10-QPeriod: Q1 FY2007

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2006

Filed February 7, 2007For Securities:EMR

Summary

Emerson Electric Co. reported a strong first quarter for fiscal year 2007, with net sales increasing 11% to $5.05 billion compared to the prior year period. This growth was driven by robust international demand, particularly in Asia and Europe, and contributions from recent acquisitions. Net earnings rose by 12% to $445 million, leading to a 15% increase in diluted earnings per share to $0.55, reflecting improved operational performance and strategic share repurchases. The company's financial position remains solid, with total assets of $19.1 billion and stockholders' equity of $8.2 billion. Emerson generated healthy operating cash flow of $327 million, although free cash flow saw a slight decrease due to increased capital expenditures. The company reaffirmed its positive outlook for fiscal year 2007, projecting underlying sales growth of 5-7% and earnings per share between $2.50 and $2.60, indicating continued confidence in its strategic initiatives and market positioning.

Key Highlights

  • 1Net sales increased by 11% to $5.05 billion in the first quarter of fiscal 2007, driven by strong international demand and acquisitions.
  • 2Net earnings grew 12% to $445 million, with diluted earnings per share increasing 15% to $0.55.
  • 3Four out of five business segments reported sales increases, with Process Management, Industrial Automation, and Network Power showing significant gains.
  • 4The company completed the acquisition of Damcos Holding AS for $214 million in January 2007, which will be integrated into the Process Management segment.
  • 5Emerson repurchased approximately 6.38 million shares of common stock during the quarter as part of its ongoing share repurchase program.
  • 6The company projects fiscal year 2007 earnings per share in the range of $2.50 to $2.60, representing 12-16% growth.
  • 7Consolidated gross profit margin improved to 35.5% from 35.0% in the prior year, attributed to higher sales prices and productivity gains, partially offset by raw material costs.

Frequently Asked Questions

Sales growth was primarily driven by strong international demand, particularly in Asia and Europe, as well as contributions from recent acquisitions. Underlying sales increased by 4%, with international sales up 11% and U.S. sales down 2%.

Profitability improved significantly. Net earnings increased by 12% to $445 million, and diluted earnings per share rose by 15% to $0.55. This was supported by an 11% increase in net sales and a slight improvement in gross profit margin to 35.5%.

Emerson maintains a positive outlook, expecting underlying sales growth between 5% and 7% for fiscal year 2007. The company forecasts earnings per share to be in the range of $2.50 to $2.60, indicating continued growth.

The company generated $327 million in operating cash flow and saw an increase in cash and equivalents by $280 million. However, free cash flow decreased by 6% due to higher capital expenditures ($121 million) and significant treasury stock purchases ($283 million).