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Emerson (EMR) Q4 Earnings Beat Estimates, Revenues Miss

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Emerson Electric Co.’s EMR fourth-quarter fiscal 2021 (ended Sep 30, 2021) adjusted earnings of $1.21 per share beat the Zacks Consensus Estimate of $1.19. On a year-over-year basis, the bottom line improved 10%.

In fiscal 2021, the company’s adjusted earnings were $4.10, up 18.5% on a year-over-year basis.

Inside the Headlines

Emerson’s net sales were $4,947 million in the quarter, reflecting an increase of 8.5% from the year-ago quarter. Underlying sales were up 7% while acquired assets and currency translation each had 1% of positive impacts on sales. However, the top line missed the Zacks Consensus Estimate of $5,107 million. As noted, supply chain, logistics, and labor constraints had an adverse impact of $175 million on net sales in the quarter.

In fiscal 2021, the company’s net sales were $18,236 million, up 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 $3,178 million, increasing 5.8% year over year. Underlying sales of the segment increased 3%. Commercial & Residential Solutions generated net sales of $1,775 million in the fiscal fourth quarter, up 14.1% year over year. Underlying sales were up 13%. Under the segment, Climate Technologies’ sales increased 16% to $1,289 million and that from Tools & Home Products jumped 9.5% to $486 million.

Emerson Electric Co. Price, Consensus and EPS Surprise

Emerson Electric Co. Price, Consensus and EPS Surprise
Emerson Electric Co. Price, Consensus and EPS Surprise

Emerson Electric Co. price-consensus-eps-surprise-chart | Emerson Electric Co. Quote

Margin Details

In the quarter under review, Emerson's cost of sales increased 10.3% year over year to $2,951 million. It represented 59.7% of net sales compared with 58.7% in the year-ago quarter. Pretax margin in the quarter was 16.7%, down 10 basis points (bps). Adjusted EBIT margin came in at 19%, down 30 bps. Selling, general and administrative (SG&A) expenses increased 11.4% to $1,054 million. As a percentage of sales, SG&A expenses were 21.3% compared with 20.8% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting fiscal 2021, Emerson had cash and cash equivalents of $2,354 million, down from $2,860 million in the previous quarter. Long-term debt balance decreased 0.7% sequentially to $5,793 million. During fiscal 2021, the company repaid debts of $308 million.

In fiscal 2021, it generated net cash of $3,575 million from operating activities, reflecting an increase of 16% from the year-ago period. Capital expenditure was $581 million, up from $538 million.

During the fiscal 2021, the company paid out dividends amounting to $1,210 million and repurchased shares worth $500 million.

Outlook

For fiscal 2022 (ending September 2022), it anticipates net sales growth of 5-7%. Underlying sales are expected to grow in the range of 6-8%.

Adjusted earnings per share are predicted to lie in the range of $4.82-$4.97 for fiscal 2022.

Emerson expects Automation Solutions’ net sales to grow in the range of 5-7% while Commercial & Residential Solutions’ net sales are projected to increase 6-9%.

The company anticipates generating operating cash flow of $3.8 billion, with free cash flow of $3.1 billion.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are A. O. Smith Corporation AOS, AZZ Inc. AZZ, and Franklin Electric Co., Inc. FELE. While A. O. Smith currently sports a Zacks Rank #1 (Strong Buy), AZZ and Franklin Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A. O. Smith delivered an earnings surprise of 16.82%, on average, in the trailing four quarters.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Franklin Electric delivered an earnings surprise of 16.27%, on average, in the trailing four quarters.


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