Under the Hood of Johnson Controls
Nov 19th 2012 7:00PM
Updated Nov 19th 2012 7:06PM
Milwaukee-based Johnson Controls (NYS: JCI) is known primarily as a "Tier One" auto supplier, a big-league provider of parts and services to global automakers like Ford (NYS: F) , Toyota (NYS: TM) , and Mercedes-Benz parent company Daimler . The company is perhaps best known among investors as a maker of batteries for cars, including the lithium-ion battery packs used in electric cars and the most advanced hybrids.
JCI's battery leadership has drawn many investors' interest. The reelection of President Obama and the very visible early success of Tesla Motors' (NAS: TSLA) Model S sedan have helped contribute to renewed investor interest in electric cars. Thanks to government backing - backing that now looks set to continue for at least four more years, thanks to President Obama's reelection - and Tesla's example, electric cars are once again being viewed as a promising growth industry.
But is an investment in Johnson Controls the best way to play it? To help investors answer that question, I created a premium report on Johnson Controls that looks at the company's business as a whole - and prospects for each of its divisions.
Following is an excerpt from that report that outlines Johnson Controls' structure and opportunities. We hope you enjoy it.
Under the hood of Johnson Controls
While it's often thought of as an auto supplier, Johnson Controls has three separate divisions, only two of which are related to autos:
- Automotive Experience is a big-league supplier of interior parts like seats, doors, and electronics to nearly all of the major automakers. In 2011, this unit generated $20.1 billion in revenue. Importantly, as we explain further below, about half of that was from Europe. The unit is growing rapidly in China: JCI had 44% of the market share for automotive seating in China as of the end of 2011. Automotive Experience has 50 manufacturing locations in China alone, working with 28 automotive joint ventures, and full local engineering and development capabilities.
- Power Solutions is the world's largest provider of auto-related batteries, with a 36% share of the global market for "SLI" batteries - the conventional lead-acid batteries found under the hood of almost every car. That's a very slow-growing business, albeit one with good margins - 2011 sales were $5.9 billion. The Power Solutions unit also makes lithium-ion automotive batteries, used in hybrids and electric cars, and the "AGM" batteries used in cars with "stop-start" technology - a rapidly growing market. Power Solutions has been expanding in China, with several factories already running; a total investment of $450 million is planned.
- Building Efficiency makes energy and HVAC systems and related control equipment for buildings, mostly big commercial and office buildings, and offers related services. This division had sales of $14.9 billion in 2011, 80% coming from service and recurring revenues. Again, JCI points to China as a significant growth market for Building Efficiency, citing a McKinsey estimate that as many as 50,000 skyscrapers will be built in China over the next 10 years.
Looking for more guidance?
That was just a sample of The Motley Fool's new premium report on Johnson Controls. If you're weighing whether the company is a buy or sell, the report is an essential resource for investors seeking more information on the company. Not only that, but the report comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. Just click here now to get started.
The article Under the Hood of Johnson Controls originally appeared on Fool.com.Fool contributor John Rosevear owns shares of Ford. The Motley Fool owns shares of Ford and Tesla Motors. Motley Fool newsletter services recommend Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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