Why Is Johnson Controls (JCI) Down 0.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Johnson Controls (JCI). Shares have lost about 0.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Johnson Controls due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Johnson Controls Q2 Earnings Beat, Revenues In Line

Johnson Controls has reported adjusted earnings per share of 32 cents in second-quarter fiscal 2019, surpassing the Zacks Consensus Estimate of 30 cents. In second-quarter fiscal 2018, earnings were 26 cents per share. The reported quarter witnessed solid organic revenue growth.

Operational Update

During the quarter under review, Johnson Controls reported revenues of $5.8 billion, up 3% year over year. Revenues were almost in line with the Zacks Consensus Estimate. In the quarter under review, the cost of sales increased to $3.94 billion from $3.81 billion in the year-ago quarter. Gross profit rose to $1.84 billion from $1.82 billion in the year-ago quarter.

Selling, general and administrative expenses in the fiscal second quarter totaled $1.46 billion, down from the prior-year quarter figure of $1.49 billion.

Segment Results

Building Solutions North America: This segment’s adjusted revenues were $2.19 billion, increasing from the year-ago quarter’s $2.10 billion. The segment’s EBITA increased to $259 million from $244 million in second-quarter fiscal 2018.

Building Solutions Europe, Middle East, Africa/Latin America: Adjusted revenues in this segment declined to $878 million from $907 million a year ago. Segment’s EBITA was $81 million, up from the second-quarter fiscal 2018 level of $78 million.

Building Solutions Asia Pacific: Adjusted revenues in this segment rose to $628 million from $586 million a year ago. This segment’s EBITA was $76 million, up from the second-quarter fiscal 2018 level of $71 million.

Global Products: Adjusted revenues in this segment rose to $2.09 billion from $2.04 billion a year ago. This segment’s EBITA was $255 million, up from the second-quarter fiscal 2018 level of $237 million.

Financial Position

Johnson Controls had cash and cash equivalents of $239 million as of Mar 31, 2019, up from $185 million as of Sep 30, 2018. Long-term debt declined to $8.41 billion in the quarter under review from $9.62 billion as of Sep 30, 2018.

In the reported quarter, the company repurchased 16 million shares for $533 million.

Guidance

The company anticipates fiscal 2019 adjusted EPS from continuing operations of $1.85-$1.95, marking a year-over-year increase of 16-23%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 7.63% due to these changes.

VGM Scores

At this time, Johnson Controls has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Johnson Controls has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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