Johnson Controls Hits Targets

The first quarter exceeds expectations, but the second looks softer.
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Johnson Controls (JCI) - Get Report posted solid gains in its first quarterly report since its acquisition last month of air conditioning giant York International.

The Milwaukee-based engineering outfit made $167 million, or 86 cents a share, on a continuing operations basis for its first quarter ended Dec. 31, up from the year-ago $156 million, or 81 cents a share. Revenue rose to $7.53 billion from $6.62 billion a year earlier. Analysts were looking for 83 cents on revenue of $6.94 billion.

Johnson Controls said it will explore strategic alternatives for the Bristol Compressor business, which is part of York International. The first-quarter earnings for this business have been reported separately as discontinued operations.

For the latest quarter, sales increased 14%, reflecting organic growth by the interior experience and power solution businesses as well as revenues from the acquisitions of York and the Delphi battery business. Operating income was a record $231 million, an increase of 5% over $219 million for the prior year. Higher power solutions and European interior experience earnings were partially offset by lower North American interior experience results and costs associated with the York acquisition. Excluding the impact of the York acquisition and foreign exchange, both sales and operating income increased 10% over the first quarter of fiscal 2005.

The company guided to second-quarter earnings of about 93 cents a share, excluding certain costs, against a 95-cent Wall Street estimate. The company is looking for revenue of $8 billion, shy of the $8.2 billion Wall Street target. For 2006, Johnson Controls expects to make $5 to $5.15 a share on revenue of $32 billion, in line with the Thomson First Call estimate of a $5.09 profit on sales of $31.7 billion.

"There are challenges to overcome in all of our industries, but along with challenges come opportunities," CEO John Barth said. "We continue to transform our businesses, increase our competitiveness, expand our markets and apply our innovation, execution and cost reduction disciplines. Our businesses were awarded major new contracts in the first quarter of 2006, which is a testament to our continued ability to deliver value to our customers. We believe we are well positioned to meet our financial targets for 2006 and beyond."