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Johnson Controls Acquires Tata JV

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Johnson Controls Inc. (JCI - Free Report) has fully acquired the India-based Tata Johnson Controls (TJC), formerly a 50:50 joint venture between the company and Tata Automotive Components. TJC is a leading supplier of automotive seating and components to major original equipment manufacturers (OEMs) in India. Both the parties have not disclosed terms of the deal.

TJC operates from 11 locations in India that includes an engineering center in Pune and a new Technical Center in Pimpri. It employs 2,100 people. After the acquisition, Johnson Controls plans to expand its prototype and testing capability in India.

Johnson Controls has been operating in India since 1995. According to Paul Chawla, president and chief executive of Johnson Controls’ Indian automotive seating and interiors operations, India is considered a part of Johnson Controls’ global strategy for sustainable growth.

As a result, expanding in emerging markets is a key priority for the company. According to market research firm IHS, more than half of global production of cars and light trucks is expected to take place in China, India, Russia and Brazil by 2017.

Johnson Controls posted a 23.6% decline in adjusted earnings to 42 cents per share in the second quarter of fiscal 2013 ended Mar 31, 2013 from 55 cents in the same quarter of prior fiscal year, but earnings were in line with the Zacks Consensus Estimate. Net income declined 24.1% to $287.0 million from $378.0 million in the second quarter of fiscal 2012.

Revenues in the quarter declined 1.3% $10.43 billion but marginally exceeded the Zacks Consensus Estimate of $10.39 billion. The decline was attributable to lower revenues in the company’s Automotive Experience and Building Efficiency segments.

Johnson Controls reiterated its guidance to generate earnings between $2.60 and $2.70 per share in fiscal 2013, which is higher than $2.56 in fiscal 2012. For the third quarter of fiscal 2013, the company expects earnings per share of 75 cents.

The company also expects that it will record better performance in the second half of 2013 due to benefits from restructuring initiatives, higher profitability from Building Efficiency segment and improvements in European and South American Automotive Experience businesses. It also expects Power Solutions business to record higher profitability in the second half of fiscal 2013.

Following the impressive guidance, shares of the company started escalating. On May 28, shares of the company reached 52-week high of $38.33.

Currently, shares of Johnson Controls retain a Zacks Rank #3, which translates to a short-term rating (1–3 months) of Hold. Some other stocks that are performing well in the broader industry where Johnson Controls operates include STRATTEC Security Corporation , Tower International, Inc. (TOWR - Free Report) and Visteon Corp. (VC - Free Report) . All these companies carry a Zacks Rank #1 (Strong Buy).


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