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Emerson Reports In Line, Affirms Guidance

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Emerson Electric Company (EMR - Free Report) released its third quarter 2011 earnings results, reporting earnings per share from continuing operations of 90 cents, in line with the Zacks Consensus Estimate. Earnings for the quarter were up 16.8% year over year.

Total revenue was $6.3 billion, up 16% year over year. Excluding a 2% benefit from acquisitions and a positive impact of 4% from currency fluctuations, underlying sales growth was 10%. Sales in the US shot up 6% and international sales grew 13% year over year.

Segment Results

The Industrial Automation segment witnessed the highest sales growth rate of 24% followed by Network Power of 19%, Process Management of 18%, 6% in Climate Technologies and 4% in Tools and Storage. Underlying sales growth was 18%, 13%, 7%, 3% and 1% in Industrial Automation, Process Management, Network Power, Climate Technologies and Tools and Storage, respectively.


Operating profit margin was 18.1%. However, pretax margin declined 10 basis points to 15.8% from 15.9% in the prior-year quarter. The decline was primarily attributable to material price inflation.

Balance Sheet

Exiting the third quarter 2011, Emerson had cash and cash equivalents of approximately $1.7 billion compared with $3.4 billion at the end of third quarter 2010. Long-term debt was $4.3 billion and total equity was $11 billion.

Net cash flow from operating activities was approximately $2.0 billion and capital expenditure amounted to $403 million year to date.


Emerson continues to expect earnings in the range of $3.20 to $3.30 a share, with an underlying sales (excluding currency translation and acquisition effects) increase of 10% to 13%.

Net sales are expected to increase in the range of 15% to 18% for fiscal 2011. Operating profit margin and pretax margin are expected to be in the range of 17.4% to 17.6% and 14.8% to 15.0%, respectively. 

Operating cash flow is expected to be in the range of $3.3 billion to $3.5 billion with free cash flow of $2.7 to $2.9 billion. 

Founded in St. Louis in 1890, Emerson is the largest publicly traded company in Missouri. The major competitors of Emerson are ABB Ltd. (ABB - Free Report) , General Electric Co. (GE - Free Report) and Hitachi Ltd. .

We currently maintain a Neutral rating on Emerson, with a Zacks #3 Rank (short-term Hold recommendation).

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