Johnson Controls to Grow on Strategic Steps & Expansion

Zacks

On Sep 25, 2014, we issued an updated research report on Johnson Controls, Inc. (JCI). This Zacks Rank #3 (Hold) stock reported a 2.44% earnings surprise in the last quarter.

Johnson Controls reported adjusted earnings of 84 cents per share in third-quarter fiscal 2014 (ended Jun 30, 2014), surpassing the Zacks Consensus Estimate of 82 cents. Earnings were up 16.7% from 72 cents in the comparable quarter of the previous year.

Johnson Controls is positioned to benefit from its focus on market expansion in China. The company supplies advanced technologies and technical capabilities in China. Recently, Johnson Controls opened a new automotive battery manufacturing plant in Fuling District of Chongqing, Western China. The plant has a production capacity of 6 million automotive batteries per year and will offer state-of-the-art technology and services to customers.

Johnson Controls projects higher sales and earnings in fiscal 2014, based on its leading market position in core businesses and strong overall performance. The company anticipates earnings in the range of $1.00–$1.02 per share for the fourth quarter of 2014, reflecting an 11% rise from the year-ago quarter. Meanwhile, the company projects earnings per share in the band of $3.10 to $3.15 for fiscal 2014.

However, Johnson Controls faces intense competition from major domestic and international manufacturers and distributors of lead-acid batteries, particularly in North America, Europe and Asia. Moreover, original equipment manufacturers are continuously pressurizing suppliers such as Johnson Controls to reduce prices due to high inventory levels.

Other Stocks to Consider

Investors interested in automobile stocks can also consider China Automotive Systems Inc. (CAAS), STRATTEC Security Corporation (STRT) and Magna International Inc. (MGA). While China Automotive sport a Zacks Rank #1 (Strong Buy), Magna International and STRATTEC Security carries a Zacks Rank #2 (Buy).

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