Johnson Wins German Contract

Johnson Controls Inc. (JCI) has won a 10-year energy performance contract with the German Army valued at €1.3 million ($1.7 million). Under the deal, Johnson will modernize the army’s Oranienstein base in Diez. The project has already started and is slated to complete by the end of this year.

Johnson has been entrusted with the task to reduce energy costs at the army base that are about €475,000 ($606,000) per year currently. It will also upgrade the lighting and improve the building control system on the site. The project is expected to provide annual energy cost savings of 49% and a 55% reduction in greenhouse gas (GHG) emissions annually.

Currently, Johnson also runs a retrofit project at the German Army base in Aulenbach. In this project, the company follows a target of reducing annual energy costs by 69% and GHG emissions by 76%.

Johnson Controls has been awarded notable contracts over the years. In 2009, the State of Michigan awarded $148.5 million in state tax breaks to the Johnson Controls–Saft joint venture to build the first U.S. production facility for lithium-ion batteries in Holland, Michigan.

Johnson Controls also won lithium-ion battery contracts from the United States Advanced Battery Consortium and Ford Motor Company (F). Johnson Controls was selected by the United States Department of Energy as one of 16 companies to participate in an $80 billion contract to improve energy efficiency projects in Federal buildings.

In May 2010, Johnson Controls was also awarded a global contract by GlaxoSmithKline (GSK) to provide workplace services to the pharmaceutical and healthcare company.

Johnson Controls' third-quarter fiscal 2010 earnings more than doubled to $367 million or 54 cents per share, from $154 million or 25 cents per share in the year-ago quarter (all excluding non-recurring items). However, quarterly earnings narrowly missed the Zacks Consensus Estimate by a penny.

The improvement in earnings was attributable to higher sales in each of its segments, driven by recovery in global markets. Net sales in the quarter rose 22% to $8.54 billion, exactly meeting the Zacks Consensus Estimate.

Despite the strong results and notable contract wins, the company’s results can be negatively affected by raw material/price squeeze and poor performance by the Building Efficiency segment on the back of a worsened residential market. Accordingly, Johnson Controls' shares have a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation.

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