Wachovia Securities Upgrades Johnson Controls (JCI) to Outperform; Raises 2010 EPS Estimates & Valuation Range

May 14, 2009 9:31 AM EDT

Wachovia Securities upgrades Johnson Controls (NYSE: JCI) to Outperform. Valuation range raised to $29-31.

Wachovia analyst says,"We have upgraded the shares to Outperform based on the company’s potential earnings power in F2011/12 and opportunity for earnings upside relative to consensus in F2010. We believe the company has a good handle on its cost structure in the auto and power solutions businesses. While concerns about Building Efficiency are justifiable, margins aren’t likely to get meaningfully worse, in our opinion. A 50bp yr./yr. decline in margin would reduce our EPS by $0.09 for fiscal 2010. Regardless, we believe consensus for 2010 is relatively conservative and there is a growing probability numbers will be revised higher. Longer-term, we believe the company has $2.00+ EPS power in fiscal ’11 and $2.50-$2.75 in fiscal ’12, assuming a material recovery in auto production from depressed levels (but still well below historical peaks). We have adjusted our Q3 and Q4 EPS for 2009 modestly. We have raised our fiscal 2010 EPS estimate to $1.45 (from $1.18). Consensus is $1.21. Our initial estimate forF’11 is $2.02. Our initial F’12 EPS estimate is $2.65."

Johnson Controls, Inc. (Johnson Controls) provides automotive interiors, products and services that optimize energy usage in buildings and batteries for automobiles and hybrid electric vehicles, along with related systems engineering, marketing and service expertise.

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