Johnson Controls (JCI) Beats On Q4 Earnings And Revenues

Johnson Controls International plc (NYSE:JCI) posted adjusted earnings of $1.21 per share in fourth-quarter (ended Sep 30, 2016) fiscal 2016 that surpassed the Zacks Consensus Estimate of $1.02. Moreover, earnings per share increased 16% from $1.04 earned in the fourth quarter of fiscal 2015.

Operational Update

Johnson Controls reported revenues of $10.2 billion, up 16.6% year over year. Revenues also surpassed the Zacks Consensus Estimate of $10.06 billion. The improvement was backed by incremental sales from the Johnson Controls-Hitachi joint venture.

Cost of sales increased to $8.1 billion from $7.2 billion in the year-ago period. Gross profit rose to $2.1 billion from $1.6 billion a year ago.

Selling, general and administrative expenses in the fourth quarter totaled $1.91 billion, up from the prior-year quarter figure of $1.03 billion. The company reported business segment income of $798 million, down from $1.05 billion recorded a year ago.

Fiscal 2016 Performance

Johnson Controls reported a 16% year-over-year increase in adjusted earnings to $3.98 per share for fiscal 2016. The figure also surpassed the Zacks Consensus Estimate of $3.92.

Revenues for fiscal 2016 increased to $37.67 billion from $37.18 billion in fiscal 2015, marginally missing the Zacks Consensus Estimate of $37.69 billion.

Segment Results

Automotive Experience: Revenues in this segment fell 5% year over year to $3.9 billion, mainly due to declines in Europe and the Americas.

Segment income rose 13% to $281 million, aided by cost-reduction initiatives, restructuring savings and operational efficiencies.

Building Efficiency: In this segment, revenues came in at $3.6 billion, up 25% from the year-ago level. Excluding incremental revenue associated with M&A and foreign currency impact, revenues improved 2%, backed by better results in North America and Asia.

The quarter-end backlog increased 5% year over year. Orders, excluding M&A and adjusted for foreign exchange, were up 6% year over year, led by an increase in orders in North America and Asia.

Segment income climbed 17% to $410 million in the reported quarter from $351 million in the prior-year quarter.

Power Solutions: Revenues in the Power Solutions segment improved 7% to $1.8 billion. Excluding the impact of foreign exchange and lower lead pass-through costs, revenues increased 8%. Segment income was $394 million, up 16% from the year-ago period due to higher volumes, mix, and cost reduction initiatives.

Financial Position

Johnson Controls had cash and cash equivalents of $684 million as of Sep 30, 2016, indicating an increase from $597 million as of Sep 30, 2015. Total debt rose to $16.4 billion as of Sep 30, 2016, from $6.6 billion as of Sep 30, 2015.

In fiscal 2016, Johnson Controls’ operating cash flow was $1.9 billion compared with $1.6 billion in the year-ago period. Meanwhile, capital expenditures increased to $1.2 billion from $1.1 billion in the prior-year period.

Share Repurchases

Johnson Controls repurchased $501 million worth of shares in fiscal 2016.

Zacks Rank

Johnson Controls is a supplier of automotive interiors, batteries and other control equipment. It currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked auto stocks include America's Car-Mart Inc. (NASDAQ:CRMT) , Gentex Corp. (NASDAQ:GNTX) and Rush Enterprises, Inc. (NASDAQ:RUSHA) .

America's Car-Mart has witnessed positive estimate revisions over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 13.20%.

Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.20%.

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