Johnson Controls Inc.JCI

Morningstar Rating

Stock Research and Analysis

by David Whiston, CPA, CFE

Johnson Controls continues to diversify itself in addition to being one of the leading auto-parts suppliers. Ongoing profitable growth in the firm's building efficiency and power solutions group has helped offset declining sales in the automotive experience Read more

Bulls Say

Johnson Controls has 13,000 HVAC service providers, making it twice the size of the second-largest competitor.

More standardization in building efficiency product lines and the company's unique ability as a one-stop shop will keep this segment growing and profitable, especially in emerging markets.

Heavy investment in lithium-ion batteries will help growth over the years as will the acquisition of Delphi's battery business, which gave the segment a presence in China. Massive increases in lead prices are mitigated by the fact that 100% of the lead price pass-through has been standard contracting with battery retailers for more than 70 years.

Building efficiency could greatly benefit from the American Reinvestment and Recovery Act. Management forecasts the company will win 25% of a possible $12 billion of projects attributable to U.S. government stimulus funding.

Johnson Controls' strong balance sheet provides financial flexibility to make investments when needed and to better withstand industry downturns. Read more

Bears Say

The company still gets more than 40% of its sales from the very cyclical auto industry.

Commercial property servicing is very fragmented, and it could take time to capture significant market share in the middle-market segment.

About 25% of battery sales are to automakers, which further exposes Johnson Controls to declines in auto production.

The battery segment's early push and recent expansion into lithium-ion batteries is the right move, but it is too early to tell whether Johnson Controls will be the leading player in this emerging market.

Despite strong businesses outside of autos, Johnson Controls' stock still experiences cyclical volatility as the market perceives it as an auto parts supplier. Read more

Strategy

Johnson Controls is focused on expanding all three areas of its business, especially the building efficiency and power solutions segments. Residential HVAC is still very much an untapped market for the Read more

Management

Stephen Roell is CEO and chairman. Although we prefer to see the roles of chairman and CEO separated, we are encouraged that Roell is a Johnson Controls veteran, having served as CFO from 1991 to 2005 and executive vice president from 2004 to 2007. Read more

Profile

Johnson Controls operates three businesses. The building efficiency segment is a $12.5 billion group that provides controls and services for HVAC systems. The automotive Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

Daily Dividend Report: FO, WFC, MON, EXC, JCI, NSC
Watch more