Johnson Controls, Inc. Earnings: Margins Shrink as Costs Rise, Profit Falls

Rising costs hurt S&P 500 (NYSE:SPY) component Johnson Controls, Inc. (NYSE:JCI) in the third quarter as profit dropped from a year earlier. Johnson Controls Inc. is a technology and industrial company focused on building efficiency, automotive experience and power solutions.

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Johnson Controls Earnings Cheat Sheet for the Third Quarter

Results: Net income for the auto parts company fell to $357 million (52 cents per share) vs. $418 million (61 cents per share) a year earlier. This is a decline of 14.6% from the year earlier quarter.

Revenue: Rose 21.4% to $10.36 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: JCI reported adjusted net income of 56 cents per share. By that measure, the company beat the mean estimate of 53 cents per share. It beat the average revenue estimate of $9.54 billion.

Quoting Management: “These record revenues mark our seventh consecutive quarter of double-digit growth. All of our businesses are continuing to grow faster than their underlying industries as a result of share gains and our strong position in the emerging markets,” said Stephen A. Roell, Johnson Controls Chairman and Chief Executive Officer. “Automotive Experience in particular exceeded the expectations set as we entered the third quarter due to faster-than-expected market recovery following the Japan earthquake and higher production levels in some markets.” Mr. Roell continued, “We continue to benefit from our investments in growth. Backlog in our Building Efficiency business increased at a double-digit pace as we continue to gain share, especially across our HVAC equipment offerings. We have completed the acquisitions of Keiper/Recaro in our automotive business and EnergyConnect in Building Efficiency. We are confident that the expanded capabilities from these acquisitions will drive accelerated growth and profitability in the coming years.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 29.2% from the year earlier, while the figure increased 7.1% in the first quarter, 49.7% in the fourth quarter of the last fiscal year and more than twofold in the third quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by one cent in the second quarter, by one cent in the first quarter, and by 3 cents in the fourth quarter of the last fiscal year.

Gross margin shrank 0.7 percentage point to 15%. The contraction appeared to be driven by increased costs, which rose 22.4% from the year earlier quarter while revenue rose 21.4%.

Competitors to Watch: Lear Corporation (NYSE:LEA), Visteon Corporation (NYSE:VC), Gentex Corporation (NASDAQ:GNTX), Motorcar Parts of America, Inc. (NASDAQ:MPAA), United Technologies Corp. (NYSE:UTX), Honeywell Intl. Inc. (NYSE:HON), Commercial Vehicle Group, Inc. (NASDAQ:CVGI), Modine Manufacturing Co. (NYSE:MOD), Stoneridge, Inc. (NYSE:SRI), and Strattec Security Corp. (NASDAQ:STRT).

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(Source: Xignite Financials)