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Here's Why it is Worth Investing in Emerson Electric (EMR)

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Emerson Electric Co. (EMR - Free Report) currently boasts robust prospects on strength in its end markets, a solid product portfolio, acquired assets and a sound capital-deployment strategy.

Zacks Investment ResearchImage Source: Zacks Investment Research

The Zacks Rank #2 (Buy) company has a market capitalization of $56.1 billion. Over the past year, it has gained 20.6% compared with the industry’s growth of 29.4%.

Let’s delve into the factors that make the company investment-worthy at the moment.

Strong End Markets: Emerson has been benefiting from strength in process automation and discrete & hybrid end markets. The company’s robust backlog level, which was $5.4 billion exiting fiscal 2021 (ended September 2021) at its Automation Solutions segment, is likely to support its performance in the quarters ahead. Also, solid momentum across its food and beverage, cold chain, residential heating, ventilation and air conditioning end markets will likely drive its performance. For fiscal 2022 (ending September 2022), Emerson anticipates net sales to grow in the range of 5-7% year over year.

Buyouts & Business Combination Benefits:  EMR’s acquisition of Progea Group and Open Systems International in the first quarter of fiscal 2021 (ended December 2020) has been strengthening its offerings under control and embedded software space and the Automation Solutions segment, respectively. The buyout of 7AC Technologies (in first-quarter fiscal 2021) has also been augmenting its offerings in heating, ventilation and air conditioning space. The deal (signed in October 2021) to combine its industrial software businesses with Aspen Technology will enable it to gain control of a high-valued pure-play industrial software leader, expedite its software strategy and realize substantial synergies, thus driving its shareholders’ value.

Rewards to Shareholders: It remains committed to rewarding shareholders through share-buyback programs and dividend payouts. In fiscal 2021, the company repurchased shares worth $500 million and paid out dividends worth $1,210 million. Also, in November 2021, it announced a 2% hike in its quarterly dividend rate. The company plans to repurchase shares worth $250-$500 million and pay dividends of $1.2 billion in fiscal 2022.

Estimate Revisions: In the past 30 days, analysts have increasingly become bullish on Emerson, as evident from positive earnings estimate revisions. The Zacks Consensus Estimate for its fiscal 2022 earnings has trended up from $4.57 to $4.82 on seven upward estimate revisions against none downward. Over the same timeframe, the consensus estimate for fiscal 2023 (ending September 2023) earnings has jumped from $5.02 to $5.31 on four upward estimate revisions against none downward.

Other Key Picks

Some other top-ranked companies from the same space are discussed below.

SPX FLOW, Inc. (FLOW - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 40.42%, on average.

In the past 30 days, SPX FLOW’s earnings estimates have increased 8% for 2021 and 17.9% for 2022. Its shares have gained 56% in the past year.

AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 25.47%, on average.

AZZ’s earnings estimates have been stable at $3.10 and $3.28 for fiscal 2022 (ending February 2022) and fiscal 2023 (ending February 2023), respectively, in the past 30 days. Its shares have gained 24.4% in the past year.

Franklin Electric Co., Inc. (FELE - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 16.27%, on average.

Franklin Electric’s earnings estimates have increased 1% for 2021 and 1.5% for 2022 in the past 30 days. Its shares have gained 39.5% in the past year.