumes.

Financial Position

Johnson Controls had cash and cash equivalents of $908 million as of June 30, 2010 compared with $543 million as of the year-ago period. Total debt amounted to $3.37 billion as of the above period. This translated into a long-term debt-to-capitalization ratio remained of 26%, flat compared to the previous quarter.

In the first nine months of fiscal year 2010, Johnson Controls’ operating cash flow increased fourfold to $1.45 billion from $359 million in the year-ago period, driven by an improvement in income. Meanwhile, capital expenditures remained almost flat at $526 million compared to $529 million in the prior year.


Johnson Controls reiterated its sales guidance for the full fiscal year 2010. The company expects an 18% rise in net sales to $33.5 billion for the fiscal year. However, it updated the earnings guidance for full fiscal year 2010. The company now expects to earn profits in the upper limit of its previous guidance of between $1.90 and $1.95 per share.

While announcing the previous quarter results, the company raised its forecasts for North American and European automotive production to 10.9 million units and 16.7 million units, respectively, for the full fiscal year. The company now believes the positive impact from these higher production estimates will be partially offset by the negative impact of the depreciating Euro.

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