01—Abstract
Summary
Summary of the 10-K filed November 20, 2017. Cited figures are marked; the original filing is the authoritative source.
Emerson Electric Co.'s (EMR) 2017 10-K filing highlights a year of significant portfolio transformation.
The company successfully divested its Network Power Systems and Power Generation, Motors, and Drives businesses, reporting them as discontinued operations. Concurrently, Emerson strengthened its core Automation Solutions segment with the acquisition of Pentair's valves & controls business. This strategic repositioning resulted in a reported net sales increase of 5% to $15.3 billiona, driven by the acquisition and a 1% increase in underlying sales, reflecting gradual improvement in industrial end markets.
While net earnings attributable to common stockholders decreased by 7% to $1.518 billionb, earnings from continuing operations saw a modest 3% increase to $1.643 billion, with diluted EPS from continuing operations rising 4% to $2.54. The company generated strong operating cash flow of $2.7 billion, demonstrating robust cash generation capabilities to fund acquisitions, dividends, and share repurchases. The outlook for fiscal year 2018 indicated continued market stabilization and expected growth in key segments.
02—Key points
Key Highlights
- Completed strategic divestitures of Network Power Systems and Power Generation, Motors, and Drives businesses, focusing the company's portfolio.
- Acquired Pentair's valves & controls business for $2.96 billion, significantly bolstering the Automation Solutions segment.
- Reported Net Sales of $15.3 billion, a 5% increase year-over-year, driven by acquisitions and a 1% underlying sales growth.
- Earnings from continuing operations increased 3% to $1.643 billion, with Diluted EPS from continuing operations up 4% to $2.54.
- Generated $2.7 billion in operating cash flow from continuing operations, up 8% year-over-year.
- Automation Solutions segment sales grew 5% largely due to the Pentair acquisition, while Commercial & Residential Solutions sales increased 5% on favorable market conditions.
- Provided a positive outlook for fiscal year 2018, anticipating continued market improvement and sales growth.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Emerson Electric Co kept $0.10.
- Revenue$15.26B100.0%
- Cost of revenue−$8.86B58.0%
- Gross profit$6.40B42.0%
- Operating costs−$4.76B31.2%
- Operating income$1.64B10.8%
- Interest, other & tax−$125.0M0.8%
- Net income$1.52B9.9%
Where FY2017 revenue went
$15.26B- Cost of revenue: $8.83B, 58% of revenue
- SG&A: $3.61B, 24% of revenue
- Net income: $1.52B, 9.9% of revenue
- R&D: $340.0M, 2.2% of revenue
- Other operating costs: $841.0M, 5.5% of revenue
- Interest, other & tax: $125.0M, 0.8% of revenue
Kept 9.9% as net incomeInterest, other & tax $125.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed November 20, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $15.26B$14.52B | +5.1% |
| Cost of Revenue | $8.83B$8.26B | +6.9% |
| Gross Profit | $6.40B$6.26B | +2.3% |
| R&D Expenses | $340.00M$320.00M | +6.3% |
| SG&A Expenses | $3.61B$3.46B | +4.1% |
| Operating Income | $1.64B$1.59B | +3.3% |
| Net Income | $1.52B$1.64B | −7.2% |
| EPS (Basic) | $2.35$2.53 | −7.1% |
| EPS (Diluted) | $2.35$2.52 | −6.7% |
| Shares Outstanding (Basic) | 642.10M644.00M | −0.3% |
| Shares Outstanding (Diluted) | 643.40M646.80M | −0.5% |
05—Questions
Frequently Asked Questions
What were the major strategic actions taken by Emerson in fiscal year 2017?
In fiscal year 2017, Emerson underwent a significant portfolio repositioning. This included the divestiture of its Network Power Systems and Power Generation, Motors, and Drives businesses. The company also strengthened its core Automation Solutions segment by acquiring Pentair's valves & controls business.
How did the strategic actions impact Emerson's financial performance?
The divestitures and acquisitions led to a 5% increase in net sales to $15.3 billion, primarily driven by the Pentair acquisition and a modest 1% growth in underlying sales. While net earnings decreased by 7% due to discontinued operations, earnings from continuing operations saw a 3% increase, and diluted EPS from continuing operations rose by 4%.
What is the outlook for Emerson in fiscal year 2018 based on this filing?
Emerson projected a positive outlook for fiscal year 2018, anticipating continued market stabilization and favorable trends in key segments like oil and gas, air conditioning, refrigeration, and construction. They expected consolidated net sales to increase by 8-10%, with underlying sales projected to grow 4-6%.
How is Emerson's business segmented, and what were the performances of these segments?
Emerson now reports in three segments: Automation Solutions, and Climate Technologies and Tools & Home Products (which together form Commercial & Residential Solutions). In 2017, Automation Solutions sales grew 5% mainly due to the Pentair acquisition, while underlying sales saw a slight decrease before improving later in the year. Commercial & Residential Solutions sales increased 5%, benefiting from strong performance in HVAC, refrigeration, and construction markets.
06—Continue