Johnson Controls Inc. JCI reported adjusted earnings of 86 cents per share in second-quarter fiscal 2016 (ended Mar 31, 2016) that surpassed the Zacks Consensus Estimate of 82 cents. Moreover, earnings per share increased 18% from 73 cents earned in the second quarter of fiscal 2015. Notably, the financial details of last year have been revised as the company classified its Global Workplace Solutions business as a discontinued operation.
Operational Update
Johnson Controls reported revenues of $9.03 billion, down 1.8% year over year. Revenues also missed the Zacks Consensus Estimate of $9.08 billion. The decline was due to deconsolidation of the company's automotive interiors business and foreign exchange. However, the top line benefited from higher organic volumes and additional revenues generated from the joint venture with Hitachi.
Cost of sales decreased to $7.3 billion from $7.6 billion in the year-ago period. Gross profit increased to $1.73 billion from $1.57 billion a year ago.
Selling, general and administrative expenses in the second quarter totaled $1.14 billion, higher than the prior-year quarter figure of $975 million. The company reported business segment income of $833 million, up 19% from $698 million recorded a year ago.
Segment Results
Automotive Experience: Revenues in this segment fell 18% year over year to $4.3 billion due to deconsolidation of the interiors business and the impact of foreign exchange. Excluding the impact of these items, sales improved 2%.
Segment income rose 24% to $324 million. Excluding the impact of foreign exchange, segment income increased 26%, driven by higher seating volumes, restructuring savings and operational efficiencies.
Building Efficiency: In this segment, revenues came in at $3.2 billion, up 33% from the year-ago level. Excluding incremental revenue associated with the Hitachi joint venture and foreign currency impact, revenues improved 3%, backed by better results in North America and Asia, partially offset by sluggishness in the European and Latin American markets.
The quarter-end backlog increased 2% year over year. Orders, excluding the Hitachi joint venture and adjusted for foreign exchange, were up 5% year over year, led by an increase in orders in North America and Asia, partially offset by softness in Latin America.
Segment income climbed 42% to $245 million in the reported quarter from $173 million in the prior-year quarter, driven by higher revenues from the Hitachi joint venture and higher volumes.
Power Solutions: Revenues in the Power Solutions segment remained flat at $1.6 billion. Excluding the impact of foreign exchange and lower lead pass-through costs, revenues increased 5%. Segment income was $264 million, unchanged from the year-ago period.