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Johnson Controls (JCI) Q1 Earnings: Surprise in the Cards? (Revised)

Johnson Controls International plcJCI is set to report first-quarter fiscal 2017 (ended Dec 31, 2016) results, before the market opens on Feb 1. In the last quarter, the company posted a positive earnings surprise of 18.63%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

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 earned in fiscal 2016. This reflects a year-over-year increase of 13-19%. Revenues are expected to increase 2.5% to 4.5% in fiscal 2017. The expected improvement in annual results raises hopes for good quarterly performance for the company.

However, the divestiture of several businesses has been weighing on the company's revenues and profits. Further, negative foreign currency translation is affecting Johnson Controls' results. Adjusted net sales declined to $36.9 billion in fiscal 2016 from $37.2 billion in the prior year due to deconsolidation of the company's automotive interiors business and foreign exchange headwinds. This trend may continue in the quarter to be reported.

Earnings Whispers

Our proven model does not conclusively show that Johnson Controls is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Johnson Controls is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 51 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Johnson Controls International PLC Price and EPS Surprise

Johnson Controls International PLC Price and EPS Surprise | Johnson Controls International PLC Quote

Zacks Rank: Johnson Controls carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

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.

Price Performance

Johnson Controls has underperformed the Zacks categorized Industrial Products-Services industry in the last three months. During this period, the company's share price increased 8.5%, while the industry saw a 12.9% increase. The company completed the spin-off of its Automotive Interiors business into an independent company, Adient. Deconsolidation of this business and negative currency translation have been hurting sales.

Stocks to Consider

Here are some 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:

Delphi Automotive PLC DLPH has an Earnings ESP of +1.88% and a Zacks Rank #3. The company is expected to report fourth-quarter and full-year 2016 results on Feb 2. You can see the complete list of today's Zacks #1 Rank stocks here.

Autoliv Inc. ALV has an Earnings ESP of +1.63% and a Zacks Rank #3. The company's fourth-quarter and full-year 2016 financial results are scheduled for release on Feb 2.

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report fourth-quarter and full-year 2016 financial numbers on Feb 10.

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(We are reissuing this article to correct a mistake. The original article, issued on Jan 30, 2017, should no longer be relied upon).

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Johnson Controls International PLC (JCI): Free Stock Analysis Report

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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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