01—Abstract
Summary
Summary of the 10-K filed November 14, 2022. Cited figures are marked; the original filing is the authoritative source.
Emerson Electric Co.'s 2022 10-K filing reveals a strategic transformation focused on portfolio optimization and an increased emphasis on its core automation and software businesses.
The company reported significant net sales growth of 8% to $19.6 billiona, driven by a combination of volume and pricing increases, despite ongoing supply chain challenges and geopolitical headwinds. Net earnings saw a substantial 40% increase to $3.2 billion, or $5.41 per diluted share, bolstered by strong operational performance and favorable divestiture gains. Key strategic moves during the fiscal year included the combination of its industrial software businesses with Aspen Technology, Inc., and the announcement of a majority stake sale in its Climate Technologies business to Blackstone.
These actions signify Emerson's intent to streamline its portfolio towards higher-growth, more cohesive industrial technology offerings, particularly in intelligent devices and software. The company generated robust operating cash flow of $2.9 billionb, though this was down 18% due to increased working capital needs, and maintained a strong financial position with substantial equity and available credit facilities.
02—Key points
Key Highlights
- Net sales increased by 8% to $19.6 billion in fiscal year 2022, driven by a 9% increase in underlying sales (6.5% to 8.5% projected for FY23).
- Net earnings attributable to common stockholders rose by 40% to $3.2 billion, with diluted EPS increasing by 42% to $5.41 ($5.25 adjusted EPS).
- Significant portfolio restructuring occurred, including the strategic combination with Aspen Technology, Inc. (creating a new industrial software leader) and the announced sale of a majority stake in the Climate Technologies business for $14.0 billion.
- Automation Solutions segment remains the largest contributor, with sales up 4% to $11.8 billion and a strong operating margin of 20.0%.
- Operating cash flow was $2.9 billion, down 18% from the prior year, primarily due to higher working capital requirements amidst supply chain constraints.
- The company has set an ambitious environmental sustainability target of achieving net zero greenhouse gas emissions across its value chain by 2045.
- Backlog increased to $8.1 billion as of September 30, 2022, up from $6.5 billion in the prior year, indicating strong future demand.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Emerson Electric Co kept $0.23.
- Revenue$13.80B100.0%
- Cost of revenue−$7.50B54.3%
- Gross profit$6.31B45.7%
- Operating costs−$4.42B32.0%
- Operating income$1.89B13.7%
- Interest, other & tax$1.34B9.7%
- Net income$3.23B23.4%
Where FY2022 revenue went
$13.80B- Cost of revenue: $7.50B, 54% of revenue
- SG&A: $3.61B, 26% of revenue
- Operating income: $1.89B, 14% of revenue
- R&D: $385.0M, 2.8% of revenue
- Other operating costs: $421.0M, 3.0% of revenue
Kept 14% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 14, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $13.80B$12.93B | +6.7% |
| Cost of Revenue | $7.50B$7.20B | +4.1% |
| Gross Profit | $6.31B$7.56B | −16.6% |
| R&D Expenses | $385.00M$347.00M | +11.0% |
| SG&A Expenses | $3.61B$3.49B | +3.4% |
| Operating Income | $1.89B$1.41B | +33.4% |
| Net Income | $3.23B$2.30B | +40.3% |
| EPS (Basic) | $5.44$3.85 | +41.3% |
| EPS (Diluted) | $5.41$3.82 | +41.6% |
| Shares Outstanding (Basic) | 592.90M598.10M | −0.9% |
| Shares Outstanding (Diluted) | 596.30M601.80M | −0.9% |
05—Questions
Frequently Asked Questions
What are the key strategic divestitures and acquisitions undertaken by Emerson during this period?
Emerson announced an agreement to sell a majority stake in its Climate Technologies business to Blackstone for $14.0 billion, expected to close in the first half of calendar 2023. They also completed the divestiture of their InSinkErator business to Whirlpool for $3.0 billion. Strategically, they combined their industrial software businesses with Aspen Technology, Inc., retaining a 55% ownership stake in the new entity.
How did the company's financial performance change in fiscal year 2022 compared to 2021?
Net sales increased by 8% to $19.6 billion, and net earnings grew significantly by 40% to $3.2 billion, with diluted EPS rising by 42% to $5.41. This growth was supported by strong operational results, though operating cash flow saw an 18% decrease due to increased working capital.
What is the company's outlook for fiscal year 2023?
Emerson projects consolidated net sales growth of 7% to 9% from continuing operations. Adjusted earnings per share from continuing operations are expected to be between $4.00 and $4.15. The company anticipates returning approximately $1.2 billion through dividends and $2 billion through share repurchases.
How is Emerson addressing supply chain challenges and raw material costs?
The company experienced higher freight costs and challenging electronic component availability in fiscal 2022. While raw materials have generally been available, Emerson is focused on having multiple sources of supply and navigating supply chain disruptions. This has contributed to an increase in inventory levels and working capital.
06—Continue