Johnson Controls Inc. JCI is set to report second-quarter fiscal 2015 results on Apr 23. In the last quarter, the company had posted a positive earnings surprise of 2.60%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Johnson Controls projects better earnings in fiscal 2015 compared with fiscal 2014, based on expectations of higher profitability from all three businesses.The company anticipates earnings per share in the range of 74–76 cents in the second quarter of fiscal 2015, higher than 64 cents reported in second-quarter fiscal 2014. Revenues should benefit from higher automotive production in all of the company’s locations, compared with the fiscal 2014 level, with a 10% improvement expected in China, 2% in North America and 2% in Europe.
However, Johnson Controls expects revenues to decline to $42.3 billion in fiscal 2015 from $42.8 billion reported in fiscal 2014.The divestiture of several businesses is having a negative impact on revenues. The company has already inked agreements to sell its Global WorkPlace Solutions business as well as its interests in the Brookfield Johnson Controls joint ventures in Australia and Canada so far this year.
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: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Johnson Controls’ earnings ESP is -4.00% as the Most Accurate estimate stands at 72 cents while the Zacks Consensus Estimate is pegged at 75 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 of 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:
General Motors Company GM has an Earnings ESP of +4.17% and a Zacks Rank #1 (Strong Buy). The company will report first-quarter 2015 earnings on Apr 23.
Allison Transmission Holdings, Inc. ALSN has an Earnings ESP of +4.62% and a Zacks Rank #1. The company will report first-quarter 2015 earnings on Apr 27.
American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +7.02% and a Zacks Rank #2 (Buy). It will release first-quarter 2015 earnings on May 1.
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