CHICAGO -- Johnson Controls Inc. on Thursday said quarterly earnings rose, but its shares fell 3 percent after the automotive interior supplier's outlook lagged Wall Street estimates.
Johnson Controls, which like other auto parts makers is facing a downturn in U.S. auto production, said strength in automotive parts and heating and cooling systems helped to boost fiscal third-quarter earnings. The company maintained the fiscal 2005 outlook it had outlined in October.
"The outlook is a bit more reserved than Street expectations ... but only modestly so, and may reflect an assumption for currency that could change over time," said Tim Ghriskey, chief investment officer at Solaris Asset Management. He said recent weakness in the euro versus the dollar may account for the company's profit view.
Net income rose to $254.7 million, or $1.31 per share, for the third quarter ended June 30, from $222.2 million, or $1.15 per share, a year earlier. Sales rose 9 percent to $7.06 billion, Milwaukee-based Johnson Controls said.
Analysts, on average, had expected Johnson Controls to earn $1.32 per share, according to Reuters Estimates.
"It looks like a solid quarter, given the auto industry's conditions," said Morningstar analyst John Novak. "They continue to be one of the better performers in the industry and seem to be weathering this latest storm."
Johnson Controls, like other parts suppliers, has been pressured in recent quarters by the high cost of materials for automotive interiors and lead for its battery business. Rising energy costs have also hurt some units, but have led to increased systems renovations that support building controls.
Light vehicle output cuts in North America by General Motors and Ford Motor Co. have hurt suppliers since the latter part of 2004.
Johnson Controls' seating and interiors sales rose 8 percent to $5.0 billion in the quarter, while overall auto industry production in North America and Europe fell about 1 percent, the company said.
Battery sales rose 24 percent to $665 million, mainly on the increase in ownership and consolidation of a Latin American joint venture in 2004, and higher shipments, the company said.
Nonresidential building controls sales rose 6 percent to $1.4 billion, mainly due to increased renovation activity and technical services revenue. Its installation and service contract backlog rose by 7 percent.
The company said it expects earnings per share from continuing operations of $1.48 to $1.52 for the fourth quarter and from $4.39 to $4.43 for full 2005. Analysts, on average, expect earnings of $1.54 per share in the fourth quarter and $4.53 per share for fiscal 2005.
Chief Financial Officer Bruce McDonald said the company forecast excludes 6 cents per share from a one-time tax benefit apparently included in the full year analyst consensus.
Johnson Controls said it expects sales to rise to about $7 billion in the fourth quarter from $6.4 billion a year earlier, and fiscal 2005 sales to increase to nearly $28 billion from $25.4 billion.
Analysts expect Johnson Controls to report revenue of $7.18 billion in the fourth quarter and $28.38 billion for the year.
Johnson Controls said it will begin to report results in five segments rather than two starting with its quarterly regulatory filing in August, an amended 2004 annual report, amended 2005 quarterly reports and 2004 quarterly data.
The new segments will include controls, battery, seating and interiors-North America, seating and interiors-Europe and seating and interiors-Asia. There will be no change in sales, operating income, net income or earnings per share.
Johnson Controls ranks No. 4 on the Automotive News list of top 150 original equipment suppliers to North America with original equipment sales of $9.50 billion in 2004.