U.S. Markets closed

Emerson Acquires A.E. Valves to Fortify Technology Portfolio

Emerson Electric Co. EMR recently acquired Advanced Engineering Valves (A.E. Valves) for an undisclosed amount. The company noted that the move will likely help enhance its critical isolation and valve technologies portfolio.

Inside the Headlines

A.E. Valves provides state-of-the-art valve technology across the global Liquefied Natural Gas (LNG) industry. The company’s non-imitable solutions are also used in other industries, including petrochemical, oil and gas, and chemical. A.E. Valves’ unique ball valve design significantly enhances the operational efficacy and safety standards across these industries. Notably, the company is a leading provider of zero-leakage, friction-free, torque-seated ball valve technology. The company’s headquarters are located in Belgium and Verviers.

Emerson intends to become the global automation technology provider on the back of A.E. Valves’ buyout. The acquisition supports the company’s Main Valve Partner initiative, through which it plans to become the primary supplier of final control solutions in the global LNG industry. Moreover, inclusion of A.E. Valves complements Emerson’s existing Vanessa triple-offset valve range, in turn, strengthening its position as a leading process isolation provider in severe service and critical cryogenic applications. Emerson believes benefits of the A.E. Valves acquisition will aid in improving operational excellence and bring in project delivery success to its customers.

Emerson stated that the buyout will strengthen its final control technology portfolio. The company is currently making several acquisitions to boost up its near-term competency. On Dec 10, 2018, Emerson completed the acquisition of iSolutions Inc., in a bid to fortify its digital transformation expertise and consultancy business.

Our Take

Emerson currently carries a Zacks Rank #4 (Sell). Over the past month, the stock has lost 8.7%, wider than the 4.9% decline recorded by the industry it belongs to.

 

The company is currently battling inflation. Material price inflation — due to tariffs imposed over U.S. imports — might escalate the company’s aggregate cost, in turn, depressing its margins in the upcoming quarters. Additionally, a stronger U.S. dollar has been hurting the company’s overseas revenues and profitability. Also, Emerson’s cash position has weakened over time. In the last six years (2012-2017), its cash and cash equivalents went down 16.7% (CAGR).

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are listed below:

DXP Enterprises, Inc. DXPE sports a Zacks Rank #1 (Strong Buy), currently. The company pulled off a positive average earnings surprise of 112.62% in the past four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enersys ENS currently carries a Zacks Rank #2 (Buy). The company delivered a positive average earnings surprise of 2.83% in the trailing four quarters.

Applied Industrial Technologies, Inc. AIT also holds a Zacks Rank of 2, at present. The company generated a positive average earnings surprise of 11.67% in the preceding four quarters.

The Hottest Tech Mega-Trend of All                

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.