Is Johnson Controls Stock a Buy?
Johnson Controls (NYSE: JCI) investors were disappointed recently as its fiscal third-quarter earnings report and, more importantly, its fiscal fourth-quarter guidance fell short of expectations. The sharp decline in the share price took the stock into negative territory for the year. Such situations often create buying opportunities but can also be a precursor to further declines. Which is it with Johnson Controls?
It wasn't so much the earnings as the implied fourth-quarter guidance that concerned investors. The company's fiscal year finishes at the end of September, so its full-year guidance incorporates its fourth-quarter guidance. Unfortunately, management downgraded its full-year sales guidance from 10% growth to "high single-digit" growth, and updated its full-year earnings per share guidance to $3.55 from a previous range of $3.50-$3.60.
The sales downgrade comes from pressure on sales in its residential heating, ventilation, and air conditioning (HVAC) and fire and security products (global products segment). On the earnings call, CEO George Oliver said, "Inventories in the channel are resetting as we've been able to improve lead times, and so, therefore, there are some short-term adjustments in the book-to-bill revenues."
Source Fool.com
