10-KPeriod: FY2020

EMERSON ELECTRIC CO Annual Report, Year Ended Sep 30, 2020

Filed November 16, 2020For Securities:EMR

Summary

Emerson Electric Co.'s 2020 10-K filing highlights a challenging year marked by a 9% decline in net sales to $16.8 billion, primarily due to the global COVID-19 pandemic impacting demand across its industrial, commercial, and residential markets. Despite the sales decrease, the company managed to improve profitability through significant cost containment and restructuring efforts, with SG&A expenses decreasing as a percentage of sales. Emerson strategically navigated the downturn by increasing its cash holdings and issuing new debt to bolster liquidity, while also completing the acquisition of Open Systems International, Inc. (OSI) to enhance its Automation Solutions segment. The company demonstrated resilience by maintaining its commitment to shareholders, increasing its dividend for the 65th consecutive year. The report details Emerson's two primary business segments: Automation Solutions and Commercial & Residential Solutions, with Automation Solutions representing the larger portion of sales and earnings. While facing headwinds, the company maintains a strong financial position, supported by consistent operating cash flow and a robust balance sheet, positioning it for a projected return to growth in fiscal year 2021.

Financial Highlights

54 data points
Beta

Revenue

$16.79B

41.8% Gross Margin

Net Income

$1.97B

11.7% Net Margin

EPS (Diluted)

$3.24

Total Assets

$22.88B

Cash & Equivalents

$3.31B

Free Cash Flow

$2.54B

Financial Statements
Beta
Revenue$16.79B
Cost of Revenue$9.78B
Gross Profit$7.01B
R&D Expenses$439.00M
SG&A Expenses$3.99B
Net Income$1.97B
EPS (Basic)$3.26
EPS (Diluted)$3.24
Shares Outstanding (Basic)602.90M
Shares Outstanding (Diluted)606.60M

Key Highlights

  • 1Net sales decreased by 9% to $16.8 billion in fiscal year 2020, largely attributed to the impact of the COVID-19 pandemic on global demand.
  • 2The company executed significant cost reduction and restructuring initiatives, which helped offset the deleveraging effect of lower sales and supported profitability.
  • 3Emerson strengthened its liquidity position by issuing $2.25 billion in long-term debt and maintained an unchanged credit rating.
  • 4A key strategic move was the acquisition of Open Systems International, Inc. (OSI) for approximately $1.6 billion, aimed at expanding Emerson's capabilities in operations technology software within the Automation Solutions segment.
  • 5The company demonstrated a continued commitment to shareholder returns by increasing its dividend for the 65th consecutive year.
  • 6Automation Solutions remained the largest segment by sales, though it experienced a 9% revenue decline, while Commercial & Residential Solutions saw an 9% decrease as well.
  • 7Emerson ended fiscal year 2020 with $3.3 billion in cash and equivalents, indicating a strong focus on liquidity and financial flexibility.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Emerson's business, leading to a 9% decrease in net sales to $16.8 billion. The pandemic caused a rapid decline in demand across most of its end markets and geographies, particularly in North America, starting in the second fiscal quarter of 2020. In response, Emerson implemented cost containment and restructuring actions, including salary and hiring freezes, furloughs, and reduced discretionary spending.

Emerson's primary strategic moves in fiscal year 2020 included bolstering its financial liquidity by issuing $2.25 billion in long-term debt and completing the strategic acquisition of Open Systems International, Inc. (OSI) for approximately $1.6 billion. This acquisition is expected to enhance its Automation Solutions segment by expanding its software capabilities in the power industry and other end markets. The company also suspended share repurchases to conserve cash but remained committed to its dividend.

Emerson operates through two main business segments: Automation Solutions and Commercial & Residential Solutions (which includes Climate Technologies and Tools & Home Products). In fiscal year 2020, both segments experienced revenue declines. Automation Solutions, the larger segment, saw sales decrease by 9% to $11.2 billion, while Commercial & Residential Solutions also decreased by 9% to $5.6 billion. The company implemented cost-saving measures across both segments to mitigate the impact of lower sales volumes.

For fiscal year 2021, Emerson anticipates a conservative macroeconomic forecast with a slow but steady improvement in demand. Consolidated net sales are expected to grow by 1% to 4%, with underlying sales potentially declining 1% or growing up to 2%. Earnings per share are projected to be between $3.06 and $3.16, with adjusted EPS expected to be between $3.40 and $3.50. The company plans to resume share repurchases and remains open to further strategic acquisitions.