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Tickers in this Article: JCI, TEN, LEA, MGA, TRW, DAN
Johnson Controls (NYSE:JCI), maker of automotive components and industrial energy systems, achieved record sales and earnings for its first quarter of fiscal 2011. The company gained from a rebound in all its business segments. It also increased sales and earnings guidance for 2011.

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Record Results
Although Johnson Controls makes heating and cooling systems for buildings, it's probably better known for its manufacture of automotive seating and batteries. Johnson Controls achieved its record results in the quarter despite the automotive and building industries still underperforming their historic levels.

Johnson Controls brought in nearly half its revenue from its automotive unit, as sales increased by 12% to $4.6 billion from $4.1 billion. Higher sales volumes along with joint ventures contributed to this. Income in the division rose 46%. Launches of new automotive seating and interior programs also helped.

In the power solutions division, which includes the automotive batteries, sales were up 21%. A new battery recycling facility as well as growing interest in batteries for hybrid vehicles should set up this division well for the future. The building efficiency revenues increased by 13%, while income in the division surged 34%. Both backlog and orders for the quarter are up over comparable previous year periods.

The Quarter's Earnings
Net income for the first quarter of fiscal 2011 was $375 million or $0.55 per diluted share compared with adjusted net income of $288 million or $0.43 per diluted share in the first quarter of 2010.The adjusted earnings is a truer comparison, as it removes a $62 million one-time tax benefit from the first quarter of 2010. Revenue was $9.5 billion, up from $8.4 billion in the year ago quarter.

Auto Supplier Revival

Although the automotive revival is gathering momentum, it doesn't look as though the halo effect for the parts suppliers stocks has been factored in. Johnson Controls, along with Tenneco (NYSE:TEN), which manufactures auto emission control devices, and fellow seat-maker Lear (NYSE:LEA), may not be getting credit for their dramatically improved prospects.

Two other big names in the space are worth a look. Canadian based Magna International (NYSE:MGA) is poised for strong growth and TRW Automotive Holding Corp (NYSE:TRW) stands to be a potent player in the auto revival. Even less well-known names such as Dana Holding Corp.(NYSE:DAN), despite its recent settlement with Toyota, should benefit from the auto industry upsurge.

Fertile Field for M&A
Another sign that the ancillary auto business is heating up is merger and acquisition activity. Johnson Controls tried to buy Visteon last year for $1.25 billion but was rebuffed. It did successfully complete its Hammerstein and Keiper/Recaro European acquisitions, which should add $700 million to revenues though earnings won't be accretive in the short run. Johnson Controls announced it's still actively seeking acquisition opportunities.

Guidance Raised
The company raised guidance for sales and earnings for 2011. It forecasts sales of $38.5 billion with an EPS of $2.50 to $2.55 per share. Second quarter earnings should increase 20% over the year ago quarter. With the auto industry rebound, for suppliers like Johnson Controls, there's a lot of upside. (For related reading, see Auto Stocks For 2011.)

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