The recent jump in auto sales are attributable to manufacturers’ incentives and a significant increase in Chinese buying. It’s not totally unexpected then that parts suppliers should be seeing some black ink from the sales jump. Those companies include Johnson Controls, Inc. (JCI) which just reported earnings.
Johnson Controls, Inc. (JCI) reported a revenue boost of 32% for its second fiscal quarter, up from $6.3 billion a year ago to $8.3 billion. The company also posted EPS of $0.40, compared with an EPS loss of -$0.33 in the year-ago period. Excluding a one-time charge linked to the recent health care reform act, Johnson’s EPS is $0.43. Ford Motor Co. (F), which is set to announce quarterly results on Monday, is expected to see a revenue jump of nearly 43% and an EPS of $0.31, compared with an EPS loss last year of -$0.75. Johnson’s results would seem to make those estimates a lock.
Johnson’s auto segment sales increased 70%, and North American sales soared 85%. Sales to China rose 91%. All this translated to net profit for the segment of $189 million, compared with last year’s loss of $269 million. Volumes were higher, operating costs were lower, and profitability was “significantly higher” in the company’s automotive joint ventures, which are mainly in China and reported as unconsolidated income.
As good as these results were, Johnson believes that there is more to come. The company upped its estimate of new car production in North America and Europe to 10.9 and 16.7 million units, respectively.
Johnson’s power segment (mostly auto batteries) sales improved 30% year-over-year. The really good news for this segment is that Johnson expects to see a substantial jump in incremental sales beginning in the company’s fourth fiscal quarter as a result of its new deal to supply batteries to Walmart Stores, Inc. (WMT). Walmart announced in February that Johnson would replace Exide Technologies (XIDE) as the retailer’s auto battery supplier.
The company also saw sales grow in its building efficiency segment. Revenue grew 16% to $104 million, and orders grew by 5%. The federal stimulus bill (ARRA) pumped $143 million into the segment’s order book in the second quarter, more than bookings in all of 2009 and the first quarter of 2010 combined. Energy efficiency is slated to get some $20 billion of the ARRA funds, so there’s still plenty of room for Johnson to grow this business.
The company guided fiscal year revenue higher, from $33 billion to $33.5 billion, and upped margin expectations in its auto group from 2.0%-2.2% to 3.1%-3.3% and in its power segment from 11.8%-12.0% to 12.6%-12.8%. Annual EPS guidance was also raised, from $1.70-$1.75 to $1.90-$1.95. Forecast capex in the power segment also grew, but free cash flow projections absolutely soared, from $100 million to $1.3 billion. If that turns out to be true, surely a dividend boost or one-time payout could be in the cards for shareholders.
Johnson’s shares set a new 52-week high of $35.46 in early trading this morning. The fundamentals are all there for an even bigger gain in the next few months.
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