Update Johnson Controls (JCI)
Johnson Controls (JCI) fell 2.8% yesterday, April 25, because I don’t think investors immediately understood the company’s results. The shares are up 2.7% today because now I think they get it.
The stock fell when the company lowered guidance for the third quarter. Fiscal second quarter earnings, Johnson Controls announced, were 56 cents a share, a penny better than Wall Street had expected, on revenue of $10.14 billion. That was a 22% increase in revenue from the second quarter of 2010 and well above the $9.37 billion in revenue analysts had projected. (Johnson Controls second quarter ends in March.)
No problems in those numbers.
But for the next quarter, the company expects earnings of just 51 cents to 53 cents instead of the 67 cents that Wall Street was projecting.
The problem, of course, is disruptions to production at Japanese auto companies (in Japan and overseas) as a result of the Japanese earthquake and tsunami.
In its conference call the company laid out the consequences of that disaster to its business in very specific detail. Based on the latest forecasts from customers, the company calculates that in its fiscal third quarter it will lose about $500 million in revenue in its auto business. That will reduce earnings by 16 cents to 18 cents a share. The company doesn’t anticipate any significant impact on revenue in the fourth quarter and said it will recover lost revenue and earnings from the third quarter in the first half of fiscal 2012. (Which, on the company’s calendar, is the period beginning with the quarter that starts in October 2011.)
Do some simple math and two things should pop out at you. Read more
Update Maxwell Technologies (MXWL)
I hate it when this happens: A perfectly good growth stock gets adopted by momentum investors. It soars in the days before the company issues earnings on the hope that the good news already in the stock price will turn into great news in the quarterly report. When it doesn’t, the stock crashes as momentum investors move on. Unfortunately, this could also scare growth investors into selling when they should be hanging on or even buying more. (For coping with this twitch-inducing market see my November 20 post http://jubakpicks.com/2009/11/20/nervous-afraid-to-stay-in-but-scared-to-get-out-join-the-club-and-read-my-three-strategies-for-coping/ )
That’s exactly the story of Maxwell Technologies (MXWL) in the last month or so. The stock rocketed from $15.85 on September 21 to $21.53 on October 19 and then, after disappointing quarterly earnings, sank back toward those September numbers. On November 30, the stock traded at $16.44.
Were the third quarter numbers so bad that they damaged the long-term growth story? Disappointing in the short-term, sure, but from a long-term perspective I’d actually call them encouraging. Read more
The IPO window opens and battery maker A123 Systems gets set to jump through
The financial crisis has been hard on IPOs, the initial public offerings that young companies use to start tapping the public stock markets for capital.
In the six months after Lehman Brothers went into bankruptcy, a grand total of two companies managed to go public. In December 2007, before the financial market meltdown, nine companies went public in a single week alone.
Right now, though there are five companies lined up to test the market for new stock offerings: Artio Global Investors (an asset management company), Seclect Medical Holdings (a hospital operator), Vitacost.com (an online vitamin retailer), Shanda Games a Chinese online computer game company), and A123 Systems.
It’s battery maker A123 Systems that interests me the most. Read more
