We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Emerson Electric (EMR) Down 4.2% Since Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Emerson Electric Company (EMR - Free Report) . Shares have lost about 4.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Emerson Beats Q1 Earnings; Sales Still Weak, View Up
Emerson reported first-quarter fiscal 2017 adjusted earnings of $0.49 per share, beating the Zacks Consensus Estimate of $0.43 by 14%.
Emerson’s earnings from continuing operations reflected growth of 22% year over year. An improving macro environment, restructuring benefits and lower expenses boosted the bottom line.
Inside the Headlines
Net sales continued to display weakness, as they decreased 4% year over year to $3,337 million. Underlying sales growth for the quarter was down 3% and currency translation also impacted the top line adversely. Sustained challenging macroeconomic conditions and significant decline in spending by global customers in the oil & gas and industrial markets were the primary causes of the dismal top-line performance.
The company’s Automation Solutions platform reported a 9% year-over-year decline in net sales to $1,967 million. Underlying sales dipped 8% as restrained spending in energy-related and general industrial markets hurt operations. Underlying sales in North America declined 11%, while Asia was down 2%. Europe slid 5% and Latin America was down 29%, while Middle East/Africa was up 3%.
Despite soft spending by the oil and gas clients, MRO activity levels seem encouraging and are expected to be beneficial for at least the next two quarters. Further, margins expanded 80 basis points to 16.6%, driven by savings from the prior-year restructuring actions.
In contrast, the Commercial & Residential Solutions platform saw a 6.3% increase in net sales to $1,252 million, supported by robust demand in global HVAC and refrigeration markets, and encouraging conditions in professional tools. Asia witnessed particularly strong growth as it rose 26% year over year, driven by a 40% growth in China, which is enjoying major demand acceleration. Europe was up 7% led by solid growth in air conditioning and professional construction tools, while North America grew 4%, driven by growth in the U.S. residential and commercial air conditioning.
Under the platform, the Climate Technologies business grew 9% year over year to $859 million, while Tools & Home Products unit remained almost flat year over year at $393 million.
Margins expanded 140 basis points to 19.9%, largely due to savings from restructuring actions across the new platform structure and leverage on higher volume.
Other Developments
In third-quarter fiscal 2016, Emerson had announced agreements to sell its Network Power, Leroy-Somer and Control Techniques businesses for an aggregate value of $5.2 billion. The deals are part of the company’s portfolio-repositioning strategy, as it seeks to enhance focus on its core Automation Solutions and Commercial & Residential Solutions businesses. The restructuring will help Emerson leverage on its growth platforms and drive profitable growth.
The company has also inked an agreement to purchase Pentair Valves & Controls, a business unit of Pentair plc, for $3.15 billion, in order to drive efficiency and growth.Integrating Pentair’s Valves & Controls business will enable Emerson to fortify its automation portfolio, and help it in offering complete valve solutions portfolio and sturdy service network, thereby elevating its brand value.
During the quarter, Emerson also expanded its global capabilities in fresh food monitoring, with the Locus Traxx and PakSense buyouts. The two companies will assist Emerson in facilitating steady and safe control of food and other temperature-sensitive goods. Emerson is now reporting the entire Network Power segment as discontinued operations.
Liquidity & Cash Flow
Exiting the quarter, the company had cash and cash equivalents of $4.2 billion, with long-term debt of $3.8 billion. Net cash provided by operating activities in the quarter plunged 51% from the prior-year quarter to $238 million.
Outlook
In light of the recent order trend, which has been favorable, Emerson raised its outlook for fiscal 2017. It now expects net sales for the year to be down 1–3%, with underlying sales flat to down 2%. This is comparable to prior projections of net and underlying sales to decline 1–3%. Further, Emerson projects reported earnings per share for fiscal 2017 to be in the range of $2.47–$2.62 (earlier guidance: $2.35–$2.50). Emerson expects Automation Solutions net sales to be down 5–7%, while Commercial & Residential Solutions net sales are now expected to be up 3–5%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 5.03% due to these changes.
