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3 Things to Look For When Johnson Controls Reports Q1 Earnings

JCI Debt to Capital (Annual) Chart

Johnson Controls (NYSE: JCI) is set to report first-quarter earnings on Feb.1. It's easy to get flustered with the flurry of facts and figures that surround earnings season. So let's prepare by looking at some things we'll probably hear about when the company reports and how we could interpret them.

JCI Debt to Capital (Annual) Chart

JCI Debt to Capital (Annual) data by YCharts

Assuming $2.2 billion in debt from the merger with Tyco, Johnson Controls also reported $4 billion in newly issued debt from the merger and $3.5 billion in debt associated with the spin-off of its automotive interiors business, Adient .

To maintain the strength of its balance sheet, management has identified a target between 35% and 40%, which, it contends, will afford the company "the flexibility to pursue growth opportunities." The high debt-to capital ratio is not a red flag per se, but it's something to monitor. It's never a bad idea to keep an eye on the balance sheet to confirm that the company remains in sound financial health.

The takeaway

Management is guiding for earnings per share between $0.50 and $0.52, but there's much more to a company's earnings than just one figure. It's important to look at the particulars. For one, investors should confirm that the building technologies and solutions segment is reporting healthy growth; likewise, the company should be reporting success in China. Though not critical to see improvement, the balance sheet should also be monitored to confirm that the company's debt is not becoming too much of a burden.

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Scott Levine has no position in any stocks mentioned. The Motley Fool owns shares of Johnson Controls. The Motley Fool is short Johnson Controls. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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