Johnson Controls Inc raised its fiscal-year earnings forecast on Friday after posting a better-than-expected quarterly profit amid increased auto production, sending its shares 2 percent higher.
The maker of auto interiors, building-efficiency systems and batteries said higher production in North America and Europe boosted shipments of auto seats, interiors and batteries, while it has started to see signs of recovery in spending aimed at reducing energy use in commercial buildings.
One of the first auto parts makers to report earnings this quarter, Johnson Controls is benefiting from heavy cost-cutting made during the recession as auto production rebounds from a deep downturn that pushed major U.S. automakers and suppliers into bankruptcy last year.
Johnson Controls expects to earn $1.90 to $1.95 per share in its fiscal 2010 year that started in October, up from its previous range of $1.70 to $1.75. Wall Street has forecast $1.85 per share.
The Milwaukee-based company also raised its sales forecast for the fiscal year by $500 million to $33.5 billion, above Wall Street projections of $33.2 billion.
We continue to be encouraged by the steady improvement in the automotive industry, Chief Executive Steve Roell said in a statement.
One of the stronger and more diversified auto suppliers, Johnson Controls is also gaining market share from troubled rivals after several large competitors went through bankruptcy in 2009 in the wake of massive production cuts by automakers.
JPMorgan analyst Himanshu Patel said Johnson Controls's forecast still appears to be conservative because the outlook is based on production estimates of 10.9 million units in North America and 16.7 million units in Europe for the current fiscal year.
That is lower than 11.4 million units and 17.25 million units for North America and Europe projected by leading industry tracking firm CSM Worldwide.
STOCK UP NEARLY 30 PCT THIS YEAR
Shares of Johnson Controls, which hit its highest level since September 2008 on Thursday, were up 2 percent at $35.65 in premarket trading on the New York Stock Exchange. The stock is up nearly 29 percent so far this year as of Thursday's closing price.
For the second quarter ended on March 31, the company reported net income of $274 million, or 40 cents per share, compared with a year-earlier loss of $193 million, or 33 cents per share.
Excluding one-time items, Johnson Controls earned 43 cents per share. On that basis, analysts on average expected profit of 39 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 32 percent to $8.3 billion, beating Wall Street forecasts of $7.92 billion.
Sales in the company's automotive unit, which includes seats and interiors, increased 70 percent to $4.2 billion, driven by stronger production volumes in North America and Europe. Sales in the power unit, which makes automotive batteries, rose 30 percent to $1.2 billion.
The building-efficiency segment, which makes heating, ventilating and air conditioning products, saw sales flat at $3 billion. Johnson Controls is retrofitting New York's landmark Empire State Building to reduce energy use.
(Reporting by Soyoung Kim; Editing by Lisa Von Ahn and Derek Caney)