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Why Is Johnson Controls (JCI) Down 5.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Johnson Controls (JCI). Shares have lost about 5.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Johnson Controls due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Johnson Controls Q4 Earnings In Line, Improve Y/Y

Johnson Controls reported adjusted earnings per share of 93 cents in fourth-quarter fiscal 2018, in line with the Zacks Consensus Estimate. Earnings increased 7% from 87 cents recorded in fourth-quarter fiscal 2017. The reported quarter saw solid organic revenue growth and free cash flow conversion.

For fiscal 2018, adjusted earnings per share were $2.83, higher than the fiscal 2017 figure of $2.60.

Operational Update

During the quarter under review, Johnson Controls reported revenues of $8.37 billion, surpassing the Zacks Consensus Estimate of $8.28 billion. Revenues increased 3% year over year. For fiscal 2018, revenues were $31.4 billion, up from the fiscal 2017 figure of $30.1 billion.

In the quarter under review, the cost of sales increased to $5.85 billion from $5.62 billion in the year-ago quarter. Gross profit rose to $2.52 billion from $2.51 billion in the year-ago quarter.

Selling, general and administrative expenses in the fiscal fourth quarter totaled $1.48 billion, up from the prior-year quarter figure of $1.25 billion.

Segment Results

Building Technologies & Solutions : This segment's adjusted revenues were $6.18 billion, increasing from the year-ago quarter figure of $6 billion. The segment's EBITA increased to $939 million from $904 million in fourth-quarter fiscal 2017.

Power Solutions : Adjusted revenues in this segment rose to $2.19 billion from $2.13 billion a year ago. Segment EBITA was $424 million, down from fourth-quarter fiscal 2017 level of $431 million.

Financial Position

Johnson Controls had cash and cash equivalents of $200 million as of Sep 30, 2018, down from $321 million as of Sep 30, 2017. Long-term debt declined to $9.64 billion in the quarter under review from $12 billion as of Sep 30, 2017.

In the reported quarter, the company repurchased 1.2 million shares for $45 million. Further, the company announced additional repurchase authorization of $1 billion.

Guidance

Johnson Controls anticipates EPS guidance for fiscal 2019 to be $2.90-$3.05.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Johnson Controls has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Johnson Controls has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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