Market Overview

Cost Synergies At Johnson Controls Could Drive Upside

Share:
Related JCI
12 Stocks To Watch For February 1, 2019
Earnings Scheduled For February 1, 2019
Jane's January Retirement Account Update - Pay Attention To The P/E Ratio (Seeking Alpha)

While it's too early to determine whether the combination of Tyco Fire & Security LLC and Johnson Controls International plc (NYSE: JCI) would create a great company, share appreciation may be limited in the near term due to the FY 2017 outlook potentially being “pretty noisy,” Wells Fargo’s Richard Kwas said in a report.

Kwas maintained a Market Perform rating on Johnson Controls, saying that cost synergies could lend upside.

Cost Synergies

“Our review of historical industrial mergers and acquisitions indicates there is potential upside to stated synergies,” Kwas wrote. He estimated incremental operating cost savings of at least $100 million, in addition to the $900 million already indicated by the company.

The analyst further mentioned that revenue synergies “could be tangible.” He noted that prior industrial transactions had yielded revenue synergies of 4-5 percent of target revenues, and applying that ratio implies a potential revenue synergy opportunity of $400 million over a multi-year period.

NewCo

“At current levels, we see modest upside potential when including our estimated equity value for Adient,” Kwas stated. He believes that the combined JCI-TYC equity could trade in the mid-40s and that the Adient spin-off would be worth $6 per share for the “new” JCI shareholders.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for JCI

DateFirmActionFromTo
Feb 2019Cowen & Co.MaintainsMarket PerformMarket Perform
Nov 2018CitigroupMaintainsBuyBuy
Oct 2018Credit SuisseInitiates Coverage OnNeutral

View More Analyst Ratings for JCI
View the Latest Analyst Ratings

Posted-In: Richard Kwas Wells FargoAnalyst Color Reiteration Analyst Ratings

 

Related Articles (JCI)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
CJefferiesUpgrades73.0
INTCMorgan StanleyUpgrades0.0
SOEvercore ISI GroupUpgrades0.0
ADBEDZ BankDowngrades0.0
AVGOCowen & Co.Downgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

As Risks Mount For IBM, Look For Shares To Trade Range Bound

8 Stocks With Highest Close In Three Weeks