Emerson Q1 Earnings Beat on Strong Margins, Revenues Dip - Analyst Blog
Emerson Electric Company (EMR) reported first-quarter fiscal 2015 earnings per share of 75 cents per share, which beat the Zacks Consensus Estimate of 73 cents by 2.7%, and the year-ago quarter figure of 65 cents by 15%. Earnings benefited from solid margin growth, favorable corporate expenses comparison and currency translations.
Emerson Electric Company - Earnings Surprise | FindTheBest
Quarter in Details
Total revenue decreased 0.3% year over year to $5,587 million and missed the Zacks Consensus Estimate of $5,606 million. However, underlying sales in the quarter increased 6%, offset by divestitures and unfavorable currency translation.
As per the segments, Process Management segment revenues grew 3%, with underlying sales up 6%, attributable to continued strength orders and solid backlog levels. The Industrial Automation segment reported flat year over year revenues, with underlying sales increase of 4% due to the unfavorable currency translation impact. Revenues in the Network Power segment contracted 14%, with rise of 1% in underlying sales, owing to negative impact of divestitures and currency translations. Revenues in the Climate Technologies segment expanded 15% in the quarter, with a 17% increase in underlying sales, aided by strength in residential air conditioning business. Commercial & Residential Solutions sales grew 3%, with rise of 4% in underlying sales, driven by strong U.S. market conditions.
In the first quarter of fiscal 2015, gross profit margin expanded 90 basis points to 40.8%, with strong improvement in the segments margin.
Liquidity & Cash Flow
Exiting the quarter, the company had cash and cash equivalents of $3.1 billion with long-term debt of $3.3 billion. Meanwhile, net cash from operating activities totaled $571 million.
2015 Outlook Revised
Emerson Electric revised its underlying sales growth guidance and now expects it to be in the range of 3% and 5% in fiscal 2015 (prior range being 4% – 5%).
Our Take
Although Emerson’s revenue miss is unsatisfactory, strong earnings growth is encouraging. The company have been benefiting from solid margin expansions across its segments. Also, favorable U.S. market conditions are expected to drive the company’s earnings going forward too. However, negative impact of divestitures and currency translations remains a headwind.
Emerson currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include II-VI Incorporated (IIVI), A.O. Smith Corp. (AOS) and Pioneer Power Solutions, Inc. (PPSI). While II-VI and A.O. Smith carry a Zacks Rank #1 (Strong Buy), Pioneer Power Solutions hold a Zacks Rank #2 (Buy).
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