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Why Sell Strategy is Apt for Johnson Controls (JCI) Stock

Zacks Equity Research
Updated

On Jul 3, Zacks Investment Research downgraded Johnson Controls International plc JCI to a Zacks Rank #4 (Sell).

The company’s strategy of divesting several businesses is adversely affecting its revenues and profits. Notably, in Mar 2017, Johnson Controls inked an agreement to sell its Scott Safety business to 3M Company MMM. Also, the company closed the divestiture of its ADT South Africa business in the same month. Besides, the separation expenses related to the spin-off of its Automotive Interiors business is proving to be costly for the company.

Additionally, deconsolidation of the automotive interiors business and negative foreign currency translation is affecting Johnson Controls’ results. In fact, revenues in the first half of fiscal 2017 were also adversely affected due to foreign currency translations.

In late April, Johnson Controls reported second-quarter fiscal 2017 adjusted earnings of 50 cents per share, in line with the Zacks Consensus Estimate. Earnings rose 11% from 45 cents in second-quarter fiscal 2016.

Johnson Controls has underperformed the Zacks categorized Industrial Products-Security and Safety Services industry in the last three months. The company’s share price has increased 4.7%, while the industry gained 6%.



Currently, Johnson Controls carries a Zacks Rank #4 (Sell). 3M Company has a Zacks Rank #2 (Buy).

Two other top-ranked stocks in the auto space are Ferrari N.V. RACE, and Allison Transmission Holdings, Inc. ALSN. While Ferrari sports a Zacks Rank #1 (Strong Buy), Allison Transmission Holdings carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Expected long-term growth rate for Ferrari and Allison Transmission Holdings and Dana Incorporated are 14.1% and 11%, respectively.

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Zacks Investment Research