Advertisement
Australia markets closed

  • ALL ORDS

    7,937.50
    -0.40 (-0.01%)
     

  • ASX 200

    7,683.00
    -0.50 (-0.01%)
     

  • AUD/USD

    0.6505
    +0.0005 (+0.08%)
     

  • OIL

    82.92
    +0.11 (+0.13%)
     

  • GOLD

    2,325.90
    -12.50 (-0.53%)
     

  • Bitcoin AUD

    98,537.79
    -4,001.37 (-3.90%)
     

  • CMC Crypto 200

    1,389.11
    -34.99 (-2.46%)
     

  • AUD/EUR

    0.6072
    +0.0002 (+0.03%)
     

  • AUD/NZD

    1.0948
    +0.0006 (+0.06%)
     

  • NZX 50

    11,946.43
    +143.15 (+1.21%)
     

  • NASDAQ

    17,526.80
    +55.33 (+0.32%)
     

  • FTSE

    8,040.38
    -4.43 (-0.06%)
     

  • Dow Jones

    38,460.92
    -42.77 (-0.11%)
     

  • DAX

    18,088.70
    -48.95 (-0.27%)
     

  • Hang Seng

    17,295.93
    +94.66 (+0.55%)
     

  • NIKKEI 225

    37,708.77
    -751.31 (-1.95%)
     

Here's Why Investors Should Steer Clear of Emerson (EMR)

Zacks Equity Research

Emerson Electric Co. EMR seems to have lost its sheen to a challenging global manufacturing market, high costs and expenses, and forex woes. Also, weak price performance and fall in earnings estimates are reflective of bearish sentiments toward the stock.
 
The company, with a market capitalization of $44.8 billion, currently carries a Zacks Rank #5 (Strong Sell). It engages in providing products and services in process management, climate technologies, network power, storage solutions, professional tools, appliance solutions, motor technologies and industrial automation.

The company belongs to the Zacks Manufacturing - Electronics industry, which is currently at the bottom 14% (with the rank of 217) of more than 250 Zacks industries. The industry is suffering from global uncertainties, unfavorable movements in foreign currencies, cost escalation and other headwinds.

Emerson’s fourth-quarter fiscal 2019 (ended Sep 30, 2019) earnings were in line with estimates while sales lagged the same by 1.5%. It delivered an average trailing four-quarter positive earnings surprise 3.03%. Over the past three months, the company’s shares have gained 16% compared with the industry’s growth of 10.9%.



Despite healthy price performance, there are many factors that are hurting the company’s investment appeal.

Top-Line Weakness: In fourth-quarter fiscal 2019, Emerson’s revenues were adversely impacted by softness in automotive, semiconductor, packaging and textiles end markets.

Emerson believes that persistent weakness in the global discrete manufacturing market is a near-term concern. For fiscal 2020 (ending September 2020), the company predicts sales to be down 3% to up 1% year over year compared with 6% rise estimated earlier. Net sales of Automation Solutions segment are projected to be down 2% to up 2%, whereas Commercial & Residential Solutions segment’s net sales are likely to decline 1-5% in fiscal 2020.

High Costs & Expenses: Over the past few quarters, Emerson has been facing headwinds from high costs and expenses. The company’s costs of sales increased 6.7% and 0.5% in the third quarter (ended June 2019) and fourth quarter of fiscal 2019, respectively. Also, selling, general and administrative expenses jumped 4.4% year over year in fiscal 2019.

Forex Woes: Geographical diversification, with a presence in the United States, Europe, Asia and the Middle East & Africa region, has exposed Emerson to geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies. Notably, unfavorable movements in foreign currencies adversely impacted the company’s sales by 2% in fourth-quarter fiscal 2019.

Emerson expects forex woes to persist in fiscal 2020 and adversely impact its sales.

Bottom-Line Estimate Trend: The Zacks Consensus Estimate for Emerson’s earnings has been lowered in the past 60 days. The consensus estimate for earnings per share is currently pegged at $3.62 for fiscal 2020 and $3.92 for fiscal 2021 (ending September 2021), reflecting respective decline of 6% and 7.8% from the 60-day-ago figures.

Also, earnings estimates for first-quarter fiscal 2020 (ending December 2019) and second-quarter fiscal 2020 (ending March 2020) were lowered by 6.9% to 67 cents and 4.5% to 84 cents from the respective 60-day-ago figures.

Emerson Electric Co. Price and Consensus

Emerson Electric Co. Price and Consensus
Emerson Electric Co. Price and Consensus

Emerson Electric Co. price-consensus-chart | Emerson Electric Co. Quote

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are Tennant Company TNC, DXP Enterprises, Inc. DXPE and Standex International Corporation SXI. While Tennant currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Standex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Tennant and DXP Enterprises have improved for the current year, while the same has been unchanged for Standex. Further, positive earnings surprise for the last reported quarter was 40% for Tennant, 16.39% for DXP Enterprises and 2.11% for Standex.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>


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
 
Emerson Electric Co. (EMR) : Free Stock Analysis Report
 
DXP Enterprises, Inc. (DXPE) : Free Stock Analysis Report
 
Standex International Corporation (SXI) : Free Stock Analysis Report
 
Tennant Company (TNC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research