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Emerson (EMR) to Report Q3 Earnings: What's in the Cards?

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Emerson Electric Co. (EMR - Free Report) is set to release third-quarter fiscal 2021 (ended June 2021) results on Aug 4, before market open.

The company’s earnings beat estimates in each of the last four quarters, the surprise being 19.20%, on average. In the last reported quarter, Emerson’s earnings of 97 cents per share beat the Zacks Consensus Estimate of 90 cents by 7.78%.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, the company’s shares have gained 11% compared with the industry’s rise of 7.6%.

Factors at Play

Emerson is expected to have benefited from strength across its medical, life science, semiconductor, food and beverage, professional tools, cold chain and residential end markets in third-quarter fiscal 2021. Also, its robust backlog level at the Automation Solutions segment, which was $5.3 billion exiting the second quarter of fiscal 2021 (ended March 2021), is likely to have acted as a tailwind in the quarter.

The company’s top-line performance is likely to have been augmented by its acquired assets in the fiscal third quarter. Emerson’s buyouts of 7AC Technologies (November 2020), Progea Group and Open Systems International (both in October 2020) as well as Verdant (March 2020) have enhanced its growth opportunities in the end markets, which is likely to get reflected in the upcoming results.

Emerson’s efforts to improve operational productivity, coupled with a healthy liquidity position, are likely to aided fiscal third-quarter performance. Also, its focus on supply-chain optimization might have helped it maintain a solid margin in the to-be-reported quarter.

Despite its cost management actions, escalating cost of sales and operating expenses have been a concern for the company. In the second quarter of fiscal 2021, its cost of sales and selling, general & administrative costs jumped 6.5% and 7.2%, respectively, on a year-over-year basis. High costs might have adversely impacted its margin and profitability in the fiscal third quarter as well.

The Zacks Consensus Estimate for Automation Solutions’ revenues for the fiscal third quarter is currently pegged at $2,906 million, indicating 4% growth from the quarter-ago reported number, and a year-over-year rise of 12.2%. The consensus estimate for revenues from the Commercial and Residential Solutions segment is pegged at $1,739 million, indicating a sequential increase of 5.7% and growth of 31% from the year-ago reported number.

The consensus estimate for the company’s fiscal third-quarter total revenues is currently pegged at $4,560 million, suggesting 16.5% and 2.9% increase on year-over-year and sequential basis, respectively. The consensus estimate for earnings of 98 cents suggests growth of 22.5% year over year and an improvement of 1% sequentially.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase 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.

But that is not the case here as we will see below.

Earnings ESP: Emerson has an Earnings ESP of -0.22%.

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: The company carries a Zacks Rank #3.

Key Picks

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

Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +2.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (DE - Free Report) has an Earnings ESP of +11.97% and Zacks Rank #2.

Donaldson Company, Inc. (DCI - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 2.