Shares of building-technologies provider Johnson Controls (NYSE: JCI) lost 10.2% of their value in July.
I use the term "July" loosely. The truth is that almost all of Johnson Controls' losses took place in the time between the end of trading on the New York Stock Exchange (NYSE) on July 26 and the morning of July 27, when Johnson Controls announced its fiscal Q3 2017 earnings.
Johnson Controls reported earning $0.59 per diluted share for fiscal Q3. Pro forma, the company's earnings were $0.71, which met analysts' similarly pro forma earnings target for the company. Revenues were, likewise, more or less in line with expectations, with Johnson Control booking $7.68 billion in revenues during the quarter, just a skosh below expectations of $7.7 billion. Why did the stock fall if Johnson basically met expectations?
The answer may lie in Johnson's guidance. Management now tells investors to expect earnings of between $2.60 and $2.62 per share this fiscal year. But as recently as January, the company had been guiding investors toward an earnings range of $2.60 to $2.75 -- far more than what Johnson Controls is promising now. Furthermore, Johnson is couching its guidance in the form of pro forma earnings, and that's a more malleable form of "profit" than the GAAP variety.
Even Johnson admits that "we have fallen short of our revenue growth expectations for the year and are guiding our full year adjusted earnings per share to the low end of the range previously provided." Investors apparently agree with that assessment.
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