Johnson Controls (NYSE:JCI) is well positioned to grow over the long term as it is steadily expanding footprint in the emerging markets including Asia-Pacific and Latin America. At the same time, the company’s building and automobile businesses are deriving substantial gains from the growing global trend of energy efficiency. We figure this alignment with global growth trends will help Johnson Controls maintain its impressive track record of growing earnings in 21 of last 22 years and dividends in 33 of last 35 years. 
We currently have a stock price estimate of $48 for Johnson Controls, marginally below its current market price.
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Expanding Presence In The Fast Growing Emerging Markets
Johnson Controls currently gets more than three-fourth of its sales from the relatively slow growing markets of Europe and North America, but it is steadily expanding presence in the fast growing emerging markets of the world like China.  Through this expansion, the company aims to get a larger share of the fast growing building and automobile sectors of these emerging markets to lift its overall growth.
In its building segment for instance, Johnson Controls is expanding its product/service offerings and establishing distribution channels in the emerging markets. The company foresees large growth potential in the building markets of certain emerging countries such as China in which driven by largely employment needs, roughly 350 million additional people are expected to move to cities from rural areas by 2025. Over this time period, to support their additional residential and commercial needs around 50,000 new high rises are expected to come up in the country.  Such high construction spending will create huge demand for heating, ventilation and air-conditioning (HVAC) systems and other building control systems that are manufactured by Johnson Controls.
Additionally, the automobile sector in which Johnson Controls is a major supplier of batteries, seats and interiors, is also growing in all major emerging markets, driven by rising car ownership rates. In China, for instance, in the first six months of 2013, car and commercial vehicle production rose by 13% annually, compared to the same period last year.  Though, Johnson Controls is already a leading supplier of car seats in the China auto market, it is further expanding production capacity in the country. The company currently has 56 plants in China that manufacture automobile seats and interiors such as door/floor/front panels, and it plans to open 10 additional plants to cater to the growing demand from the country’s auto sector.  Not just in auto seats and interiors, Johnson Controls is also expanding its production capacity of lead-acid and advanced start-stop auto batteries in China.
In addition to China, the company is also expanding in other emerging markets both through organic growth and acquisitions. Earlier this year in May, Johnson Controls bought out its local partner in an Indian joint venture – Tata Johnson Controls – which sells car seats and other components to the Indian automobile industry. Then, earlier this month, the company acquired a majority share in the Colombian battery supplier MAC in order to bag a larger share of the fast growing Latin automobile industry.
Thus, across its businesses Johnson Controls is expanding in the emerging markets and we figure these investments will help maintain its growth over the long term.
Energy Efficiency And Sustainability Support Johnson Controls’ Growth And Outlook
Separately, the growing global trend of higher energy efficiency driven by rising energy prices and efforts to slash emissions is also benefiting Johnson Controls.
Higher energy efficiency in buildings is growing demand for the company’s energy related advisory services. In this space, Johnson Controls’ growth is also helped from the fact that investments by customers in building energy efficiencies are recovered over time through lower operational costs.
Similarly, growing adoption by the automobile industry of start-stop batteries which save fuel and slash emissions is raising sales of Johnson Controls’ Absorbent Glass Mat (AGM) batteries. The start-stop technology switches-off the engine automatically when the vehicle comes to rest and restarts the engine as soon as the brake is released or clutch is engaged. Estimates suggest that this technology saves around 5% on fuel consumption. Europe was the first region to adopt the start-stop technology and Johnson Controls estimates that by 2018 nearly 80% of all cars built in the continent will feature this technology. In addition to Europe, North America and China are beginning to adopt this technology. Johnson Controls being a leading provider of advanced batteries that can support start-stop technology is benefiting from this trend. Unit sales of its AGM batteries which power start-stop vehicles recently crossed 21 million, from their launch in 2001.  The company is also a leading maker of Li-ion batteries capable of powering hybrid and electric vehicles that are expected to come in to mainstream over the long term. The company is thus also well positioned to benefit from the long term energy efficiency related developments in the automobile space.
Mitigating these growth drivers is slower growth in building and automobile sectors of the emerging countries especially in China. If growth in key emerging markets slips significantly in the near future then there could be a downside to our current valuation of Johnson Controls.Notes: