U.S. markets closed

What's in the Offing for Emerson (EMR) in Q1 Earnings?

Zacks Equity Research

Emerson Electric Co. EMR is set to release first-quarter fiscal 2020 (ended December 2019) results on Feb 4, before market open.

The company reported better-than-expected results once in the last four quarters and met estimates thrice, the positive earnings surprise being 3.03%, on average. In the last reported quarter, Emerson’s earnings of $1.07 per share came in line with the Zacks Consensus Estimate.

In the past six months, the company’s shares have rallied 17.7% compared with the industry’s rise of 18.6%.



Factors at Play

Emerson is likely to have benefited from steady demand in process and hybrid end markets across the globe in first-quarter fiscal 2020. The company’s Automation Solutions segment is likely to have gained from broad-based demand across maintenance, repair and operations end markets, along with strength in brownfield projects. Also, healthy growth in bookings for final control and systems businesses is likely to have supported the segment's top-line performance in the quarter. The Zacks Consensus Estimate for Automation Solutions’ revenues for the fiscal first quarter is currently pegged at $2,900 million, indicating growth of 3.6% from the year-ago reported figure.

Acquired assets boosted Emerson’s sales by 5% and 1% in the third quarter and fourth quarter of fiscal 2019, respectively, a trend that most likely continued in the fiscal first quarter, owing to the benefits from its buyout of Intelligent Platforms business of General Electric Company GE in February 2019.  Notably, the Intelligent Platforms business has been strengthening the company’s growth opportunities across process and discrete industries as well as hybrid markets such as like metals and mining, food and beverage, life sciences, and packaging.

In addition, benefits from the company’s cost-reduction efforts and greater operational efficacy are likely to have boosted Emerson’s margins and profitability in the to-be-reported quarter.

However, softness in the global discrete manufacturing market due to weak automotive and semiconductor end markets is likely to have hurt Emerson’s top-line performance. Also, escalating cost of sales has been a persistent concern for the company. In the third quarter and fourth quarter of fiscal 2019, the company's cost of sales jumped 6.7% and 0.5%, respectively, year over year. High costs are likely to have adversely impacted its margin and profitability in the fiscal first quarter as well.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Emerson has an Earnings ESP of 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 67 cents.

Emerson Electric Co. Price and EPS Surprise

Emerson Electric Co. Price and EPS Surprise

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

Zacks Rank: Emerson carries a Zacks Rank #2.

Key Picks

Here are a couple of companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this time around:

Arvinas, Inc. ARVN has an Earnings ESP of +6.73% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Plug Power, Inc. PLUG has an Earnings ESP of +8.33% and a Zacks Rank of 3.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
General Electric Company (GE) : Free Stock Analysis Report
 
Plug Power, Inc. (PLUG) : Free Stock Analysis Report
 
Emerson Electric Co. (EMR) : Free Stock Analysis Report
 
Arvinas, Inc. (ARVN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research