+ Watch JCI
on My Watchlist
The Company operates in three primary businesses: building efficiency, automotive experience and power solutions.
I discarded this one from my Stock Advisor watchlist, today. I don't think it's a market-beater, though in some respects it's an impressive company. Here are some notes coming from Brendan Mathews on my Stock Advisor team:Johnson Controls (JCI)$26/share $17.9 billion market cap==Past 1-2 years View==Johnson Controls could benefit from the recovering economy as car sales increase and cap-ex budgets loosen to include more spending on efficient heating and cooling systems. Over the long-term, demand for Efficient Building should grow as energy becomes more expensive and people become more environmentally aware. The company is already large, so it’s unlikely to double, but it is fairly like to grow 50% over the next five years. ==Key Recent Developments==Lower European auto production has largely offset recovery in the North American auto markets. Johnson Controls has been forced to restructure its European operations, closing plants and laying-off workers. In the most recent quarter, the company took a large charge to cover the cost of restructuring, which were mostly cash severance payments to European workers. Weak global market for Building Efficiency, including a 10% down turn in the U.S. institutional market.A $447 million charge for to bring its pension and healthcare liabilities into compliance with accounting rules.Management’s said that “softening end markets” and a weak Euro will limit the company’s ability to grow sales and earnings in 2013==Outlook==The situation is basically the same – the company still has leadership in its three key markets (auto experience, building efficiency, and batteries). Unfortunately, however, those are all competitive, cyclical markets. If we’ve learned anything over the past year, it’s that building efficiency, which the company hoped would lessen its economic sensitivity, is also highly dependent on the general economy. ==Probability of Beating the Market==40%. Coming off the bottom of 2009, Johnson Controls grew revenue near 20% in 2010 and 2011 as the economy rebounded. For Johnson Controls to continue growing there will need to be a strong upswing in the economy, which is certainly possible, but doesn’t seem imminent. The company’s scale in multiple markets provides some cushion against economic downturns, but ultimately, this company is heavily-levered to the global economy and GDP growth.==Our Motley Fool 5-and-3==5 Potential Green Flags1. Further interest in “Green Buildings,” spurred by government regulation or increased energy costs2. Continued growth in the start-stop battery market – expected to grow 5x between 2011 and 20153. Resurgence in the global auto market4. Continued growth in the building efficiency backlog – maintaining a book to bill ratio greater than 15. Additional, smart acquisitions in the efficiency and power solutions businesses3 Potential Red Flags1. Further weakening in the global auto market or residential and commercial real estate markets2. Additional contributions to the company’s under-funded pension3. Increase in the company’s debt level
WOW! Was I wrong here! I'm exiting -- goodness. #sakesalive
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