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Why Is Emerson Electric (EMR) Up 7.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Emerson Electric (EMR - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Emerson Electric due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Emerson Electric reported first-quarter fiscal 2024 (ended Dec 31, 2023) adjusted earnings of $1.22 per share, which beat the Zacks Consensus Estimate of $1.04. The bottom line increased 56.4% from the year-ago quarter's level.
Emerson’s net sales of $4.1 billion beat the consensus estimate of $3.9 billion. The top line increased 22.1% year over year, driven by solid segmental performance. The underlying sales were up 10% as well.
Segmental Details
Effective from the fiscal first quarter of 2023, the company started reporting under two segments, namely Intelligent Devices and Software and Control Automation Solutions.
The Intelligent Devices segments’ net sales were $2.8 billion, up 11% year over year. Our estimate for segmental revenues was $2.6 billion. The segment consists of four subgroups, namely Final Control, Measurement & Analytical, Discrete Automation and Safety & Productivity.
Final Control’s revenues increased to $940 million from $862 million in the first quarter of fiscal 2024. Measurement & Analytical generated revenues of $947 million, up from $749 million reported in the year-ago period. Discrete Automation’s revenues totaled $613 million compared with $618 million reported in the year-ago quarter. Safety & Productivity’s revenues increased to $322 million from $310 million in the year-ago quarter.
The Software and Control Automation Solutions segment generated net sales of $1.31 billion in the fiscal first quarter, up 3% year over year. Our estimate for segmental revenues was $1.28 billion. The segment consists of three subgroups, namely Control Systems & Software, AspenTech and Test & Measurement.
Control Systems & Software reported revenues of $675 million compared with $606 million reported in the year-ago quarter. AspenTech generated net sales of $257 million, up 6% year over year. Test & Measurement reported revenues of $382 million in the fiscal first quarter.
Margin Details
In the quarter under review, Emerson's cost of sales increased 25.6% year over year to $2.2 billion. The pretax earnings margin in the quarter was 3.4% compared with 12.5% in the year-ago period. Adjusted EBITA margin was 23.4% compared with 19.7% in the year-ago quarter. Selling, general and administrative expenses increased 24% to $1.3 billion.
Balance Sheet and Cash Flow
Exiting first-quarter fiscal 2024, Emerson had cash and cash equivalents of $2.1 billion compared with $8.1 billion at the end of fiscal 2023 (ended September 2023). Long-term debt was $7.63 billion compared with $7.61 billion at the end of fiscal 2023. In the first three months of fiscal 2024, the company did not make any payment for long-term debt.
In the same period, the company generated net cash of $415 million from operating activities, reflecting a decrease of 0.7% from the year-ago period. Capital expenditure was $77 million, up from $59 million in the year-ago period. It paid out dividends of $300 million and repurchased common stocks worth $175 million in the same period.
Q2 Fiscal 2024 Outlook
For the second quarter of fiscal 2024 (ending March 2024), Emerson anticipates year-over-year net sales growth of 12.5-14.5% and underlying sales growth of 3.5-5.5%.
It anticipates earnings per share of 68-72 cents for the second quarter of fiscal 2024. Adjusted earnings per share are expected to be $1.22-$1.26 per share. The midpoint of the guided range — $1.24 — lies below the Zacks Consensus Estimate of earnings of $1.25 per share.
Fiscal 2024 Outlook Up
Emerson has raised its sales outlook for fiscal 2024. The company now anticipates net sales growth of 14.5-17% year over year in fiscal 2024 compared with 13-15.5% expected before. Underlying sales are predicted to rise 4.5-6.5% in the fiscal year compared with 4-6% anticipated earlier.
It anticipates earnings per share of $2.80 -$2.95 for fiscal 2024 compared with $3.82-$4.02 expected earlier. Adjusted earnings per share are estimated to be in the range of $5.30-$5.45 compared with $5.15-$5.35 expected earlier. The Zacks Consensus Estimate for the same is pegged at $5.29. The company expects operating cash flow to be in the band of $3.0-$3.1 billion for fiscal 2024. Free cash flow is anticipated to be in the $2.6-$2.7 billion range for the same period.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Emerson Electric has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Emerson Electric has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Emerson Electric belongs to the Zacks Manufacturing - Electronics industry. Another stock from the same industry, Eaton (ETN - Free Report) , has gained 10.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Eaton reported revenues of $5.97 billion in the last reported quarter, representing a year-over-year change of +10.8%. EPS of $2.55 for the same period compares with $2.06 a year ago.
For the current quarter, Eaton is expected to post earnings of $2.27 per share, indicating a change of +20.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Eaton. Also, the stock has a VGM Score of C.
