Bleak Short-Term Outlook Overshadows Long-Term Value: Johnson Controls, Inc. (JCI), Honeywell International Inc. (HON), United Technologies Corporation (UTX)

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It’s hard to find undervalued companies in this overheated market, but there are still a few stocks suffering from an undue discount due to short-term worries.

Johnson Controls, Inc. (NYSE:JCI) is a leading auto-parts supplier that is attempting to diversify its operations away from the cyclical auto industry. The company is trying to sell one of its automotive businesses, but the near-term outlook for the business as a whole is not great.

Honeywell International Inc. (NYSE:HON)

However, with several market-leading product lines, the company is in a position to achieve long-term success.

Market Leader

Although Johnson Controls, Inc. (NYSE:JCI) is heavily involved in the automotive interiors marketplace, it also has operations in HVAC systems and vehicle batteries.

The company is by far the largest HVAC service provider in the country — nearly three times the size of the next-largest competitor. This allows for superior economies of scale that give the company a competitive advantage.

In addition, the company’s start-stop batteries are considered the market leader in an industry poised for growth. Management has also made a large bet on lithium ion batteries — an investment that has yet to play out.

Most importantly, Johnson Controls has a strong balance sheet, which provides it some protection in the case of another downturn in the auto market. However, a sale of the automotive interiors business would go a long way toward reducing this cyclical imperative.


While Johnson Controls is trying to diversify into other areas, it will continue to face competition on all fronts. Honeywell International Inc. (NYSE:HON) is involved in the automotive transportation industry, but has successfully diversified into aerospace and other areas. The company is a major supplier of systems for the Airbus A350 and is a leading company in the aerospace systems market.

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