Johnson Controls Inc raised its fiscal-year earnings forecast on Friday after posting a better-than-expected quarterly profit amid increased auto production.

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 seen signs of recovery in spending aimed at reducing energy use in commercial buildings.

That gives us some confidence that, as the year plays out, our second half will continue to improve, Chief Executive Steve Roell said on a conference call with analysts.

We expect the fiscal third quarter to show sales growth, Roell said.

One of the first auto parts makers to report earnings this quarter, Johnson Controls is benefitting 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.

One of the stronger and more diversified auto suppliers, Johnson Controls is also gaining market share from troubled rivals after several large competitors went bankrupt in 2009 in the wake of massive production cuts by automakers.

Executives said that the company would look at acquisition opportunities in all three business segments and there are smaller acquisitions in the pipeline that could be announced in the next few quarters.

We're clearly looking at what's out there and what we can do to help benefit our business. We've prioritized and met with our management regarding some of the opportunities we would look to, Roell said.

Longer term, I believe that building efficiency will still have the lion's share of our merger and acquisition activity.

Johnson Controls' forecast seems 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, said JPMorgan analyst Himanshu Patel.

That is lower than 11.4 million units and 17.25 million units for North America and Europe projected by industry tracking firm CSM Worldwide.


Shares of Johnson Controls were down 0.2 percent at $34.94 on the New York Stock Exchange after earlier hitting their highest level since September 2008. The stock is up nearly 29 percent 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.

The results include a non-cash tax charge of $18 million, or 3 cents per share, associated with the recent U.S. healthcare reform legislation.

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.

(Additional reporting by Bernie Woodall; Editing by Lisa Von Ahn, Derek Caney and Robert MacMillan)