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Johnson Controls (JCI) Up 2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Johnson Controls (JCI - Free Report) . Shares have added about 2% in that time frame, underperforming the S&P 500.

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

Johnson Controls Q2 Q3 Earnings & Revenues Beat Estimates

Johnson Controls reported adjusted earnings per share of 81 cents in third-quarter fiscal 2018, beating the Zacks Consensus Estimate of 80 cents. Moreover, earnings increased 14% from 50 cents recorded in third-quarter fiscal 2017.

Operational Update

Johnson Controls reported revenues of $8.1 billion, surpassing the Zacks Consensus Estimate of $7.96 billion. Revenues increased 6% year over year.

Cost of sales increased to $5.64 billion from $5.25 billion in the year-ago quarter. Gross profit rose to $2.47 billion from $2.43 billion in the year-ago quarter.

Selling, general and administrative expenses in the fiscal third quarter totaled $1.52 billion, down from the prior-year quarter figure of $1.61 billion.

Segment Results

Building Technologies & Solutions: This segment’s adjusted revenues were $6.28 billion, increasing from the year-ago quarter figure of $6.06 billion. Segment EBITA increased to $954 million from $908 million in third-quarter fiscal 2017.

Power Solutions: Adjusted revenues in this segment rose to $1.84 billion from $1.61 billion a year ago. Segment EBITA was $310 million, up from third-quarter fiscal 2017 level of $304 million.

Financial Position

Johnson Controls had cash and cash equivalents of $283 million as of Jun 30, 2018, down from $321 million as of Sep 30, 2017. Long-term debt declined to $10.37 billion in the quarter from $12 billion as of Sep 30, 2017.

In the reported quarter, the company repurchased 1.6 million shares for $60 million.

Guidance

Johnson Controls tweaked the adjusted EPS guidance for fiscal 2018 to $2.80-$2.82 from the previous $2.75 to $2.85.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Johnson Controls has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, 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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