On Dec 29, 2015, Zacks Investment Research upgraded Johnson Controls Inc. JCI to a Zacks Rank #3 (Hold).
Why the Upgrade?
Johnson Controls reported adjusted earnings of $1.07 per share in fourth-quarter fiscal 2015 (ended Sep 30, 2015) that surpassed the Zacks Consensus Estimate of $1.01. Also, earnings increased 2.9% from $1.04 per share recorded in the fourth quarter of fiscal 2014.
Johnson Controls has made strong projections for fiscal 2016. The company’s strategic and operating plans are expected to lead to better performance during the fiscal year. Johnson Controls envisions earnings per share in the band of $3.70–$3.90 for fiscal 2016, compared with $3.58 per share earned in fiscal 2015. This represents a year-over-year increase of 8–14%. Revenues are anticipated to rise 4% to $38.6 billion in fiscal 2016 from $37.2 billion in fiscal 2015.
The top line will benefit from an improvement in results in the Building Efficiency and Power Solutions segments. Higher automotive production will also have a favorable impact on revenues, with an 11% improvement expected in China and a 2% rise projected in North America. Organic sales from both Building Efficiency and Power Solutions are anticipated to increase by 10% in fiscal 2016.
In addition, Johnson Controls will benefit from its acquisitions and mergers. In fiscal 2015, the company completed three acquisitions. Moreover, Johnson Controls regularly hikes its dividend to boost shareholder value. The company has raised its dividend in 35 of the last 37 years. In Nov 2015, Johnson Controls increased its quarterly cash dividend by 11.5% to 29 cents per share, which reflects management’s confidence in the overall business.
Stocks to Consider
Better-ranked automobile stocks include General Motors Company GM, Fox Factory Holding Corp FOXF and O'Reilly Automotive Inc. ORLY. All these stocks carry a Zacks Rank #2 (Buy).
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