logo
  Join        Login             Stock Quote

Deutsche Bank Upgrades Johnson Controls (JCI) To 'Buy' On Valuation, Cuts PT To $39

 April 13, 2012 07:33 PM
 


Deutsche Bank analyst Rod Lache upgraded his rating on shares of Johnson Controls Inc. (NYSE:JCI) to "Buy" from "Hold" based on valuation, while lowering its price target to $39 from $40.

The catalyst for Lache's more favorable stance on the stock is two-fold: he believes that investors have become overly bearish regarding JCI's near term and long term prospects, and he believes there's a very strong probability that JCI will begin showing improved performance over the relatively near term.

The analyst believes that increased confidence in the prospects for double digit earnings growth should serve as a catalyst for multiple expansion. Automotive Experience margins have disappointed, as the company suffered longer term consequences from decisions made during the 2008-2009 downturn.

[Related -AeroVironment, Inc. (AVAV): Calls In Play As Shares Take Off]

Building Efficiency margins disappointed as a result of costs associated with rapid growth in GWS, as well as over-hiring in anticipation of growth which did not fully materialize. Power Solutions has suffered through a difficult (warm) winter, and a plant closure in China.

Lache believes that JCI is now through the most difficult phase of its Automotive Experience pipeline. Building Efficiency is undergoing a restructuring that should provide near term positives, and the GWS business should show incremental improvement over the next few quarters.

Power Solutions expectations have been properly re-set (the analyst doesn't expect a guidance revision), and he believes that there's potential for significantly improved results over the next few quarters.

[Related -Johnson Controls Inc (JCI): Fundamental Stock Research Analysis]

Lache believes it is important to note that JCI has an impressive longer term track record, with year-over-year revenue growth in 64 of the past 65 years and earnings growth in 20 of the past 21 years.

And despite the recent disappointments, even the company's recent performance has been respectable. JCI achieved a dramatic earnings recovery in 2010, net income rose by a further 22% in 2011 (a new record), and the analyst still expects earnings to rise by 13% in 2012 despite the aforementioned challenges.

Moreover, if Lache's estimates prove correct, JCI should return to high teens % earnings growth in 2013. Even if the multiple expansion (that we anticipate) does not occur, he believes that JCI's shares offer compelling returns as they track JCI's double digit earnings growth.

JCI closed Friday's regular trading up 2.32% at $32.57.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageFord Motor Company (F): A long Road to Deutsche Bank’s $19 Target

Ford Motor Company (NYSE:F) is going the right way on a one way street where most everybody else is driving read on...

article imageCitigroup Inc (C) Q1 Earnings Preview: Too Many Parts Heading South

Citigroup Inc (NYSE:C) will issue its first quarter results via press release at approximately 8 a.m. (ET) read on...

article imageFacebook Inc (FB): You Might Not Like It Today, But You’ll Like It Tomorrow

Do you honestly want to invest in stocks right now? It sure looks like the bull market is at least on read on...

article imageJPMorgan Chase & Co. (JPM) Q1 Earnings Preview: Regulation Costs To Trim Guidance?

JPMorgan Chase & Co. (NYSE:JPM) will host a conference call to review first quarter 2014 financial results read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.