Wednesday, October 22, 2014

Why Johnson Controls Could Rise

Despite having declined nearly 9% year to date as of this writing, Johnson Controls' (NYSE: JCI  ) stock price has the potential to do much better for the rest of 2014. The three reasons I'll highlight include a specific end-market improvement, company restructuring, and exposure to an overall pickup in the economy. Altogether, it makes a powerful case for why Johnson Controls can rise from here.

Building-efficiency improvement

As I discussed in my previous article, which outlines management's latest quarterly conference call, Johnson Controls is investing in acquisitions in order to expand its exposure to the heating, ventilation, and air conditioning, or HVAC, market via its building-efficiency segment. The company's other two segments are focused on the automotive industry. As such, building efficiency generated 29% of segmental income in the first nine months. However, investors can expect it to contribute more in the future following the $1.6 billion acquisition of HVAC-focused Air Distribution Technology, or ADT, and the announcement of a joint venture with Hitachi.