Johnson Controls (JCI 1.56%) is a diverse company that's almost three companies in one: power solutions, automotive experience, and building efficiency. Johnson Controls' competitive advantage comes from cost advantages, high switching expenses, intangible assets, and the sheer size that enables it to pile money into research and development for new products.

After a slower start to fiscal 2013, it should be no surprise that a company that is continuing to restructure, while still holidng those advantages, has turned the corner for a solid fiscal fourth quarter. Johnson Controls traded more than 5% higher Tuesday after its earnings beat hit the news feeds. Here are some highlights: 

  • Sales were up 6% over last year's fourth quarter, to $11 billion.
  • Record segment income improved 27% to $920 million.
  • Net income improved 25% to $657 million.
  • Earnings per share improved 23% to $0.95.

Johnson Controls President and CEO Alex Molinaroli said in a press release:

While the macro-economic environment continues to be challenging, each of our businesses generated top line growth in the fourth quarter. Even more importantly, they all had significant improvements in profitability. It is particularly pleasing that our efforts to improve execution and control costs are gaining traction.

In addition to the stronger revenue Molinaroli mentioned, profitability improved in each segment as well. Johnson Controls' power solutions, automotive experience, and building efficiency all improved profitability by 410, 110, and 60 basis points, sequentially.

Investors also cheered the announcement that Johnson Controls would curtail the automotive interiors business which had lost $13 million on sales of $4.2 billion in the fourth quarter. Curtailing the interiors operations shouldn't harm the seating and electronics business in the automotive segment and will further focus the company on its more profitable automotive businesses. That's key going forward because automotive experience represents roughly half of the company's net sales yet was the least profitable of the three segments in the fourth fiscal quarter.

Momentum building
Johnson Controls seems to have some momentum as its business markets stabilize and the automotive market continues to rebound. As we saw this quarter, management believes margins will continue to expand across all business segments, and as capital expenditures lower it will generate much stronger cash flows.

"We are at the beginning of the next era for Johnson Controls. We believe initiatives to improve the profitability of our businesses are gaining momentum and our markets are stabilizing," Molinaroli said. "In the coming months, we will provide detail on how we plan to build on the strengths of Johnson Controls to improve our performance and drive higher levels of shareholder value. I believe our 2013 results shows that we have a strong foundation to build upon."

Johnson Controls also noted that for the first quarter of 2014 it expects earnings to increase roughly 30%; it will provide further guidance at its analyst day on Dec. 18 in New York. Look for Johnson Controls to continue strengthening its business and to gain even more momentum in fiscal 2014. With a consistently increasing dividend since 2010 the company merits a place on your watchlist.