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TMCNet:  Johnson Controls Q3 Adj Profit Tops View, But Sales Miss

[July 18, 2014]

Johnson Controls Q3 Adj Profit Tops View, But Sales Miss

(dpa-AFX International Compact Via Acquire Media NewsEdge) MILWAUKEE (dpa-AFX) - Auto parts supplier Johnson Controls, Inc. (JCI) reported Friday a profit for the third quarter that plunged from last year, hurt by higher costs and charges. However, adjusted earnings per share from continuing operations topped analysts' expectations, while quarterly sales missed their estimates by a whisker. The company also provided earnings guidance for the fourth quarter, in line with Street view.


The company noted that the automotive electronics business results have been reclassified to discontinued operations as a result of its sale announced in January to Visteon Corp. (VC) for $265 million.

"Our performance was consistent with the expectations we disclosed in our second quarter earnings call, with strong overall performance by our automotive and power businesses and margin improvement in Building Efficiency," Chairman and CEO Alex Molinaroli said in a statement.

The Milwaukee, Wisconsin-based company posted net income of $176 million or $0.26 per share for the third quarter, sharply lower than $550 million or $0.80 per share in the prior-year quarter.

Income from continuing operations plunged to $238 million or $0.35 per share from $530 million or $0.77 per share in the year-ago quarter.

Excluding restructuring and non-recurring items, adjusted income from continuing operations was $0.84 per share, compared to last year's $0.72 per share.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.83 per share in the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 3 percent to $10.81 billion from $10.50 billion in the same quarter last year, and missed eighteen Wall Street analysts' consensus estimate of $10.84 billion by a whisker.

Products and systems sales grew 5 percent to $8.90 billion, while services revenues declined 7 percent to $1.91 billion from last year.

Building efficiency sales declined 4 percent from last year to $3.58 billion, with segment profit decreasing 17 percent, while automotive experience sales increased 7 percent to $5.73 billion, with segment profit declining 17 percent from the prior-year quarter. Sales for power solutions grew 6 percent to $1.51 billion from last year, with its segment profit surging 43 percent.

Income from business segment operations for the quarter grew 15 percent to $794 million from $690 million in the prior-year quarter.

"The overall non-residential HVAC markets remain challenged, but we are starting to see some increased demand in certain vertical markets. While orders are still lower than last year, the institutional building sector started showing some improvement as we exited the quarter," Molinaroli added.

Looking ahead to the fourth quarter, the company expects earnings from continuing operations in a range of $1.00 to $1.02 per share, while analysts project earnings of $1.01 per share.

Further, the company reaffirmed its annual free cash flow guidance of $1.6 billion and segment margin improvements in all three of its businesses.

Johnson Controls completed the acquisition of Air Distribution Technologies, Inc. late in the third quarter from its owner Canada Pension Plan Investment Board or CPPIB, for about $1.6 billion in a bid to expand its buildings business. The deal did not have a material impact on earnings.

JCI closed Thursday's regular trading session at $49.88, down $0.51 or 1.01% on a volume of 3.83 million shares. In the past 52-week period, the stock has been trading in a range of $39.13 to $52.50.

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