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Emerson (EMR) Q3 Earnings Beat, Soar Y/Y on Higher Revenues

Emerson Electric Co. EMR reported third-quarter fiscal 2022 (ended Jun 30, 2022) adjusted earnings (excluding 16 cents from non-recurring items) of $1.38 per share, which outperformed the Zacks Consensus Estimate of $1.29. This compares with our estimate of $1.27. The bottom line improved in double digits in the reported quarter. Results benefited from strong growth in underlying orders and increased demand for technology, software and solutions.

Emerson’s net sales of $5,005 million fell short of the Zacks Consensus Estimate of $5,120.2 million. This compares with our estimate of $5,089.8 million. The top line increased 6.6% year over year. Underlying sales were up 7%.

Segmental Details

Automation Solutions’ net sales were $2,872 million, flat year over year. This compares with the Zacks Consensus Estimate of $3,452 million. Our estimate for the quarter was $3,102.2 million. Underlying sales of the segment increased by 4%. Commercial & Residential Solutions generated net sales of $1,902 million in the fiscal third quarter, up 8% year over year. This compares with the Zacks Consensus Estimate of $1,937 million. Our estimate for the quarter was $1,992.7 million. Underlying sales were up 13%. Within the segment, Climate Technologies’ sales jumped more than 100% to $239 million, and that from Tools & Home Products augmented 6.7% to $522 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 7% year over year to $2,908 million. Pretax margin in the quarter was 23.9% compared with 16.7% in the year-ago period. Adjusted EBITA margin came in at 22.8% compared with 20.1% in the year-ago quarter. Selling, general and administrative expenses decreased 2.1% to $1,052 million.

Balance Sheet and Cash Flow

Exiting third-quarter fiscal 2022, Emerson had cash and cash equivalents of $2,529 million compared with $2,860 million in the year-ago quarter. Long-term debt was $8,367 million compared with $5,835 million in the year-ago period. During the first nine months of 2022, the company repaid debts of $512 million.

In the first nine months of fiscal 2022, it generated net cash of $1,705 million from operating activities, reflecting a decrease of 37.3% from the year-ago period. Capital expenditure was $335 million, down from $350 million in the year-ago period.

During the first nine months of fiscal 2022, the company paid out dividends of $918 million and repurchased shares worth $418 million.

Fiscal 2022 Outlook

Emerson anticipates net sales of 7-8% year over year (8-10% increase anticipated earlier) in fiscal 2022. Underlying sales are now expected to rise 9-10% compared with 9-11% increase estimated earlier.

EMR anticipates earnings per share of $5.25-$5.35 for fiscal 2022. Adjusted earnings per share are estimated to be $5.05-$5.15 compared with $4.95-$5.10 expected earlier. The Zacks Consensus Estimate for the same stands at $5.05.

Operating cash flow is forecast to be $3 billion in fiscal 2022 compared with $3.6 billion anticipated earlier. The company expects capital spending of approximately $525 million in fiscal 2022.  Free cash flow is predicted to be $2.5 billion compared with $3 billion anticipated earlier. EMR expects to buyback shares worth approximately $500 million in fiscal 2022.

Zacks Rank & Key Picks

Emerson carries a Zacks Rank #3 (Hold). Some better-ranked stocks within the broader Industrial Products sector are as follows:

Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have gained 23.4% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 47%, on average.

Titan International has an estimated earnings growth rate of 157.7% for the current year. Shares of the company have rallied around 40% in the past six months.


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