Johnson Controls Inc. Earnings: What to Expect

Johnson Controls (JCI +0.48%) will release its quarterly report on Thursday, and the stock has risen to all-time highs based on the strength of the auto industry. With the company providing critical systems to U.S. automakers Ford (F 0.98%) and General Motors (GM 0.40%), as well as a host of other manufacturers around the world, Johnson Controls has benefited from the huge upsurge in car and truck sales both in the U.S. and abroad, and investors have high hopes that the parts-and-systems maker will continue to see big earnings growth well into the future.

Johnson Controls makes a wide variety of different products for the auto industry, ranging from seating systems and instrument panels to electronics systems. But Johnson Controls also has exposure to the broader commercial sector through its building-efficiency division, which helps optimize HVAC systems for reduced energy use, as well as dealing with specialized solutions for industrial refrigeration and fire and security systems. Let's take an early look at what's been happening with Johnson Controls during the past quarter, and what we're likely to see in its report.

Source: Johnson Controls.

Stats on Johnson Controls

Source: Yahoo! Finance.

How fast can Johnson Controls earnings keep growing?
In recent months, analysts have had mixed views on Johnson Controls earnings, cutting fourth-quarter estimates by $0.03 per share, but boosting their full year fiscal 2014 and 2015 projections by 1% and 3%, respectively. The stock has kept climbing sharply, rising another 23% since mid-October.

Johnson Controls got the quarter started on the right foot, announcing September-quarter results that sent the stock more than 5% higher. Revenue climbed 6%, producing a 25% boost in net income. Profits climbed in each of the company's three major segments, with its power-solutions business seeing gains of more than four percentage points, while the automotive experience unit posted a rise of 1.1 percentage point in margins.

But Johnson Controls isn't satisfied with its past performance and is, instead, striving to become even more successful. Investors were pleased with its move to cut back on its automotive interiors business, which might seem counterintuitive given the success of Ford and General Motors. But the business had produced losses recently, and Johnson Controls doesn't expect that the move will hamper its ability to cash in on more lucrative car seating and electronics products. In addition, the company said in November that it would implement major share repurchases, aiming to return capital to investors while still retaining enough to make smart strategic moves.

One of those moves involved the company buying a 60% stake in Hitachi's global air-conditioning business. The buy should help bolster Johnson Controls' reputation as an energy company, given the increased importance of energy efficiency in commercial and industrial buildings. Combined with its decision to sell its auto electronics business to Visteon for $265 million last week, Johnson Controls hasn't hesitated to put all its pieces in place to make the most of its opportunities.

In the Johnson Controls earnings report, watch to see how the company continues to use its extensive Chinese workforce to boost its internal efficiency, especially in the rapidly expanding auto field. But also remember to look beyond autos to the company's building efficiency segment, which has huge potential to drive growth well into the future, even when the cyclical auto sector suffers its next downturn.

Click here to add Johnson Controls to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.