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Emerson (EMR) to Report Q4 Earnings: Beat in the Cards?

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Emerson Electric Co. (EMR - Free Report) is set to release fourth-quarter fiscal 2020 (ended September 2020) results on Nov 3, before market open.

Notably, the company’s earnings met estimates twice in the last four quarters and surpassed twice, the positive earnings surprise being 12.07%, on average. In the last reported quarter, Emerson’s earnings of 80 cents per share beat the Zacks Consensus Estimate of 61 cents by 31.2%.

In the past three months, the company’s shares have gained 3.9% compared with the industry’s rise of 3.1%.

Factors at Play

Emerson is anticipated to have gained from strength in its medical, life science, food and beverage, and power end markets, owing to healthy demand for its products and solutions in fourth-quarter fiscal 2020. Also, the company is likely to have benefited from its robust backlog level in the quarter.  In addition, its focus on higher operational efficacy and cost-control measures are likely to have enhanced margins and profitability in the to-be-reported quarter.

Also, the company’s fourth-quarter fiscal 2020 revenues are likely to have benefited from its acquired assets. Emerson’s buyout of Intelligent Platforms business of General Electric Company (GE - Free Report) (completed in February 2019) has strengthened its growth opportunities across process and discrete industries as well as hybrid markets. Also, the buyouts of Verdant (March 2020) and American Governor Company (April 2020) have strengthened its product offerings, which might get reflected in the fiscal-fourth quarter results.

However, the coronavirus outbreak-led overall weak demand environment, along with persistent weakness in the North American upstream oil and gas end markets, is likely to have affected its top-line performance in the quarter. Notably, the company anticipates revenues to return to growth on a year-over-year basis in either the second or third quarters of fiscal 2021.

In addition, given Emerson’s diverse geographic presence, its operations are subject to global economic and political risks as well as forex woes. For instance, unfavorable movements in foreign currencies adversely impacted sales by 2% and 1% in the second and third quarters of fiscal 2020, respectively. A stronger U.S. dollar might have hurt the company's overseas business in fourth-quarter fiscal 2020.

Amid this backdrop, the Zacks Consensus Estimate for Automation Solutions’ revenues for the fiscal fourth quarter is currently pegged at $3,018 million, indicating 16.6% growth from the quarter-ago reported number, but a year-over-year decline of 10.4%. The consensus estimate for revenues from the Commercial and Residential Solutions segment is pegged at $1,445 million, indicating a sequential increase of 8.9%, but a year-over-year decline of 10.1%.

Earnings Whispers

Our proven model suggests an earnings beat for Emerson this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of +1.97% as the Most Accurate Estimate is pegged at 97 cents, higher than the Zacks Consensus Estimate of 95 cents.

Emerson Electric Co. Price and EPS Surprise

Emerson Electric Co. Price and EPS Surprise

Emerson Electric Co. price-eps-surprise | Emerson Electric Co. Quote

Zacks Rank: Emerson carries a Zacks Rank #3.

Other Key Picks

Here are a couple of other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:

Plug Power, Inc. (PLUG - Free Report) has an Earnings ESP of +31.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eaton Corporation, plc (ETN - Free Report) has an Earnings ESP of +4.98% and a Zacks Rank of 3.

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