Emerson Electric Co.’s EMR third-quarter fiscal 2020 (ended Jun 30, 2020) adjusted earnings of 80 cents per share beat the Zacks Consensus Estimate of 61 cents. On a year-over-year basis, the bottom line declined 14.9% from 94 cents.
Inside the Headlines
Emerson’s revenues were $3,914 million in the quarter, reflecting a decline of 16% from the year-ago quarter. Underlying sales were down 15% on account of the decline in demand owing to the coronavirus outbreak. Forex woes had a 1% adverse impact on sales, while acquired assets had no impact.
Notably, the top line beat the Zacks Consensus Estimate of $3,853 million.
The company reports net sales under two segments — Automation Solutions, and Commercial & Residential Solutions. Fiscal third-quarter segmental results are briefly discussed below:
Automation Solutions’ revenues were $2,589 million, decreasing 14.4% year over year. Underlying sales declined 13%, while forex woes adversely impacted sales by 1%. Acquired assets had no impact on sales.
Commercial & Residential Solutions generated revenues of $1,327 million in the fiscal third quarter, down 20.1% year over year. Underlying sales were down 19%, while forex woes adversely impacted sales by 1%. Acquired assets had no impact on sales. Under the segment, Climate Technologies’ sales declined 19.1% year over year to $970 million, while that from Tools & Home Products decreased 22.9% to $357 million.
Emerson Electric Co. Price, Consensus and EPS Surprise
Emerson Electric Co. price-consensus-eps-surprise-chart | Emerson Electric Co. Quote
In the quarter under review, Emerson's cost of sales decreased 14.4% year over year to $2,296 million. It represented 58.7% of net revenues compared with 57.3% in the year-ago quarter. Gross margin was at 41.3%, down 140 basis points on a year-over-year basis. Selling, general and administrative (SG&A) expenses declined 17.1% year over year to $934 million. As a percentage of sales, SG&A expenses were 23.9% compared with 24% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, Emerson had cash and cash equivalents of $2,450 million, up from $1,603 million at the end of the year-ago quarter. Long-term debt balance increased 26.8% year over year to $5,500 million. During the first nine months of fiscal 2020, the company repaid debts of $502 million.
In the first nine months of fiscal 2020, it generated net cash of $1,854 million from operating activities, reflecting an increase of 2.9% from the year-ago comparable period. Capital expenditure was $329 million, down from $395 million in the year-ago comparable period.
During the first nine months of fiscal 2020, the company paid out dividends amounting to $910 million and repurchased shares worth $942 million.
For fiscal 2020 (ending September 2020), it anticipates net sales decline of 9-10%. Underlying sales are expected to fall 7.5-9%.
Adjusted earnings per share are predicted to be $3.20-$3.35 for fiscal 2020.
Emerson expects Automation Solutions’ net sales to decline 8-10%, while Commercial & Residential Solutions’ net sales are projected to decline 9-11%.
Notably, the company anticipates continued challenging but gradually improving demand environment in the fiscal fourth quarter and in the quarters ahead.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are AGCO Corporation AGCO, Avery Dennison Corporation AVY and Berry Global Group, Inc. BERY. While AGCO sports a Zacks Rank #1 (Strong Buy), Avery Dennison and Berry Global carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO delivered an earnings surprise of 409.54%, on average, in the trailing four quarters.
Avery Dennison delivered an earnings surprise of 7.70%, on average, in the trailing four quarters.
Berry Global delivered an earnings surprise of 16.34%, on average, in the trailing four quarters.
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