Johnson Controls: Beating Earnings & Raising Guidance Is Not Enough (JCI, HON, CREE, XIDE, AONE, MAG, TRW)

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The ride continues at Johnson Controls, Inc. (NYSE: JCI). For the first quarter of its 2011 fiscal year, the company reported record net sales of $9.5 billion and record income of $533 million, or EPS of $0.55. Analysts were expecting EPS of $0.54 on sales of $8.97 billion.  Over the past year, Johnson’s stock has performed better than nearly all its competitors in the company’s main lines of business.  That may be part of the problem today.

In its building efficiency segment, the company competes with Honeywell International Inc. (NYSE: HON) and Cree, Inc. (NASDAQ: CREE). In its power segment, the company’s competitors include Exide Technologies (NASDAQ: XIDE) and A123 Systems, Inc. (NASDAQ: AONE). And in its automotive segment, Magna International Inc. (NYSE: MAG) and TRW Automotive Holdings Corp. (NYSE: TRW) are among a host of US and international competitors. With the exception of TRW, which more than doubled its stock price in the past year, Johnson shares have outperformed all the rest, rising about 40%.

The company has benefited from rising auto sales, increased installation of energy efficiency controls, and a contract to supply Wal-Mart Stores Inc. (NYSE: WMT) with auto batteries. Profits in the auto segment rose 46% compared with a year ago and profits in the building efficiency group rose 34%. More modest gains in revenue indicate that the company’s margins are strong and likely to get stronger.

On the strength of its first quarter report, Johnson raised its guidance for both sales and earnings. The company now forecasts full-year revenue to reach $38.5 billion, up from a previous estimate of $37 billion. Full-year EPS is rose from a previous estimate of $2.30-$2.45 to a new estimate of $2.50-$2.55. The new guidance is better than analysts’ expectations of EPS of $2.54 and revenue of $37.19 billion.

Johnson also expects to increase capital spending from $1.2 billion to $1.4 billion as it expands it capacity to make batteries.  Johnson is currently building new capacity to manufacture start-stop batteries, a technology that will be available next year on some cars sold in the US by Ford Motor Co. (NYSE: F).

The company’s CEO noted that Johnson is “increasingly confident” that it will post record results in 2011, and that the company will “consistently outperform our markets and increase shareholder value.”

So far today, though, Johnson’s shares are down nearly 2.5%, to $39.15, near the top of the company’s 52-week range of $25.56-$41.45. Volume is also heavier than usual in the shares.

Paul Ausick