Johnson Controls, Inc.
) reported earnings of 69 cents per share in first-quarter fiscal
2014 (ended Dec 31, 2013), up 32.7% from 52 cents in the
comparable quarter of the prior-year quarter. Earnings per share
were in line with the Zacks Consensus Estimate.
The improvement in earnings surpassed management's guidance of an
increase of around 30% from first-quarter 2013. The
year-over-year improvement was driven by the company's focus on
operational and cost efficiency.
Revenues in the quarter went up 4.7% year over year to $10.9
billion, higher than the Zacks Consensus Estimate of $10.7
billion. Revenue growth across Automotive Experience and Power
Solutions segments led to the increase.
Revenues also benefited from enhanced global automotive
production partially offset by decline in Building Efficiency
revenues. The company expects the global commercial buildings
markets to improve in the future, which will have favorable
impacts on its business later in the year.
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Cost of sales increased 3.9% year over year to $9.3 billion from
$8.9 billion. Gross profit improved 9.3% year over year to $1.7
billion. Consequently, gross margin expanded to 15.2% in the
quarter from 14.5% in the earlier-year quarter.
Selling, general and administrative expenses in the first quarter
rose to $1.08 billion from $1.05 billion in the prior-year
quarter. The company reported segment income of $686 million, up
25% from $549 million in the year-ago quarter.
Revenues in this segment improved 10% year over year to $5.8
billion on higher automotive production in all geographic
regions. Adjusted segment income surged to $232 million from $101
million mainly due to higher income from its Seating segment. The
Automotive Experience results benefited from higher global
production, cost reduction initiatives and operational efficiency
in the metals and mechanisms business.
In this segment, revenues decreased 4% year over year to $3.4
billion due to lower demand in Europe, the Middle East and Latin
America as well as Global Workplace Solutions, partially offset
by higher revenues in Asia. The quarter-end backlog stood at $5
billion, a 1% decrease from the prior-year quarter. Orders were
5% higher than last year. Segment income dropped 15% in the
reported quarter to $146 million from $172 million.
Revenues in the Power Solutions segment grew 6% to $1.8 billion
on increased global original equipment battery shipments. Segment
income gained 12% to $308 million, driven by higher volumes,
improved mix of products, vertical integration and benefits from
Johnson Controls had cash and cash equivalents of $245 million as
of Dec 31, 2013, a decrease from $314 million as of Dec 31, 2012.
Total debt increased to $6.7 billion as of Dec 31, 2013 from $6.4
billion as of Dec 31, 2012. Consequently, the
debt-to-capitalization ratio was 36.6% as of Dec 31, 2013 against
35.1% as of Dec 31, 2012.
In the first quarter of fiscal 2014, Johnson Controls' operating
cash used was $281 million compared with $298 billion in the
year-ago quarter. Meanwhile, capital expenditures decreased to
$345 million from $371 million in the prior-year quarter.
Johnson Controls anticipates earnings to be within the range of
64-66 cents in the second quarter of fiscal 2014. The company
projects higher sales and earnings in fiscal 2014, based on its
continued market leadership in core businesses and strong overall
Johnson Controls expects earnings per share in the band of $3.15
to $3.30 for the year. Revenues are likely to improve 3% to $43.8
billion driven by growth in all the business segments. Revenues
will benefit from higher automotive production in all its
locations compared to the 2013 level, with 11% improvement in
China, 6% in North America and 2% in Europe.
Johnson Controls predicts free cash flow generation of about $1.6
billion which will provide opportunities for future capital
expenditures, strategic acquisitions, share repurchases and
dividend payouts. Margins are expected to improve in all the
operating segments in fiscal 2014.
The first-quarter of fiscal 2014 was very crucial for Johnson
Controls. In the quarter, the company recorded a 16% increase in
quarterly dividend and repurchased $1.2 billion shares. In
addition, it collaborated with Hitachi for expanding its Building
Efficiency product offerings.
Johnson Controls is a supplier of automotive interiors,
batteries, and other control equipment. It currently holds a
Zacks Rank #3 (Hold).
Other stocks performing well in the same industry include
Magna International Inc.
). Gentex holds a Zacks Rank #1 (Strong Buy) while Magna and
Tenneco are Zacks Ranked #1 (Strong Buy) stocks.