10-KPeriod: FY2017

EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2017

Filed November 20, 2017For Securities:EMR

Summary

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 billion, 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 billion, 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.

Financial Highlights

56 data points
Beta

Revenue

$15.26B

42.0% Gross Margin

Net Income

$1.52B

9.9% Net Margin

EPS (Diluted)

$2.35

Total Assets

$19.59B

Cash & Equivalents

$3.06B

Free Cash Flow

$1.44B

Financial Statements
Beta
Revenue$15.26B
Cost of Revenue$8.83B
Gross Profit$6.40B
R&D Expenses$340.00M
SG&A Expenses$3.61B
Operating Income$1.64B
Net Income$1.52B
EPS (Basic)$2.35
EPS (Diluted)$2.35
Shares Outstanding (Basic)642.10M
Shares Outstanding (Diluted)643.40M

Key Highlights

  • 1Completed strategic divestitures of Network Power Systems and Power Generation, Motors, and Drives businesses, focusing the company's portfolio.
  • 2Acquired Pentair's valves & controls business for $2.96 billion, significantly bolstering the Automation Solutions segment.
  • 3Reported Net Sales of $15.3 billion, a 5% increase year-over-year, driven by acquisitions and a 1% underlying sales growth.
  • 4Earnings from continuing operations increased 3% to $1.643 billion, with Diluted EPS from continuing operations up 4% to $2.54.
  • 5Generated $2.7 billion in operating cash flow from continuing operations, up 8% year-over-year.
  • 6Automation Solutions segment sales grew 5% largely due to the Pentair acquisition, while Commercial & Residential Solutions sales increased 5% on favorable market conditions.
  • 7Provided a positive outlook for fiscal year 2018, anticipating continued market improvement and sales growth.

Frequently Asked Questions

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.

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%.

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%.

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.