Emerson (EMR) Q4 Earnings Miss Estimates, Sales Rise Y/Y
Emerson Electric Co. EMR reported fourth-quarter fiscal 2023 (ended Sep 30, 2023) adjusted earnings of $1.29 per share, which missed the Zacks Consensus Estimate of earnings of $1.30. However, the bottom line increased 21% in the reported quarter.
Emerson’s net sales of $4,090 million missed the consensus estimate of $4,204 million. However, the top line increased 5% year over year, driven by a solid segmental performance. Underlying sales were up 5% as well.
Segmental Details
Effective from the fiscal first quarter of 2023, the company started reporting under two segments, namely Intelligent Devices and Software and Control Automation Solutions.
The Intelligent Devices segments’ net sales were $3,146 million, increasing 6% year over year. Our estimate for segmental revenues was $3,191.1 million. The segment consists of four subgroups, namely Final Control, Measurement & Analytical, Discrete Automation and Safety & Productivity.
Final Control’s revenues increased to $1,081 million from $1,001 million in the fourth quarter of fiscal 2023. Measurement & Analytical generated revenues of $1,045 million, up from $921 million reported in the year-ago period. Discrete Automation’s revenues totaled $666 million compared with $718 million reported in the year-ago fiscal quarter. Safety & Productivity’s revenues increased to $354 million from $336 million reported in the year-ago fiscal quarter.
The Software and Control Automation Solutions segment generated net sales of $963 million in the fiscal fourth quarter, up 3% year over year. Our estimate for segmental revenues was $1,013.5 million. The segment consists of two subgroups, namely Control Systems & Software, and AspenTech.
Control Systems & Software reported revenues of $714 million compared with $687 million reported in the year-ago quarter. AspenTech generated net sales of $249 million, down 1% year over year.
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 0.7% year over year to $2,078 million. The pretax earnings margin in the quarter was 22.1% compared with 15.5% in the year-ago period. Adjusted EBITA margin was 25.5% compared with 24.7% in the year-ago quarter. Selling, general and administrative expenses increased 13.3% to $1,114 million.
Balance Sheet and Cash Flow
Exiting fourth-quarter fiscal 2023, Emerson had cash and cash equivalents of $8,051 million compared with $1,804 million in the year-ago period. Long-term debt was $7,610 million compared with $8,259 million in the year-ago period. In fiscal 2023, the company repaid long-term debt of $741 million.
In the same time period, the company generated net cash of $637 million from operating activities, reflecting a decrease of 78.2% from the year-ago period. Capital expenditure was $363 million, up from $299 million in the year-ago period.
The company paid out dividends of $1,198 million and repurchased common stocks worth $2000 million in the same time period.
1Q24 Outlook
For the first quarter of fiscal 2024, Emerson anticipates year-over-year net sales growth of 14-17.5% and underlying sales growth of 6.5-8.5%.
EMR anticipates earnings per share of $0.45-$0.50 for the first quarter of fiscal 2024. Adjusted earnings per share are anticipated to be $1.00-$1.05. The midpoint of the guided range — $1.025 — lies below the Zacks Consensus Estimate of earnings of $1.04 per share.
FY24 Outlook
Emerson anticipates net sales growth of 13-15.5% year over year in fiscal 2024. Underlying sales are expected to rise 4-6% in the fiscal year.
EMR anticipates earnings per share of $3.82-$4.02 for fiscal 2024. Adjusted earnings per share are estimated to be $5.15-$5.35. The Zacks Consensus Estimate for the same is $4.98 per share. The company expects operating cash flow to be $3.0B-$3.1B for fiscal 2024. Free Cash Flow is anticipated to be $2.6B-$2.7B for the same period.
Zacks Rank & Other Stocks to Consider
EMR currently sports a Zacks Rank #1 (Strong Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Graco Inc. GGG presently carries a Zacks Rank #2 (Buy). GGG’s earnings surprise in the last four quarters was 7.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.3%. The stock has gained 13.5% in the past year.
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.
AIT’s earnings estimates have increased 2.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 23.9% in the past year.
A. O. Smith Corporation AOS currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased 4.5% for 2023. The stock has soared 25.0% in the past year.
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