10-QPeriod: Q1 FY2011

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2010

Filed February 2, 2011For Securities:EMR

Summary

Emerson Electric Co. reported strong performance for the first quarter of fiscal year 2011, ending December 31, 2010. Net sales increased by 15% year-over-year to $5.535 billion, driven by robust underlying sales growth and strategic acquisitions. Earnings from continuing operations also saw a significant increase of 24% to $713 million, translating to a 15% rise in diluted EPS from continuing operations to $0.63. The company's financial position remains strong, with improved liquidity and a conservative capital structure. Key segments like Process Management and Industrial Automation showed substantial growth, reflecting a recovery in industrial markets. While Network Power experienced a decline in earnings despite sales growth, this was attributed to acquisition-related amortization and costs, which are expected to normalize. The company provided a positive fiscal year 2011 outlook, forecasting sales between $24 billion and $24.5 billion and diluted EPS in the range of $3.15 to $3.30, signaling continued optimism about future performance.

Financial Highlights

53 data points
Beta

Revenue

$5.54B

39.1% Gross Margin

Net Income

$480.00M

8.7% Net Margin

EPS (Diluted)

$0.63

Total Assets

$22.70B

Cash & Equivalents

$1.49B

Free Cash Flow

$240.00M

Financial Statements
Beta
Revenue$5.54B
Cost of Revenue$3.37B
Gross Profit$2.16B
SG&A Expenses$1.31B
Operating Income$480.00M
Net Income$480.00M
EPS (Basic)$0.63
EPS (Diluted)$0.63
Shares Outstanding (Basic)752.20M
Shares Outstanding (Diluted)758.10M

Key Highlights

  • 1Net sales for the quarter increased 15% to $5.535 billion, driven by an 11% increase in underlying sales and a 5% contribution from acquisitions.
  • 2Earnings from continuing operations before income taxes grew 24% to $713 million, indicating strong operational leverage.
  • 3Diluted EPS from continuing operations rose 15% to $0.63, demonstrating improved profitability on a per-share basis.
  • 4Gross profit margin improved to 39.1% from 38.7% in the prior year, attributed to higher volume, acquisitions, and cost reduction efforts.
  • 5The Network Power segment saw a decline in earnings (-12%) despite a 21% sales increase, primarily due to increased amortization and costs from recent acquisitions (Avocent and Chloride).
  • 6The company ended the quarter with a strong balance sheet, characterized by a total debt-to-total capital ratio of 33.6% and an interest coverage ratio of 11.8x.
  • 7Emerson provided a positive fiscal year 2011 outlook, projecting sales between $24 billion and $24.5 billion and diluted EPS between $3.15 and $3.30.

Frequently Asked Questions

Sales growth was primarily driven by an 11% increase in underlying sales, reflecting higher volume across most segments and regions, as well as a 5% boost from strategic acquisitions. Geographically, international sales showed growth in all major regions, with notable increases in Canada, Latin America, and the Middle East/Africa.

Profitability significantly improved. Earnings from continuing operations before income taxes increased by 24% to $713 million, and net earnings common stockholders rose by 13% to $480 million. Diluted EPS from continuing operations increased by 15% to $0.63. This was supported by a higher gross profit margin and effective cost management, despite some increases in SG&A expenses related to acquisitions and compensation.

While most segments performed well, the Network Power segment experienced a decline in earnings despite strong sales growth. This was attributed to increased amortization from acquisitions (Avocent and Chloride) and associated integration costs. Management indicated these costs are expected to normalize in the latter half of fiscal 2011. Segments like Process Management and Industrial Automation showed particularly strong earnings growth, benefiting from market recovery and operational efficiencies.

Emerson Electric provided a positive outlook for fiscal year 2011, forecasting total sales in the range of $24 billion to $24.5 billion, representing a 14% to 17% increase over fiscal 2010. Underlying sales are expected to grow between 10% and 13%. The company also projects diluted earnings per share to be in the range of $3.15 to $3.30, and operating cash flow is targeted at approximately $3.3 billion to $3.5 billion.