Johnson Controls Inc. (JCI:US), the largest U.S. auto supplier, fell the most in six months after lowering its forecast for profit for the fourth quarter because of softness in global markets.
Johnson Controls slid 7.9 percent to $26.07 at the close in New York, the biggest decline since Jan. 19. Sales and profit in the third quarter, which ended June 30, missed analysts’ estimates. The company said in slides contained in a filing it may divest assets and cut jobs.
“Near term, the stock likely has limited upside versus the market,” David Leiker, an analyst at Robert W. Baird & Co., wrote in a report today lowering his rating to neutral from outperform.
Profit in the three months ended Sept. 30 will be in a range of unchanged to 5 percent higher, the company said today, down from a gain of about 25 percent, a forecast it gave April 20. The average estimate of 18 analysts surveyed by Bloomberg was for profit to increase 21 percent. Automakers, including General Motors Co. (GM:US) and Ford Motor Co. (F:US), are struggling to cut losses in Europe, which is heading for its fifth straight year of declining sales.
Johnson Controls’ shares have fallen 17 percent this year after declining 18 percent in 2011.
Net income in the quarter that ended June 30 rose 17 percent to $417 million, or 61 cents a share, from $357 million, or 52 cents, Johnson Controls said today. Excluding $52 million in pretax restructuring costs and a one-time tax benefit of $22 million, profit was 64 cents a share. The average estimate of 28 analysts surveyed by Bloomberg was for a profit of 66 cents.
“While we saw a significant improvement in profitability in the third quarter, sluggish demand in some of our key markets along with a much weaker euro resulted in lower top line growth than we expected,” Stephen Roell, chief executive officer of the Milwaukee-based company, said in a statement.
Johnson Controls, in a slide presentation for its analyst and investor conference call today, said it wants to “right- size headcount” and may divest “underperforming” businesses’’ to improve profitability.
Sales in the quarter were $10.6 billion, compared with an average estimate of $10.9 billion. Sales in the auto-parts unit rose 6.8 percent to $5.46 billion, helped by higher auto production in North America and Asia. Profit for the unit, which makes cockpits, seats and instrument panels, rose 42 percent to $202 million.
Johnson Control’s building-efficiency unit’s sales fell 2.4 percent to $3.8 billion. Income for the unit rose 28 percent to $264 million, as record high temperatures in North America boosted residential air-conditioning sales. The company’s efficiency business also includes controls and services for air- conditioning and security in commercial buildings.
In automotive batteries, Johnson Control’s smallest and most-profitable business, sales fell 2.7 percent to $1.32 billion; profit from that unit fell 8.6 percent to $149 million. Johnson Controls said consumer demand for replacement batteries in North America and batteries for new cars in Europe was lower than it expected.
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