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Here's Why You Should Invest in Emerson (EMR) Stock Now

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Emerson Electric Co. (EMR - Free Report) currently boasts robust growth prospects on strength across its end markets, acquired assets, strong cash flows and a sound capital-deployment strategy.

Notably, the Zacks Rank #2 (Buy) company has a market capitalization of $58.5 billion. In the past three months, the stock has gained 5.8% compared with the industry’s growth of 1.8%.

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Let’s delve into the factors that make investment in the company a smart choice at the moment.

Business Strength: Emerson has been witnessing continual strength across its medical, life science, semiconductor, food and beverage, cold chain and residential end markets. Also, recovery in automation end markets along with robust backlog level — which was $5.3 billion exiting second-quarter fiscal 2021 (ended Mar 31, 2021) — at its Automation Solutions segment will support its revenues in the quarters ahead. For fiscal 2021 (ending September 2021), the company anticipates its overall net sales to grow 6-9% on a year-over-year basis.

Acquisition Benefits: The buyout of Intelligent Platforms (acquired from General Electric Company in February 2019) has expanded its opportunities across process and discrete industries as well as hybrid markets like metals and mining, food and beverage, life sciences, and packaging. Moreover, the acquisition of American Governor (April 2020) has enhanced its offerings for its power customers. Further, its acquisition of 7AC Technologies (November 2020) has been enabling it to boost its offerings within heating, ventilation and air conditioning space. Notably, it expects acquisitions to have a positive impact of 1% on sales growth in fiscal 2021.

Strong Cash Flows & Shareholder Rewards: Strong cash flow position adds to the company’s strength. In fiscal 2020 (ended Sep 30, 2020) and the first half of fiscal 2021, Emerson generated net cash of $3,083 million and $1,615 million from operating activities, respectively, marking growth of 2.6% and 59.6% from their respective year-ago figures. For fiscal 2021 it anticipates operating cash flow of $3.3 billion and free cash flow of $2.7 billion. In addition, in fiscal 2020 and the first half of fiscal 2021, it repurchased shares worth $942 million and $78 million, respectively. Moreover, in fiscal 2020 and the first half of fiscal 2021, it made dividend disbursement of $1,209 million and $606 million, respectively. In November 2020, it hiked its annual dividend rate by 2 cents.

Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for third-quarter fiscal 2021 (ending June 2021) earnings has trended up from 89 cents to 96 cents on five upward estimate revisions against none downward. Also, the consensus estimate for its fiscal 2021 earnings has increased from $3.74 to $3.93 on nine upward estimate revisions versus none downward.

Other Key Picks

Some other top-ranked stocks from the same space are A. O. Smith Corporation (AOS - Free Report) , Eaton Corporation, plc (ETN - Free Report) and Regal Beloit Corporation (RBC - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A. O. Smith delivered an earnings surprise of 7.14% in the last reported quarter.

Eaton delivered an earnings surprise of 15.20% in the last reported quarter.

Regal Beloit delivered an earnings surprise of 17.86% in the last reported quarter.

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