Will North America Continue Its Contribution To Johnson Controls’ Growth?

April 30th, 2019 by Trefis Team
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Johnson Controls (NYSE: JCI)  is set to announce its Q1 2019 results on May 1 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $5.8 billion in Q1 2019, which would be a decrease of 22.6% on a year-on-year basis. The decrease is due to the sale of the Power Solutions Division in early November. Market expectation is for the company to report earnings of $0.30 per share in Q1 2019, lower than $0.53 per share in the year-ago period.

 

We have summarized our key expectations from the earnings announcement in our interactive dashboard –What Has Driven Johnson Controls’ Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Industrials data.

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Key Factors Affecting Earnings:

Building Solutions Revenue to Grow:

  • Johnson Controls has seen a steady increase in revenue over the past few quarters. In Q1 2019 (ended December 2018) we see a fall big in Revenue due to the sale of Power Solutions Division.
  • Building Solutions Revenue has been increasing at a steady and moderate pace across geographies after a good growth jump in 2017, where Total Revenue went up by more than 60% year on year.
  • Global Products segment and Building Solutions North America are expected to continue contributing the highest to Total revenue, approximately 73%,  by posting around $8.7 billion and about $9.1 billion in revenues, respectively. This has been aided by the growth in the North American non-residential construction markets.
  • Power Solutions division was sold off in November 2018 and thus is recognized as a Discontinued operation.

 

Trend in Expenses:

  • Total Expenses have stayed steady across the quarters. The fall in Q1 2019 (ended December 2018), like for Revenue, is due to the sale of Power Solutions Division.
  • Cost of Sales has remained around the same range over the quarters. i.e. 68%-70%. In Q1 2019 (ended December 2018) it was 68.4%

 

Full Year Outlook:

  • For the full year, we expect gross revenue to decrease by 22.5% to $24.3 billion in 2019.
  • Building Solutions revenue is expected to increase by 4% as all geographies will continue on the growth path.
  • Overall EBITDA Margin is expected to remain steady at around 13% in 2019.

 

Trefis has a price estimate of $36 per share for Johnson Controls’ stock. The value is based on the expectation that the company will continue to grow its Building Solutions revenue while maintaining the EBITDA margins.

 

 

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