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Lithium Battery Bulls Are Juiced on Valence

Although it's not clear what rate Valence will pay as a result of the amendment, Wm Smith analyst Rob Young notes that previously it was a floating rate of LIBOR (London Interbank Offered Rate) plus 400 basis points; as of the fiscal second quarter 2011 it was 6.75%.

Last month, Smith Electric Vehicles said it had sold two all-electric Smith Newton trucks to the U.S. Marine Corps. Michael Lew of Needham notes that these vehicles are being powered by lithium batteries from Valence.

Smith Electric will deliver the trucks to Camp Pendleton, Calif., the Corps' largest West Coast training facility. Smith noted that a September report by the Center for a New American Security recommended, in the interest of financial and security concerns, that America's armed forces set a goal of operating all of its systems on non-petroleum fuels by 2040. The Marine Corps has already set out to reduce its energy use 30% by 2015 and increase its reliance on renewable electrical energy to 25% by 2025, according to Smith.

On Jan. 20, Johnson Controls, which garnered 28.3% of the votes, reported better-than-expected first-quarter earnings and lifted full-year projections as the auto industry climate continued to improve. However, the company said the automotive and buildings markets are still far below historic norms.

Due to the impact of European automotive acquisitions, higher auto production in North America and Europe, and higher Power Solutions aftermarket battery volumes, Johnson Controls now forecasts 2011 revenue to increase 12% to $38.5 billion vs. the previous forecast of $37 billion. Analysts by consensus are expecting revenue of $37.19 billion.

Earnings per share for the 2011 fiscal year are now expected to total $2.50 to $2.55 compared with earlier guidance of $2.30 to $2.45 a share. Johnson Controls expects its second quarter 2011 earnings to fall in the range of 52 cents to 54 cents a share. The Wall Street consensus calls for full-year earnings of $2.54 a share and second-quarter earnings of 57 cents a share.

Johnson Controls reported first-quarter net income growth of about 7% to $375 million or 55 cents a share compared with net income of $350 million, or 52 cents a share the previous year. Net sales rose about 13% to $9.5 billion for the quarter ending Dec. 31, from $8.4 billion the year before. Analysts, on average, expected earnings of 54 cents on revenue of $8.97 billion.

The company said its power solutions sales increased 21% to $1.6 billion from $1.3 billion in the first quarter, reflecting higher aftermarket and original equipment unit shipments. Higher auto production contributed to a 17% increase in global original equipment battery sales, Johnson Controls said.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

>To follow the writer on Twitter, go to Andrea Tse.

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