Smart Grid and Energy Efficient Technologies Boost Earnings for Established Companies (JCI, HON, XIDE, WMT)

While there are a lot of small companies vying for market share in the rapidly growing alternative energy sphere, they’re not the only players in the game. Two established players reported earnings this morning that testify to the growth that is just beginning for companies that don’t build windmills or solar panels.

Johnson Controls Inc. (NYSE: JCI) reported robust third quarter results this morning of $0.61 diluted EPS on revenues of $8.5 billion. Year-ago results totaled diluted EPS of $0.26 on revenues of $7 billion. Analysts were expecting EPS of $0.55 on revenues of $8.48 billion. Honeywell International Inc. (NYSE: HON) reported second quarter EPS of $0.60 on revenues of $8.2 billion. Honeywell’s EPS included a non-cash pension expense of $0.18/share. Analysts had been expecting EPS of $0.57 on revenues of $8 billion.

In Honeywell’s largest division, automation and control systems, sales grew 7.4% and profits grew by 16% year-over-year. Part of that growth was driven by energy efficiency-related products like smart meters and programmable thermostats that can help consumers reduce heating and cooling costs. Last year, the company received a smart grid grant from the US Department of Energy to develop a peak pricing response program for commercial customers in southern California. Honeywell also acquired Akuacom in May 2010, a company that develops automated demand response technology and services for the smart grid.

Johnson Controls has a more diversified approach to energy efficiency, including automobile batteries. The company is set to replace Exide Technologies (NASDAQ: XIDE) as the sole supplier of batteries for Wal-Mart Stores Inc. (NYSE: WMT). The company also supplies building effiency products like control systems and HVAC controls that can reduce the amounts of energy a commercial or industrial customer uses.

But Johnson is making a big push in batteries, primarily the lead-acid batteries it will be supplying for Wal-Mart. The company just acquired 90% of a Korean battery maker and plans to increase capacity at the plant by about 25%, to more than 10 million batteries a year. The company is also building more battery capacity in China.

Johnson also boosted its estimate of total North American auto production for the second consecutive quarter. The previous estimate of 10.9 million units was raised to 11.4 million units today. European production estimates remained unchanged at 16.7 million units.

The company, together with Volkswagen AG, is also introducing a new type of lead-acid battery that is designed specifically for start-stop vehicles. Johnson estimates that 60% of vehicles made in Europe by mid-decade will use start-stop technology, which shuts off the engine when the car idles for more than a few seconds.

Johnson’s shares are getting hurt today because the company said its full-year EPS would come in at about $1.95, at the high-end of its previous guidance of $1.90-$1.95, but below analysts’ expectations of $1.99. The company is being cautious on the impact on sales of fluctuations in the euro.

Honeywell provided revenue guidance of $32.4-$32.9 billion for the fiscal year, above analysts’ expectations of $32.15 billion. EPS guidance was given at $2.40-$2.50, in-line with expectations of $2.48. Honeywell predicated these estimates on a euro value of $1.20. The euro is trading at about $1.29 today, not a good sign for Honeywell.

Honeywell shares are up about 2% at mid-day, and Johnson shares are off about 3.5%

Paul Ausick