Johnson Controls Stock Hits New High: Company Predicts Higher Profits This Year

Shares of Johnson Controls Inc. surged 9 percent to an all-time high after the company said a lower tax rate and strong sales of air conditioners and automotive batteries will boost its profits this year. Net income fell $38 million, or 20 cents a share, to $165 million, or 84 cents a share, in the quarter that ended on March 31. But net income from continuing operations, which excludes restructuring costs and a tax credit, was $162 million, or 83 cents, up from $54 million, or 28 cents, a year ago. The 83 cents was higher than the 75 cents forecast by analysts surveyed by Thomson Financial First Call.

From Milwaukee Journal Sentinel

Net income fell $38 million, or 20 cents a share, to $165 million, or 84 cents a share, in the quarter that ended on March 31. But net income from continuing operations, which excludes restructuring costs and a tax credit, was $162 million, or 83 cents, up from $54 million, or 28 cents, a year ago. The 83 cents was higher than the 75 cents forecast by analysts surveyed by Thomson Financial First Call.

The company said its results were aided by a tax rate that fell to 17 percent in the quarter, as it realized more profits in countries with lower tax rates.

The company’s stock price closed at $81.40, up $6.57.

Johnson Controls is Wisconsin’s largest company based on sales. Headquartered in Glendale, WI, it makes automotive batteries, building control systems and equipment and automotive seats and interiors.

Sales rose 18 percent, to $8.2 billion, with much of the increase linked to acquisitions: Delphi Corp.’s battery business and York International, a maker of heating and air conditioning equipment. Those acquisitions helped drive a 74 percent increase in building efficiency, or controls, sales and a 29 percent surge in battery, or power solutions, sales. Those gains offset flat sales in the company’s largest business, automotive seats and interiors.

There’s room for more growth in the battery business, Johnson Controls executives said during a conference call with investment analysts.

The company is preparing to expand its manufacturing capacity in North America and Asia in light of strong demand. Johnson already has a market share of at least 60 percent in the North American market, Vice President Denise Zutz said.

Chairman and Chief Executive John Barth said: “For the first time in the history of JCI, we are really positioned as a multi-industry company. We have three businesses that can rightfully claim that we either are the market leader or we certainly are positioned — and we’ll find out how good we are — to be the market leader.”

The company increased its annual earnings outlook to a record $5.25 to $5.35 a share, on sales of $32 billion.

In a research note, Merrill Lynch analyst John Murphy said Johnson Controls’ profit margin was lower because of newly acquired companies but that results should improve as the company continues to integrate the York and Delphi battery businesses.

On the automotive side, the company posted flat sales, with operating income down 1 percent. That came despite a challenging environment in which Detroit-based Ford and General Motors are in the middle of massive, multibillion-dollar restructuring plans. The performance “was a result of strong results in Europe and exposure to Honda and Toyota,” Murphy said.

Zutz said the company will be forced to restructure some of its production as a result of the Ford and GM plant closings.

The company eliminated nearly 300 jobs when GM shut its Oklahoma City sport utility vehicle factory in February. More production shifts are expected when Ford shuts its factory in Norfolk, VA, in 2008 and its plant in St. Paul, MN, in 2009. Together, those actions should cost the company about $15 million to $20 million, Chief Financial Officer Bruce McDonald said.

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