Johnson Controls Inc. (JCI) is set to report first-quarter fiscal 2015 results on Jan 22. In the last quarter, it had posted a positive earnings surprise of 2.97%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Johnson Controls projects better earnings in fiscal 2015 compared to fiscal 2014, based on expectations of higher profitability from all three businesses. The company believes that its strategic and financial plans will lead to better performance and higher operating margins. Johnson Controls anticipates earnings in the range of 74 cents to 77 cents in the first quarter of fiscal 2015. Revenues in 2015 will likely benefit from the improvement in results in the Building Efficiency and Power Solutions segments. Also, revenues will have a favorable impact from higher automotive production at all of the company’s locations, compared to the fiscal 2014 level.
However, Johnson Controls faces strong competition from major domestic and international manufacturers, and distributors of lead-acid batteries. In addition, the company expects revenues to decline to $42.3 billion in fiscal 2015 from $42.8 billion reported in fiscal 2014. This leads to expectations of weaker first quarter revenue as well.
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, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Johnson Controls’ Earnings ESP is -2.60% as the Most Accurate estimate stands at 75 cents while the Zacks Consensus Estimate is pegged at 77 cents.
Zacks Rank: Johnson Controls’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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:
O'Reilly Automotive Inc. (ORLY) has an Earnings ESP of +2.40% and a Zacks Rank #1 (Strong Buy). The company will report its fourth-quarter 2014 results on Feb 4, 2015.
Lear Corp. (LEA) has an Earnings ESP of +1.94% and a Zacks Rank #2 (Buy). The company’s fourth-quarter financial results are scheduled to release on Jan 30.
Ford Motor Co. (F) has an Earnings ESP of +8.70% and a Zacks Rank #3. It will release its fourth-quarter earnings results on Jan 29.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment