Johnson Controls International plc JCI is set to report first-quarter 2017 results, before the market opens on Feb 1. In the last quarter, the company posted a positive earnings surprise of 18.63%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
In fiscal 2017, the company expects to generate strong earnings based on solid operational execution and cost benefits from mergers. Johnson Controls expects adjusted earnings per share in the band of $2.60–$2.75 for fiscal 2017, compared with $2.31 earned in fiscal 2016. This reflects a year-over-year increase of 13–19%. Revenues are expected to increase 2.5% to 4.5% in fiscal 2017. The expected improvement in annual results raises hopes for good quarterly performance for the company.
However, the divestiture of several businesses has been weighing on the company’s revenues and profits. Further, negative foreign currency translation is affecting Johnson Controls’ results. Adjusted net sales declined to $36.9 billion in fiscal 2016 from $37.2 billion in the prior year due to deconsolidation of the company's automotive interiors business and foreign exchange headwinds. This trend may continue in the quarter to be reported.
Earnings Whispers
Our proven model does not conclusively show that Johnson Controls is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: The Earnings ESP for Johnson Controls is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 51 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Johnson Controls International PLC Price and EPS Surprise
Johnson Controls International PLC Price and EPS Surprise | Johnson Controls International PLC Quote
Zacks Rank: Johnson Controls carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Price Performance
Johnson Controls has underperformed the Zacks categorized Industrial Products-Services industry in the last three months. During this period, the company’s share price increased 8.5%, while the industry saw a 12.9% increase. The company completed the spin-off of its Automotive Interiors business into an independent company, Adient. Deconsolidation of this business and negative currency translation have been hurting sales.