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Johnson Controls (JCI) Completes Scott Safety's Divestiture

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Johnson Controls International plc (JCI - Free Report) has completed the sale of safety gear business, Scott Safety, to 3M (MMM - Free Report) for roughly $2 billion. It engages in production of safety products and equipment for gas and flame detection, thermal imaging and other critical products.

In fiscal 2017, the business is expected to generate a total sale of approximately $575 million and EBDITA of nearly $160 million.

Net cash of $1.9 million generated from the transaction will be utilized by Johnson Controls to repay a portion of the debt, resulted from the money borrowed for merging with Tyco International Holding.

Johnson Controls International PLC Price and Consensus

For the current fiscal, dilution related to Scott Safety business divestiture is assumed to be entirely offset by lower financing charges, lower effective tax rate owing to the transaction and benefit of share repurchases in fiscal 2017.

This latest divestiture is in line with the company’s strategy to spin off low-margin businesses and focus on less cyclical, faster-growing and higher-margin alternatives.

However, these recent divestitures are adversely impacting Johnson Controls’ revenue and profit figures due to high separation costs. Earlier in March, the company had divested its ADT South Africa business.

Price Performance

Johnson Controls has gained 0.1% of its value year to date compared with 8.1% growth of its industry.

 



 

Zacks Rank & Key Picks

Johnson Controls carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include Volkswagen AG , Daimler AG and 3M. While Volkswagen and Daimler hold a Zacks Rank #2 (Buy), 3M carries the same Zacks Rank as Johnson Controls.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Volkswagen has an expected growth rate of around 8.9% over the long term.

Daimler has an expected long-term growth rate of 2.8%.

3M has an expected long-term growth rate of 9.5%.

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