Johnson Controls Reveals Impressive FY17 & FY20 Outlook

Share price of Johnson Controls Inc. (NYSE:JCI) decreased 1.2% to $44.10 on Dec 6, 2016 due to decline in quarterly dividend to 25 cents from 29 cents paid on Aug 2016. Johnson Controls has also underperformed the Zacks categorized Industrial Product-Services industry in the last three months.

Meanwhile Johnson Controls has made strong projections for fiscal 2017. The company will be accelerating growth in its core buildings and energy businesses. Johnson Controls will also make various investments for raking in more profits, enhancing free cash flow and improving its Operating System, which in turn will enhance shareholders’ value.

In fiscal 2017, the company expects to generate strong earnings based on solid operational execution and cost benefits from mergers. Johnson Controls expects adjusted earnings per share in the band of $2.60–$2.75 for fiscal 2017, compared with $2.31 per share earned in fiscal 2016. This represents a year-over-year increase of 13–19%.

Revenues are expected to increase 2.5% to 4.5% in fiscal 2017. Earnings before interest and taxes (EBIT) margin before special items is expected to rise 80 to 110 basis points.

Dividend

Johnson Controls also announced that its board of directors has approved a quarterly dividend of 25 cents per share. The dividend will be paid on Jan 6, 2017 to shareholders on record as of Dec 14, 2016.

Mid-to-Long Term Outlook

Johnson Controls expects adjusted earnings per share to increase at a CAGR of 12% to 15% until fiscal 2020. Organic revenues CAGR including $500 million run-rate sales synergies is expected to be 3% to 4%. Adjusted EBIT is likely to improve 40% to 55%. EBIT margin is projected to expand by 300 to 380 basis points. In addition, the company expects to achieve around $1 billion of cost saving due to benefits of merger and better productivity.

Price Performance

Johnson Controls has underperformed the Zacks categorized Industrial Product-Services industry in the last three months due to currency headwinds, business divestitures and stiff competition. The company’s shares have lost 6.61% in the three months, compared to a 0.26% fall recorded by the industry. Moreover, the company has witnessed significant negative estimate revisions over the last 60 days.

Zacks Rank & Key Picks

Currently, Johnson Controls carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the auto space include Allison Transmission Holdings, Inc. (NYSE:ALSN) , America's Car-Mart Inc. (NASDAQ:CRMT) and Rush Enterprises, Inc. (NASDAQ:RUSHA) .

Both Allison Transmission and America's Car-Mart sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term growth rate of 11%.

America's Car-Mart has a long-term growth rate of 45.50%.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%.

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