Johnson Controls (JCI) Q3 Earnings May Beat: Stock To Gain?

Johnson Controls Inc. (NYSE:JCI) is set to report third-quarter (ended Jun 30, 2016) fiscal 2016 results on Jul 21. In the last quarter, the company had delivered a positive earnings surprise of 4.88%. Let’s 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 this quarter because it has the right combination of the two key components.

Zacks ESP: Earnings ESP for Johnson Controls is currently pegged at +0.97% as the Most Accurate estimate of $1.04 stands above the Zacks Consensus Estimate of $1.03. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Johnson Controls currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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

What is Driving the Better-than-Expected Earnings?

Johnson Controls expects earnings per share in the third quarter of fiscal 2016 to be in the range of $1.01–$1.04, up from 91 cents recorded in the third quarter of fiscal 2015. The company is focused on its comprehensive cost saving program along with improving its productivity.

Johnson Controls actively undertakes acquisitions and mergers in order to provide its customers with world-class technologies through strong complementary brands and channels. In fiscal 2015, the company completed three acquisitions. Johnson Controls is also gaining strategic contracts which are aiding its business expansion. In Jun 2016, Johnson Controls reported plans to form a joint venture with Binzhou Bohai Piston Co., Ltd., to build a new automotive battery manufacturing plant in China. This will be Johnson Controls’ fourth such plant in the world’s largest automobile market.

Stocks to Consider

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

Westport Fuel Systems Inc. (NASDAQ:WPRT) has an Earnings ESP of +9.09% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Aug 3.

Allison Transmission Holdings, Inc. (NYSE:ALSN) has an Earnings ESP of +1.61% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Jul 27.

General Motors Company (NYSE:GM) has an Earnings ESP of +4.08% and a Zacks Rank #3. The company’s second-quarter fiscal 2016 financial results are expected to release on Jul 21.