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Emerson's iSolutions Buyout to Fortify Consultancy Business

Emerson Electric Co. EMR recently completed the acquisition of iSolutions Inc., for an undisclosed amount. The company noted that the buyout will significantly aid in boosting its digital transformation expertise and consultancy business.

Emerson’s share price remained nearly flat at $62.28 per share as of Dec 11, 2018, post broadcast of the deal’s closure news on Dec 10.

Inside the Headlines

iSolutions is a renowned Canada-based consulting group, providing state-of-the-art data management and designing solutions in the market. The decision-support tools of the company support execution of data-driven operational and production decisions that are based on the evaluation of real-time insights from plant systems and integrated field. The non-imitable solutions of iSolutions are largely popular across the oil and gas, and utilities end-markets North American power.

Inclusion of iSolutions’ expertise will help Emersion expedite the digital transformation deployments and roadmap implementation across organizations. Its customers will be able to realize quicker return on technology investments and secure Top Quartile performance in the areas of energy consumption, production, reliability and safety. In short, iSolutions’ unique information technology/operational technology (IT-OT) will support the integration of data from the plant floor to the different business systems of the organizations.

Moreover, the data-management practices of iSolutions (for discrete, hybrid and process businesses) are likely to strengthen Emerson’s Operational Certainty Consulting services. Going forward, iSolutions (on behalf of Emerson) will assist organizations in deploying Emerson’s industry popular Plantweb™ digital ecosystem.

Our Take

Emerson currently carries a Zacks Rank #4 (Sell). Over the past month, the stock has lost 5.6%, wider than the 4.3% loss recorded by the industry it belongs to.

The company is currently battling inflation. Material price inflation — on account of tariffs imposed over U.S. imports — is expected to escalate the company’s aggregate cost, in turn dampening its margins in the upcoming quarters. Moreover, a stronger U.S. dollar has been hurting the company’s international revenues and profitability. Also, we notice that Emerson’s cash position has weakened over time. In the last six years (2012-20817), 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). 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 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. The company generated a positive average earnings surprise of 11.67% in the preceding four quarters.

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