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Shift from GM to Fiat, VW may boost Johnson
Johnson Controls Inc, the world's largest maker of car batteries and seats, may boost earnings for an 18th straight year in 2008 by relying on orders from Fiat SpA and Volkswagen AG rather than General Motors Corp.
The shift may help insulate the Milwaukee-based company, founded by thermostat inventor Warren Johnson in 1885, against declining sales from US automakers.
At the same time, Johnson Controls' heating and cooling business, the world's largest, may gain by selling energy-efficient systems to commercial buildings in the United States and overseas amid rising oil prices.
The partsmaker has posted a profit every quarter since 1992. It projects 2008 earnings of $2.45 to $2.50 a share, up as much as 40 cents from 2007, excluding a one-time tax benefit last year. Net income in the fiscal first quarter ended Dec 31 rose 45 percent from a year earlier, the company said on Jan 18.
"I think their earnings are recession-proof, but the market still hasn't bought into that yet," said David Leiker, an auto-parts analyst at RW Baird & Co in Milwaukee, who recommends buying Johnson Controls. "It's trading at a valuation below the market right now, and we think it is very attractive."
Johnson Controls has fallen 15 percent on the New York Stock Exchange since Oct 1 as US auto and home sales weakened. The shares are priced at 15.6 times earnings, lower than the 18.4 average multiple on the Standard & Poor's 500 Index.
Global sales
Asian and European carmakers provide two-thirds of global automotive revenue for Johnson Controls.
The company derived 54 percent of last year's North American auto-related sales from GM, Ford Motor Co or Chrysler LLC, down from 65 percent in 2006.
Orders from the three companies in North America accounted for 10 percent of the parts manufacturer's overall revenue.
About 15 percent of sales for competitor Magna International Inc come from Auburn Hills, Michigan-based Chrysler. American Axle & Manufacturing Holdings Inc derives 75 percent from Detroit-based GM, according to the companies.
Johnson Controls has contracts with every major car producer in China, the world's second-largest vehicle market. The country accounted for about $1.2 billion of the company's sales in 2006.
The shift may help insulate the Milwaukee-based company, founded by thermostat inventor Warren Johnson in 1885, against declining sales from US automakers.
At the same time, Johnson Controls' heating and cooling business, the world's largest, may gain by selling energy-efficient systems to commercial buildings in the United States and overseas amid rising oil prices.
The partsmaker has posted a profit every quarter since 1992. It projects 2008 earnings of $2.45 to $2.50 a share, up as much as 40 cents from 2007, excluding a one-time tax benefit last year. Net income in the fiscal first quarter ended Dec 31 rose 45 percent from a year earlier, the company said on Jan 18.
"I think their earnings are recession-proof, but the market still hasn't bought into that yet," said David Leiker, an auto-parts analyst at RW Baird & Co in Milwaukee, who recommends buying Johnson Controls. "It's trading at a valuation below the market right now, and we think it is very attractive."
Johnson Controls has fallen 15 percent on the New York Stock Exchange since Oct 1 as US auto and home sales weakened. The shares are priced at 15.6 times earnings, lower than the 18.4 average multiple on the Standard & Poor's 500 Index.
Global sales
Asian and European carmakers provide two-thirds of global automotive revenue for Johnson Controls.
The company derived 54 percent of last year's North American auto-related sales from GM, Ford Motor Co or Chrysler LLC, down from 65 percent in 2006.
Orders from the three companies in North America accounted for 10 percent of the parts manufacturer's overall revenue.
About 15 percent of sales for competitor Magna International Inc come from Auburn Hills, Michigan-based Chrysler. American Axle & Manufacturing Holdings Inc derives 75 percent from Detroit-based GM, according to the companies.
Johnson Controls has contracts with every major car producer in China, the world's second-largest vehicle market. The country accounted for about $1.2 billion of the company's sales in 2006.
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