Emerson Electric Co.’s EMR fourth-quarter fiscal 2020 (ended Sep 30, 2020) adjusted earnings of $1.10 per share beat the Zacks Consensus Estimate of 95 cents. On a year-over-year basis, the bottom line improved 2.8%.
In fiscal 2020, the company’s adjusted earnings were $3.46, down 6% on a year-over-year basis.
Inside the Headlines
Emerson’s net sales were $4,558 million in the quarter, reflecting a decline of 8.3% from the year-ago quarter. Underlying sales were down 9% on account of the decline in demand owing to the coronavirus outbreak. Forex woes had a 1% positive impact on sales, while acquired assets had no impact. Notably, the top line beat the Zacks Consensus Estimate of $4,509 million.
In fiscal 2020, the company’s net sales were $16,785 million, down 8.6% on a year-over-year basis.
The company reports net sales under two segments — Automation Solutions, and Commercial & Residential Solutions. Fiscal fourth-quarter segmental results are briefly discussed below:
Automation Solutions’ net sales were $3,005 million, decreasing 10.8% year over year. Underlying sales declined 11%, while foreign exchange and acquired assets had no impact on sales.
Commercial & Residential Solutions generated net sales of $1,555 million in the fiscal fourth quarter, down 3.3% year over year. Underlying sales were down 3%, while foreign exchange and acquired assets had no impact on sales. Under the segment, Climate Technologies’ sales declined 2.7% year over year to $1,111 million, and that from Tools & Home Products decreased 4.7% to $444 million.
Emerson Electric Co. Price, Consensus and EPS Surprise
Emerson Electric Co. price-consensus-eps-surprise-chart | Emerson Electric Co. Quote
In the quarter under review, Emerson's cost of sales decreased 5.9% year over year to $2,676 million. It represented 58.7% of net sales compared with 57.2% in the year-ago quarter. Gross margin was at 41.3%, down 150 basis points. Selling, general and administrative (SG&A) expenses declined 14.7% to $946 million. As a percentage of sales, SG&A expenses were 20.8% compared with 22.3% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting fiscal 2020, Emerson had cash and cash equivalents of $3,315 million, up from $1,494 million at the end of the fiscal 2019. Long-term debt balance increased 47.9% year over year to $6,326 million. During fiscal 2020, the company repaid debts of $503 million.
In fiscal 2020, it generated net cash of $3,083 million from operating activities, reflecting an increase of 2.6% from a year ago. Capital expenditure was $538 million, down from $594 million.
During fiscal 2020, the company paid out dividends amounting to $1,209 million and repurchased shares worth $942 million.
For fiscal 2021 (ending September 2021), it anticipates net sales growth of 1-4%. Underlying sales are expected to lie in the range of a decline of 1% to growth of 2%.
Adjusted earnings per share are predicted to be $3.45 for fiscal 2021.
Emerson expects Automation Solutions’ net sales to lie in the range of a decline of 1% to growth of 2%, while Commercial & Residential Solutions’ net sales are projected to increase 5-8%.
Notably, the company anticipates gradually improving demand environment in the fiscal first quarter and in the quarters ahead.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are Kaman Corporation KAMN, Dover Corporation DOV and IDEX Corporation IEX. While Kaman sports a Zacks Rank #1 (Strong Buy), Dover and IDEX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kaman delivered a positive earnings surprise of 30.42%, on average, in the trailing four quarters.
Dover delivered a positive earnings surprise of 18.10%, on average, in the trailing four quarters.
IDEX delivered a positive earnings surprise of 6.80%, on average, in the trailing four quarters.
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