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Emerson (EMR) Q1 Earnings Beat, Revenues Miss Estimates

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Emerson Electric Co. (EMR - Free Report) reported mixed results for first-quarter fiscal 2019 (ended December 2018), wherein earnings beat estimates, while revenues missed the same.

Earnings/Revenues

Adjusted earnings came in at 74 cents per share, higher than the year-ago figure of 58 cents. This solid growth was primarily attributable to favorable global market conditions, partially offset by rise in cost of sales and interest expenses. Moreover, the bottom line surpassed the Zacks Consensus Estimate of 66 cents.

Emerson Electric Co. Price, Consensus and EPS Surprise

Emerson Electric Co. Price, Consensus and EPS Surprise | Emerson Electric Co. Quote

Revenues in the reported quarter were $4,147 million, up from the year-ago figure of $3,816 million. This upside stemmed from strong demand from global industrial markets as well as strength in global cold chain and professional tools markets. However, the top line missed the Zacks Consensus Estimate of $4,227 million.

Segmental Break-Up

Quarterly sales of the Automation Solutions segment were $2,799 million, up 8.8% year over year. Underlying sales also grew 7% as favorable trends in key served markets supported operations. Underlying sales in North America rose 8%, led by broad-based demand across most key markets and solid MRO and small- to mid-sized brownfield projects. Asia and Middle East/Africa underlying sales were up 8%, while Europe was up 3%.

The Commercial & Residential Solutions platform witnessed a 6.9% increase in net sales, but 1% decline in underlying sales, with net sales coming in at $1,338 million. The top line was supported by robust demand in residential air conditioning and professional tools markets. Europe was up an impressive 3% on account of robust demand across professional tools, and heating and air conditioning markets.  However, Asia, Middle East & Africa witnessed decline of 23% year over year, while China was down 30% due to weakness in the air conditioning and heating markets.

Under this platform, the Climate Technologies business declined 4.6% year over year to $880 million, while the Tools & Home Products unit jumped 38.7% to $458 million.

Costs/Margins

Cost of sales in the reported quarter was $2,386 million, up 8.4% year over year. Gross profit margin expanded 20 basis points (bps) to 42.5%. This upside stemmed from positive impacts of cost-reduction initiatives and higher revenues.

Selling, general and administrative expenses in the fiscal first quarter were $1,077 million, up from $995 million reported a year ago. Adjusted earnings before interest and taxes margin was 15.3%, up 110 bps year over year.

Liquidity & Cash Flow

Exiting the fiscal first quarter, the company had cash and cash equivalents of $1,248 million, with long-term debt of $2,641 million. Net cash provided by operating activities in the first three months of fiscal 2019 declined 27.7% from the prior fiscal year to $323 million.

Outlook

For fiscal 2019, Emerson expects net sales to increase 7-10%, with underlying sales to be up 4-7%.

The company projects GAAP earnings per share for fiscal 2019 in the range of $3.60-$3.75.

Emerson estimates Automation Solutions net sales to be up 5-8%, while Commercial & Residential Solutions net sales will likely jump 3-5%.

Zacks Rank & Key Picks

Emerson currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are iRobot Corporation (IRBT - Free Report) , Enersys (ENS - Free Report) and Cintas Corporation (CTAS - Free Report) . While iRobot sports a Zacks Rank #1 (Strong Buy), Enersys and Cintas carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

iRobot surpassed estimates in each of the trailing four quarters, average beat being 102.97%.

Enersys exceeded estimates thrice in the trailing four quarters, average beat being 2.83%.

Cintas surpassed estimates in each of the trailing four quarters, average beat being 6.81%.

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