[caption id="attachment_86773" align="aligncenter" width="718"] Source: Company reports/Coresight Research[/caption]   Fiscal 2Q19 Results Johnson Controls reported fiscal 2Q19 revenues of $5.78 billion, up 2.6% and in line with the consensus estimate. Organic growth was 6%. Revenues in the field business (building solutions) grew 3%, and 6% organically. Revenues in the products business grew 2%, and 7% organically. The adjusted EBIT margin increased 57 bps year over year. Adjusted EPS from continuing operations was $0.32, beating the consensus estimate by two cents. GAAP EPS from continuing operations was $0.26, compared to $0.20 in the year-ago quarter. Diluted EPS (including discontinued operations) was $0.57, compared with $0.47 I the year-ago quarter. Results by Segment Field Business:

• Building Solutions North America recorded revenues of $2.2 billion, up 4.2% year over year and up 5% organically, driven by solid growth in HVAC (high voltage alternative current) & Controls and Fire and Security. Adjusted orders increased 2% year over year, and backlog stood at $5.6 billion at the end of the quarter, up 5% year over year. Adjusted EBITA (earnings before interest, taxes and amortization) margins expanded by 20 bps due to volume leverage, cost synergies and productivity savings, partially offset by unfavorable mix and salesforce additions.
• Building Solutions EMEA/LA (Europe, Middle East, Africa/Latin America) recorded revenues of $878 million, down 3.2% year over year but up 4% organically, driven by growth in service and project installation. Growth was positive in most regions, with strength in Fire & Security and Industrial Refrigeration in Europe and Latin America. Adjusted orders increased 3% year over year, and backlog stood at $1.7 billion at the end of the quarter, up 9% year over year. Adjusted EBITA margins expanded by 60 bps due to favorable volume, the benefit of cost synergies and productivity savings, partially offset by unfavorable mix and salesforce additions. Adjusted for currency, margins increased by 100 bps.
• Building Solutions Asia Pacific recorded revenues of $628 million, up 7.2% year over year and up 12% organically, driven by double-digit growth in project installations. Adjusted orders increased 1% year over year, and backlog stood at $1.6 billion at the end of the quarter, up 8% year over year. Adjusted EBITA margins were flat due to favorable volume more than offset by unfavorable mix, salesforce additions and margin pressure.

Products:

• Global Products recorded revenues of $2.1 million, up 2.3% year over year and up 7% organically, driven by double-digit growth in Building Management Systems, mid-single digit growth in HVAC & Refrigeration Equipment and low double-digit growth in Specialty Products. Adjusted EBITA margins increased by 60 bps due to cost synergies and productivity savings, slightly offset by ongoing investments in products.

Details from the Quarter On April 30, the company closed the sale of the Power Solutions business to Brookfield Business Partners for approximately $11.6 billion, whose proceeds are earmarked for the repayment of $3.4 billion of debt and for $8.2 million in share repurchases. Separately, the company announced plans to repurchase $4.0 billion of its common shares at a price of $36-$40 per share, in addition to a cash tender offer to purchase $1.5 billion of its outstanding notes. Other details: Management commented that investments in the sales organization, new product development plus efforts to drive commercial excellence drove organic growth. The company continues to grow its services business, which enhances value for its buildings customers. The company remains focused on driving productivity, optimizing the cost structure and improving pricing discipline across product categories, which drove margins higher in all categories except Asia Pacific, and management commented that operating leverage is improving. The order pipeline remains robust, though order timing varied in the quarter, and management characterized the company’s backlog as an attractive mix of short- and long-cycle activity, which supports its confidence for the second half of the year. Selected projects:

• The company is executing the second phase of a multiyear energy efficiency and renewable energy project with the University of Hawaii.
• The company recently announced a joint project with Microsoft to deliver a building in he UAE fully powered by renewable energy sources with zero net energy consumption and a LEED (Leadership in Energy and Environmental Design) platinum certification.

Implications for Retail The company rebranded its former Tyco Retail Solutions product lines—for loss prevention, inventory intelligence and traffic insights—under Sensormatic Solutions in January 2019. These solutions support secure, adaptive retail environments and enable accurate decision making by retailers. Outlook The company raised its 2019 EPS guidance to $1.85-$1.95 (up 16%-23%) from $1.75-$1.85 (up 10%-16%).