Emerson Q4 Earnings Top, Revenues Meet; Outlook Good
Emerson Electric Company (EMR) reported fourth-quarter and fiscal 2014 results, ended Sep 30, 2014. Excluding one-time items, earnings for the quarter came in at $1.30 per share which was up 10% from the year-ago quarter. Also, quarterly earnings beat the Zacks Consensus Estimate of $1.22 by 6.6%.
For fiscal 2014, the company reported Non-GAAP earnings of $3.75 a share which was up 6% year over year. Full year earnings were well above the Zacks Consensus Estimate of $3.70.
Emerson Electric Co - Quarterly EPS (:BNRI) | FindTheBest
Revenues
Total revenue was flat year over year at $6.8 billion and was in line with the Zacks Consensus Estimate. However, organic sales in the quarter increased 4%, offset by divestitures and unfavorable currency translation. The upside in organic sales can be attributed to improved business conditions across all segments.
Geographically, revenues in the U.S. improved 8% reflecting better economic conditions while Asia revenues inched up a mere 2% owing to slow growth in China. However, emerging market revenues grew a meaningful 5%. Europe revenues were flat year over year owing to weak market conditions. Orders grew a healthy 9% reflecting enhanced market conditions.
Revenues for fiscal 2014 came in at $24.5 billion, which were down marginally year over year. However, organic sales were up 3% driven by a favorable contributionof 1% from acquisitions which was offset by divestitures.
Segment Results
Net sales for the fourth quarter at the Process Management segment grew 8%, with organic sales up 5%, attributable to continued strength in global energy and chemical markets. The segment reported strong growth in North America, revenues at which surged 13% as investments in oil and gas production and processing projects remained strong.
On a geographic basis, the segment’s performance highlighted mixed results. Asia revenues were up 1%, primarily supported by strength in Southeast Asia while India sales were marred by declines in Australia and China due to challenging comparisons. Although Europe revenues were flat, Russia demonstrated considerable improvement.
The Industrial Automation segment reported 5% increase in the quarter, driven by improved demand for capital goods but remained mixed across markets.
Geographically, North America revenues were up 12%, Asia sales garnered a 5% improvement. On the other hand, Europe revenues deteriorated 2%. During the quarter under review, growth was led by the HVAC-related hermetic motors business, which recorded over 20% revenue growth, attributable to strength in the electrical distribution. The segment reported growth across all categories except for motors and drives, which reported a marginal decline reflecting weaknesses in Europe.
Net sales in the Network Power segment contracted 20% owing to the Artesyn divestiture. However, underlying sales grew 1% with North America revenues up 1%, Asia down 3% and Europe escalating 7%. The segment reported increased demand for data center solutions globally, driven by heightened project activities in Europe and favorable economic conditions in North America. On the other hand, the telecommunications infrastructure business slowed down, plummeting at a double-digit rate.
Revenues in the Climate Technologies segment expanded 7% in the quarter, as 7% growth in North America and 8% growth in Asia more than offset a 3% decline in Europe. The air conditioning business in North America was robust, with residential revenues witnessing more than 20% growth on demand acceleration related to regulatory changes effective Jan 1, 2015, along with improved commercial market conditions.
Business in Asia benefited from continued momentum in China, which was up 7% on robust growth in the refrigeration business. Europe revenues deteriorated as economic conditions softened. Also, demand for sensors and controls decreased moderately.
Commercial & Residential Solutions sales grew 5%, marking the strongest quarter of the year for the segment. This increase was driven by 7% growth in North America revenues which was offset by a slight decline in international sales. Growth was aided by strength in the professional tools, wet/dry vacuums and food waste disposers businesses.
Margins
In the fourth quarter of fiscal 2014, gross profit margin expanded 120 basis points to 42.4%, with strong improvement in the Process Management and Industrial Automation segments.
Balance Sheet & Cash Flow
Exiting the year, the company had cash and cash equivalents of $3.3 billion with long-term debt of $4.1 billion. Meanwhile, net cash from operating activities totaled $3.6 million.
Outlook
Along with the earnings release, Emerson Electric provided an outlook for fiscal 2015. The company expects underlying sales growth between 4% and 5% in fiscal 2015, better than in 2014, with unfavorable currency translation and the potential power transmission divestiture both deducting 2% each. Meanwhile, sales growth is expected to remain flat or increase a marginal 1%.
Emerson currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include CUI Global Inc. (CUI), CLARCOR Inc. (CLC) and A.O. Smith Corp. (AOS). All three carry a Zacks Rank #2 (Buy).
Read the Full Research Report on EMR
Read the Full Research Report on AOS
Read the Full Research Report on CLC
Read the Full Research Report on CUI
Zacks Investment Research
