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Emerson (EMR) Unveils New Service Center in Permian Basin

Zacks Equity Research

Emerson Electric Company EMR recently opened a $4 million Permian Basin Service Center. The move will allow the company to bring advanced oil and gas technologies and services to the Permian Basin region and train its workforce on digital technologies to optimize production efficiencies.

The 16,000-square-foot center will help in addressing the labor and equipment shortage issues of the pipeline operators in the region. Notably, with the new facility, customers will gain access to the company’s portfolio of automation solutions that range from instrumentation and intelligent field devices to control systems, operations management as well as enterprise management software. As a matter of fact, the advanced offerings will help operators in expanding their pipeline capacity for domestic consumption and export.

The center will offer Emerson’s comprehensive lifecycle services portfolio for actuators, regulators and valves. Its integrated customer engagement room will also drive digital transformation by providing customers training and product demonstrations facilities. In addition, the company’s initiatives like STEM education and collaborations with schools in the Permian Basin will strengthen the workforce with digital knowhow.

Our Take

Emerson is well positioned to benefit from favorable global industrial end markets, as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending. Going forward, the company’s Automation Solutions segment is likely to benefit from broad-based demand across most key markets, strong Maintenance, Repair and Operations projects as well as ongoing small to mid-sized brownfield and expansion projects.

In addition, robust demand in residential air conditioning and professional tools markets are likely to drive the company's Commercial & Residential Solutions business revenues. Notably, for fiscal 2019 (ending September 2019), the company expects net sales to increase 7-10% (higher than 6-9% predicted earlier), with underlying sales to be up 4-7%.

This Zacks Rank #3 (Hold) company has returned 4.2% in past three months, outperforming the industry’s rise of 3.5%.

However, escalating costs remain a cause of concern for Emerson. Notably, in the fiscal first quarter (ended December 2018), the company's cost of sales was up 9% year over year. As a matter of fact, it expects inflation environment to persist in the quarters ahead, and plans to have more material containment on account of the same.

Key Picks

Some better-ranked stocks from Zacks Industrial Products sector are Alarm.com Holdings, Inc. ALRM, Pioneer Power Solutions, Inc. PPSI and Brady Corporation BRC. While Alarm.com Holdings sports a Zacks Rank #1 (Strong Buy), Pioneer Power Solutions and Brady carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alarm.com Holdings delivered average earnings surprise of 27.26% in the trailing four quarters.

Pioneer Power Solutions pulled off average positive earnings surprise of 208.48% in the trailing four quarters.

Brady delivered average earnings surprise of 5.71% in the trailing four quarters.

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