Hot Stock of the Day: Johnson Controls International plc (NYSE: JCI)

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On Friday, Shares of Johnson Controls International plc (NYSE: JCI) rose 0.44% to $36.75. The stock traded total volume of 2,119,937 shares lower than the average volume of 4.47M shares.

Johnson Controls International plc (JCI) recently stated fiscal first quarter 2019 GAAP earnings per share (“EPS”) from continuing operations, counting special items, of $0.12.  Excluding these items, adjusted EPS from continuing operations was $0.26, up 24% as compared to the prior year period.

Sales of $5.50B increased 3% contrast to the prior year.  Excluding the impacts of M&A and foreign currency, sales grew 6% organically.

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GAAP earnings before interest and taxes (“EBIT”) were $329.0M and EBIT margin was 6.0%. Adjusted EBIT was $400.0M and adjusted EBIT margin was 7.3%, up 50 basis points over the prior year.  Excluding the impact of M&A and foreign currency, the underlying adjusted EBIT margin increased 60 basis points.

BUSINESS RESULTS:

Building Solutions North America:

ABS REPORT

Sales in the quarter of $2.10B increased of 5% as compared to the prior year.  Excluding M&A and foreign currency, organic sales increased 6% as compared to the prior year driven by solid growth across HVAC & Controls, Fire & Security and Solutions.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 5% year-over-year.  Backlog at the end of the quarter of $5.40B increased 4% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $253.0M, up 7% as compared to the prior year. Adjusted segment EBITA margin of 12.0% expanded 30 basis points as compared to the prior year as favorable volume leverage as well as cost synergies and productivity savings, were partially offset by unfavorable mix and salesforce additions.

Building Solutions EMEA/LA (Europe, Middle East, Africa/Latin America):

Sales in the quarter of $907.0M declined 1% as compared to the prior year.  Excluding M&A and foreign currency, organic sales grew 4% as compared to the prior year driven by stronger service growth. Growth was positive across most regions, led by strength in HVAC, Fire & Security and Industrial Refrigeration in Europe, and Fire & Security and Industrial Refrigeration in Latin America.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 9% year-over-year.  Backlog at the end of the quarter of $1.60B increased 15% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $77.0M, up 8% as compared to the prior year. Adjusted segment EBITA margin of 8.5% expanded 70 basis points over the prior year, counting a 30 basis point headwind related to foreign currency.  Adjusting for foreign currency, the underlying margin improved 100 basis points driven by favorable volume and mix as well as the benefit from cost synergies and productivity savings, partially offset by salesforce investments.

Building Solutions Asia Pacific:

Sales in the quarter of $613.0M increased 3% as compared to the prior year.  Excluding M&A and foreign currency, organic sales increased 6% as compared to the prior year driven mainly by high-single digit growth in project installations.

Orders in the quarter, excluding M&A and adjusted for foreign currency, increased 9% year-over-year.  Backlog at the end of the quarter of $1.50B increased 12% year-over-year, excluding M&A and adjusted for foreign currency.

Adjusted segment EBITA was $66.0M, down 11% as compared to the prior year. Adjusted segment EBITA margin of 10.8% declined 160 basis points over the prior year as favorable volume was more than offset by unfavorable mix, salesforce additions and expected underlying margin pressure.

Global Products:

Sales in the quarter of $1.80B increased 3% as compared to the prior year. Excluding M&A and foreign currency, organic sales increased 7% as compared to the prior year with high-single digit growth in HVAC & Refrigeration Equipment, low-double digit growth in Building Management Systems, and mid-single digit growth in Specialty Products.

Adjusted segment EBITA was $194.0M, up 9% as compared to the prior year. Adjusted segment EBITA margin of 10.6% expanded 60 basis points over the prior year driven by favorable volume and mix, positive price/cost as well as the benefit of cost synergies and productivity savings, partially offset by ongoing product and channel investments.

Corporate:

Adjusted Corporate expense was $93.0M in the quarter, a decrease of 11% contrast to the prior year, driven mainly by continued cost synergies and productivity savings.

OTHER ITEMS:

  • On November 13, 2018, the Company declared a contract to sell its Power Solutions business for $13.20B. The transaction is expected to close no later than June 30, 2019, subject to customary closing conditions and regulatory approvals. The results of the Power Solutions business are stated in suspended operations for all periods presented.
  • Cash used by operating activities from continuing operations was $0.10B and capital expenditures were $0.20B in the quarter, resulting in a free cash outflow from continuing operations of $0.20B. Adjusted free cash flow was also an outflow of $0.20B, which excludes net cash outflows of $0.10B mainly related to integration costs.
  • During the quarter, the Company repurchased about 14.0M shares for $467.0M.

JCI has the market capitalization of $33.87B and its EPS growth ratio for the past five years was 19.70%. The return on assets ratio of the Company was 4.70% while its return on investment ratio stands at 9.10%. Price to sales ratio was 1.15 while 92.30% of the stock was owned by institutional investors.

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