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Why Is Emerson Electric (EMR) Up 7.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Emerson Electric (EMR - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Emerson Electric due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Emerson Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Emerson Electric reported first-quarter fiscal 2024 (ended Dec 31, 2023) adjusted earnings of $1.22 per share, which beat the Zacks Consensus Estimate of $1.04. The bottom line increased 56.4% from the year-ago quarter's level.
Emerson’s net sales of $4.1 billion beat the consensus estimate of $3.9 billion. The top line increased 22.1% year over year, driven by solid segmental performance. The underlying sales were up 10% as well.
Segmental Details
Effective from the fiscal first quarter of 2023, the company started reporting under two segments, namely Intelligent Devices and Software and Control Automation Solutions.
The Intelligent Devices segments’ net sales were $2.8 billion, up 11% year over year. Our estimate for segmental revenues was $2.6 billion. The segment consists of four subgroups, namely Final Control, Measurement & Analytical, Discrete Automation and Safety & Productivity.
Final Control’s revenues increased to $940 million from $862 million in the first quarter of fiscal 2024. Measurement & Analytical generated revenues of $947 million, up from $749 million reported in the year-ago period. Discrete Automation’s revenues totaled $613 million compared with $618 million reported in the year-ago quarter. Safety & Productivity’s revenues increased to $322 million from $310 million in the year-ago quarter.
The Software and Control Automation Solutions segment generated net sales of $1.31 billion in the fiscal first quarter, up 3% year over year. Our estimate for segmental revenues was $1.28 billion. The segment consists of three subgroups, namely Control Systems & Software, AspenTech and Test & Measurement.
Control Systems & Software reported revenues of $675 million compared with $606 million reported in the year-ago quarter. AspenTech generated net sales of $257 million, up 6% year over year. Test & Measurement reported revenues of $382 million in the fiscal first quarter.
Margin Details
In the quarter under review, Emerson's cost of sales increased 25.6% year over year to $2.2 billion. The pretax earnings margin in the quarter was 3.4% compared with 12.5% in the year-ago period. Adjusted EBITA margin was 23.4% compared with 19.7% in the year-ago quarter. Selling, general and administrative expenses increased 24% to $1.3 billion.
Balance Sheet and Cash Flow
Exiting first-quarter fiscal 2024, Emerson had cash and cash equivalents of $2.1 billion compared with $8.1 billion at the end of fiscal 2023 (ended September 2023). Long-term debt was $7.63 billion compared with $7.61 billion at the end of fiscal 2023. In the first three months of fiscal 2024, the company did not make any payment for long-term debt.
In the same period, the company generated net cash of $415 million from operating activities, reflecting a decrease of 0.7% from the year-ago period. Capital expenditure was $77 million, up from $59 million in the year-ago period. It paid out dividends of $300 million and repurchased common stocks worth $175 million in the same period.
Q2 Fiscal 2024 Outlook
For the second quarter of fiscal 2024 (ending March 2024), Emerson anticipates year-over-year net sales growth of 12.5-14.5% and underlying sales growth of 3.5-5.5%.
It anticipates earnings per share of 68-72 cents for the second quarter of fiscal 2024. Adjusted earnings per share are expected to be $1.22-$1.26 per share. The midpoint of the guided range — $1.24 — lies below the Zacks Consensus Estimate of earnings of $1.25 per share.
Fiscal 2024 Outlook Up
Emerson has raised its sales outlook for fiscal 2024. The company now anticipates net sales growth of 14.5-17% year over year in fiscal 2024 compared with 13-15.5% expected before. Underlying sales are predicted to rise 4.5-6.5% in the fiscal year compared with 4-6% anticipated earlier.
It anticipates earnings per share of $2.80 -$2.95 for fiscal 2024 compared with $3.82-$4.02 expected earlier. Adjusted earnings per share are estimated to be in the range of $5.30-$5.45 compared with $5.15-$5.35 expected earlier. The Zacks Consensus Estimate for the same is pegged at $5.29. The company expects operating cash flow to be in the band of $3.0-$3.1 billion for fiscal 2024. Free cash flow is anticipated to be in the $2.6-$2.7 billion range for the same period.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Emerson Electric has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Emerson Electric has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Emerson Electric belongs to the Zacks Manufacturing - Electronics industry. Another stock from the same industry, Eaton (ETN - Free Report) , has gained 10.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Eaton reported revenues of $5.97 billion in the last reported quarter, representing a year-over-year change of +10.8%. EPS of $2.55 for the same period compares with $2.06 a year ago.
For the current quarter, Eaton is expected to post earnings of $2.27 per share, indicating a change of +20.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Eaton. Also, the stock has a VGM Score of C.