Johnson Controls Inc. (JCI) has revealed a profit of $292 million or 43 cents per share in the second quarter of fiscal 2010 ended March 31, 2010, in stark contrast to a loss of $97 million or 16 cents per share (excluding non-recurring items). This was much better than the Zacks Consensus Estimate of 36 cents per share.
The improvement in earnings was attributable to higher sales in each of its segments. Net sales in the quarter increased 32% to $8.3 billion.
Segment Performance
Sales in the Automotive Experience segment shot up by 70% to $4.2 billion, driven by higher production volumes and new program launches in all geographic regions. The segment reported a profit of $189 million compared with a loss of $269 million (excluding non-recurring items) in the year-ago quarter. This was attributable to higher volumes, operational efficiencies and significantly higher profitability of its automotive joint ventures.
Sales in the Power Solutions segment escalated 30% to $1.2 billion, reflecting higher aftermarket and original equipment unit shipments. Aftermarket unit sales rose 9% due to new customers and improved markets. Original equipment battery sales were boosted 44% due to higher global automotive production and incremental volume from new customers.
Segment income more than doubled to $134 million from $66 million in the second quarter of 2009. This was attributable to higher volumes as well as improved capacity utilization due to the completion of restructuring activities.
Sales in the Building Efficiency segment were flat at $3 billion compared with the last year. The segment reported an increase in income to $104 million from $90 million in the 2009 quarter, driven by higher margins in all parts of the business, except North America and Europe.
Financial Position
Johnson Controls had cash and cash equivalents of $770 million as of March 31, 2009 compared with $311 million as of the year-ago period. Total debt amounted to $3.4 billion as of the above period. The long-term debt-to-capitalization ratio stood at 26%.
In the first half of fiscal year 2010, Johnson Controls’ operating cash flow improved to $1 billion in sharp contrast to an outflow of $135 million in the year-ago period, driven by an improvement in net income. Meanwhile, capital expenditures decreased to $311 million from $426 million in the second quarter of fiscal year 2009.
Guidance
Johnson Controls raised its earnings guidance for 2010, as automotive production levels continue to recover in both North America and Europe. Consequently, the company increased its forecasts for North American and European automotive production to 10.9 million units and 16.7 million units, respectively, for full fiscal year 2010.
The company now expects an 18% rise in net sales to $33.5 billion for the year, up from the previous guidance of an increase of 16% to $33 billion. It expects to earn $1.90–$1.95 per share compared with the earlier guidance of $1.70–$1.75 per share.
Capital expenditures are expected to rise to $750 million–$800 million from the previous guidance of $700 million–$750 million due to increased investments in Power Solutions segment.
Based on the improved results and guidance, the stock price went up about 1.25% to $35.44 on Friday morning.
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