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Emerson (EMR) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Emerson Electric Co. EMR is set to release fourth-quarter fiscal 2019 (ended September 2019) results on Nov 5, before market open.

The company delivered better-than-expected results once in the last four quarters and met estimates in twice, the average positive earnings surprise being 2.22%. Notably, in the last reported quarter, Emerson’s earnings of 94 cents per share came in line with the Zacks Consensus Estimate.

In the past three months, the company’s shares have rallied 13.8% compared with the industry’s rise of 11.8%.

Factors to Consider

Emerson is expected to have benefited from robust demand in process and hybrid end markets across the globe in fourth-quarter fiscal 2019. Its Automation Solutions segment is likely to have gained from broad-based demand across maintenance, repair and operations end markets along with strength across brownfield and greenfield projects.

In addition, improvement in North America air conditioning markets and strong sales in Asia, Middle East and Africa region are likely to get reflected in the top-line results of the company’s Commercial & Residential Solutions segment.

Acquired assets boosted its sales by 6% and 5% in the second quarter and third quarter of fiscal 2019, respectively, a trend that most likely continued in the fourth-quarter fiscal 2019, owing to the benefits from the company’s 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 life sciences, metals and mining, and packaging.

However, persistent weakness in the global discrete manufacturing market due to soft automotive and semiconductor end markets is likely to have hurt the company’s top-line performance. Also, escalating cost of sales remains a persistent concern for Emerson. In the second quarter and third quarter of fiscal 2019, the company's cost of sales jumped 8.8% and 6.7%, respectively, year over year. High costs are likely to have adversely impacted its margin and profitability in the to-be reported quarter as well.

Moreover, given Emerson’s diverse geographic presence, its operations are subject to global economic and political risks as well as forex woes. For instance, unfavorable movements in foreign currencies adversely impacted sales by 2% in the third quarter of fiscal 2019. A stronger U.S. dollar might have hurt the company's overseas business in fourth-quarter fiscal 2019.

Amid this backdrop, the Zacks Consensus Estimate for revenues from the Automation Solutions segment for the fiscal fourth quarter is currently pegged at $3,410 million, indicating growth of 5.6% from the year-ago reported figure. The consensus mark for revenues from Commercial & Residential Solutions segment stands at $1,615 million, reflecting 2.4% decline year over year.

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 -1.01% as the Most Accurate Estimate is pegged at $1.06, lower than the Zacks Consensus Estimate of $1.07.

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 #3.

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 earnings season:

Plug Power, Inc. PLUG has an Earnings ESP of +58.33% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sealed Air Corporation SEE has an Earnings ESP of +2.40% and a Zacks Rank #3.

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