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Emerson's (EMR) Buyout of 7AC to Aid HVAC Product Lines

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Emerson Electric Co. (EMR - Free Report) yesterday announced that it completed the acquisition of Beverly, MA-based 7AC Technologies, Inc. Financial terms of the transaction have not been disclosed by the company.

It is worth noting here that Emerson Electric’s share price gained 2.44% yesterday, ending the trading session at $77.81.

Inside the Headlines

7AC is a specialist in providing heating and air conditioning products and services. It has a solid customer base in the United States. The solutions and systems used and provided by this firm help in sustainable air management and energy savings.

The solutions provided by 7AC as well as its expertise in providing energy-efficient products will add more value to Emerson Electric’s product line dedicated to heating, ventilation and air conditioning. To be precise, the companies will channelize their capabilities to develop technologies to attain the desired temperature and humidity easily for residential and commercial customers.

Notably, 7AC will form part of Emerson Electric’s Commercial & Residential Solutions segment. The division engages in providing products and services used in commercial air conditioning, residential cooling and heating, industrial and commercial refrigeration, and cold chain management. Also, the segment offers professional tools and appliance solutions.

The segment’s revenues in fourth-quarter fiscal 2020 (ended Sep 30, 2020) were $1,555 million, representing 34.1% of total revenues generated by Emerson.

Emerson Electric’s Buyout Activities

Acquiring businesses is a good mean for Emerson to expand its product line, gain access to new markets and enhance customer base. In fiscal 2020 (ended September 2020), it used $126 million for making acquisitions.

In March 2020, Emerson acquired Verdant, a leading provider of energy management solutions. Also, it added American Governor Company to its portfolio in April 2020. While Verdant has been strengthening Emerson’s thermostat and sustainability solutions portfolio, American Governor Company has been boosting offerings for power customers.

In October 2020, Emerson acquired Minneapolis, MN-based Open Systems International, Inc. The buyout is expected to help digitize the operations of Emerson and assist in the use of renewable energy sources. In the same month, Emerson bought Modena, Italy-based Progea Group. The buyout is expected to boost Emerson’s offerings within control and embedded software space.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $45.4 billion, Emerson Electric currently carries a Zacks Rank #3 (Hold). Solid backlog level, operational efficiency and cost-reduction actions are likely to benefit the company in the quarters ahead. However, weakness in certain end-markets, including oil & gas and process, might be concerning.

In the past three months, the company’s shares have gained 11.5% compared with the industry’s growth of 13.2%.




 

Meanwhile, the Zacks Consensus Estimate for its earnings has been stable at $3.44 for fiscal 2021 (ending September 2021) and has been increased 0.8% to $3.86 for fiscal 2022 (ending September 2022) in the past 30 days. Also, the consensus estimate for the first quarter of fiscal 2021 (ending December 2020) has grown 11.5% to 68 cents per share.

Emerson Electric Co. Price and Consensus

 

Emerson Electric Co. Price and Consensus

Emerson Electric Co. price-consensus-chart | Emerson Electric Co. Quote

Stocks That Warrants a Look

Three better-ranked stocks in the industry are Franklin Electric Co., Inc. (FELE - Free Report) , II-VI Incorporated (IIVI - Free Report) and Regal Beloit Corporation (RBC - Free Report) . While both Franklin Electric and II-VI currently sport a Rank #1 (Strong Buy), Regal Beloit carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for these companies have improved for the current year. Further, earnings surprise for the last reported quarter was 25.76% for Franklin Electric, 52.73% for II-VI and 39.52% for Regal Beloit.

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