01—Abstract
Summary
Summary of the 10-K filed November 19, 2018. Cited figures are marked; the original filing is the authoritative source.
Emerson Electric Co. reported solid performance for the fiscal year ended September 29, 2018, with net sales increasing 14% to $17.4 billiona.
This growth was driven by a strong 21% increase in the Automation Solutions segment, bolstered by acquisitions and broad-based demand, and a more modest 2% increase in Commercial & Residential Solutions. Net earnings attributable to common stockholders saw a significant jump of 45% to $2.2 billionb, or $3.46 per diluted share, benefiting from this robust sales performance and a notable income tax benefit of $0.30 per share resulting from the U.S. Tax Cuts and Jobs Act. The company continued its strategic portfolio repositioning through several key acquisitions in 2018, including Aventics and Textron's tools and test equipment business, aimed at strengthening its core segments.
Emerson also maintained a strong cash flow generation, with operating cash flow increasing 8% to $2.9 billionc, supporting its investment in acquisitions, dividends, and share repurchases. The company outlook for fiscal 2019 remains positive, with expected net sales growth of 6-9%.
02—Key points
Key Highlights
- Net sales increased by 14% to $17.4 billion in fiscal 2018, driven by strong performance in Automation Solutions.
- Net earnings attributable to common stockholders grew 45% to $2.2 billion, with diluted EPS of $3.46.
- The company benefited from a $0.30 per share income tax benefit due to the Tax Cuts and Jobs Act.
- Significant acquisitions, including Aventics and Textron's tools and test equipment business, were completed in 2018 to enhance segment offerings.
- Operating cash flow from continuing operations increased 8% to $2.9 billion, demonstrating strong cash generation.
- The Automation Solutions segment saw sales growth of 21%, fueled by demand across industrial markets and strategic acquisitions.
- Emerson Electric Co. declared a quarterly cash dividend increase of 1% to an annualized rate of $1.96 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Emerson Electric Co kept $0.13.
- Revenue$17.41B100.0%
- Cost of revenue−$9.98B57.3%
- Gross profit$7.43B42.7%
- Operating costs−$5.23B30.0%
- Operating income$2.20B12.7%
- Interest, other & tax$-00.0%
- Net income$2.20B12.7%
Where FY2018 revenue went
$17.41B- Cost of revenue: $9.98B, 57% of revenue
- SG&A: $4.27B, 25% of revenue
- Net income: $2.20B, 13% of revenue
- R&D: $436.0M, 2.5% of revenue
- Other operating costs: $524.0M, 3.0% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 19, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $17.41B$15.26B | +14.0% |
| Cost of Revenue | $9.98B$8.83B | +12.9% |
| Gross Profit | $7.43B$6.40B | +16.1% |
| R&D Expenses | $436.00M$340.00M | +28.2% |
| SG&A Expenses | $4.27B$3.61B | +18.4% |
| Operating Income | $2.20B$1.64B | +34.1% |
| Net Income | $2.20B$1.52B | +45.1% |
| EPS (Basic) | $3.48$2.35 | +48.1% |
| EPS (Diluted) | $3.46$2.35 | +47.2% |
| Shares Outstanding (Basic) | 632.00M642.10M | −1.6% |
| Shares Outstanding (Diluted) | 635.30M643.40M | −1.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of Emerson Electric's sales growth in fiscal 2018?
Sales growth was primarily driven by the Automation Solutions segment, which experienced a 21% increase due to strong demand across energy-related and general industrial markets, as well as the impact of strategic acquisitions. The Commercial & Residential Solutions segment also contributed positively, albeit at a slower pace with a 2% increase, benefiting from demand in HVAC and refrigeration markets.
How did the Tax Cuts and Jobs Act impact Emerson Electric's financial results?
The Tax Cuts and Jobs Act enacted in late 2017 provided a significant benefit to Emerson Electric in fiscal 2018. The company recognized a net tax benefit of $189 million ($0.30 per share), primarily due to the revaluation of deferred income tax liabilities to the new lower corporate tax rate and a reversal of previously accrued taxes on planned repatriation of non-U.S. cash. This tax benefit substantially contributed to the increase in net earnings.
What is the company's strategy regarding acquisitions and divestitures?
Emerson Electric is actively engaged in strategic portfolio repositioning. In fiscal 2018, they completed several acquisitions, including Aventics and Textron's tools and test equipment business, to enhance their Automation Solutions and Commercial & Residential Solutions segments, respectively. The company also divested its residential storage business. This strategy aims to focus the company on core, high-growth businesses.
How is Emerson Electric managing its cash flow and capital allocation?
The company generated strong operating cash flow of $2.9 billion in fiscal 2018, which funded significant investments in acquisitions totaling $2.2 billion. Emerson also continued to return capital to shareholders through dividends, totaling $1.2 billion, and share repurchases of $1.0 billion. The company also maintains a substantial revolving credit facility to support its financial flexibility.
06—Continue