At this time, Emerson Electric's stock has a nice Growth Score of 'B', however its Momentum is doing a bit better with an 'A'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Emerson Electric (EMR) Down 4.2% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Emerson Electric Company (EMR - Free Report) . Shares have lost about 4.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Emerson Beats Q1 Earnings; Sales Still Weak, View Up
Emerson reported first-quarter fiscal 2017 adjusted earnings of $0.49 per share, beating the Zacks Consensus Estimate of $0.43 by 14%.
Emerson’s earnings from continuing operations reflected growth of 22% year over year. An improving macro environment, restructuring benefits and lower expenses boosted the bottom line.
Inside the Headlines
Net sales continued to display weakness, as they decreased 4% year over year to $3,337 million. Underlying sales growth for the quarter was down 3% and currency translation also impacted the top line adversely. Sustained challenging macroeconomic conditions and significant decline in spending by global customers in the oil & gas and industrial markets were the primary causes of the dismal top-line performance.
The company’s Automation Solutions platform reported a 9% year-over-year decline in net sales to $1,967 million. Underlying sales dipped 8% as restrained spending in energy-related and general industrial markets hurt operations. Underlying sales in North America declined 11%, while Asia was down 2%. Europe slid 5% and Latin America was down 29%, while Middle East/Africa was up 3%.
Despite soft spending by the oil and gas clients, MRO activity levels seem encouraging and are expected to be beneficial for at least the next two quarters. Further, margins expanded 80 basis points to 16.6%, driven by savings from the prior-year restructuring actions.
In contrast, the Commercial & Residential Solutions platform saw a 6.3% increase in net sales to $1,252 million, supported by robust demand in global HVAC and refrigeration markets, and encouraging conditions in professional tools. Asia witnessed particularly strong growth as it rose 26% year over year, driven by a 40% growth in China, which is enjoying major demand acceleration. Europe was up 7% led by solid growth in air conditioning and professional construction tools, while North America grew 4%, driven by growth in the U.S. residential and commercial air conditioning.
Under the platform, the Climate Technologies business grew 9% year over year to $859 million, while Tools & Home Products unit remained almost flat year over year at $393 million.
Margins expanded 140 basis points to 19.9%, largely due to savings from restructuring actions across the new platform structure and leverage on higher volume.
Other Developments
In third-quarter fiscal 2016, Emerson had announced agreements to sell its Network Power, Leroy-Somer and Control Techniques businesses for an aggregate value of $5.2 billion. The deals are part of the company’s portfolio-repositioning strategy, as it seeks to enhance focus on its core Automation Solutions and Commercial & Residential Solutions businesses. The restructuring will help Emerson leverage on its growth platforms and drive profitable growth.
The company has also inked an agreement to purchase Pentair Valves & Controls, a business unit of Pentair plc, for $3.15 billion, in order to drive efficiency and growth.Integrating Pentair’s Valves & Controls business will enable Emerson to fortify its automation portfolio, and help it in offering complete valve solutions portfolio and sturdy service network, thereby elevating its brand value.
During the quarter, Emerson also expanded its global capabilities in fresh food monitoring, with the Locus Traxx and PakSense buyouts. The two companies will assist Emerson in facilitating steady and safe control of food and other temperature-sensitive goods. Emerson is now reporting the entire Network Power segment as discontinued operations.
Liquidity & Cash Flow
Exiting the quarter, the company had cash and cash equivalents of $4.2 billion, with long-term debt of $3.8 billion. Net cash provided by operating activities in the quarter plunged 51% from the prior-year quarter to $238 million.
Outlook
In light of the recent order trend, which has been favorable, Emerson raised its outlook for fiscal 2017. It now expects net sales for the year to be down 1–3%, with underlying sales flat to down 2%. This is comparable to prior projections of net and underlying sales to decline 1–3%. Further, Emerson projects reported earnings per share for fiscal 2017 to be in the range of $2.47–$2.62 (earlier guidance: $2.35–$2.50). Emerson expects Automation Solutions net sales to be down 5–7%, while Commercial & Residential Solutions net sales are now expected to be up 3–5%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 5.03% due to these changes.
Emerson Electric Company Price and Consensus
Emerson Electric Company Price and Consensus | Emerson Electric Company Quote
VGM Scores
At this time, Emerson Electric's stock has a nice Growth Score of 'B', however its Momentum is doing a bit better with an 'A'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.