10-QPeriod: Q1 FY2013

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2012

Filed February 6, 2013For Securities:EMR

Summary

Emerson Electric Co. reported a strong first quarter for fiscal year 2013, with net sales increasing by 5% to $5.6 billion and net earnings attributable to common stockholders rising by 22% to $454 million compared to the prior year period. This growth was driven by robust performance in the Process Management segment, benefiting from strong demand in global oil and gas, chemicals, and power markets, as well as favorable year-over-year comparisons due to the previous year's supply chain disruptions. The company also saw positive sales contributions from its Climate Technologies segment and solid demand in U.S. residential end markets. Despite some softness in Industrial Automation and Network Power segments, the overall results demonstrate a positive trajectory for Emerson. Financially, the company maintained a solid balance sheet with key leverage ratios remaining stable. Operating cash flow saw a significant increase of 66% to $554 million, leading to a substantial improvement in free cash flow. Emerson reiterated its positive fiscal year 2013 outlook, anticipating continued sales growth and an improvement in earnings per share, driven by its strategic investments and operational efficiencies.

Financial Highlights

52 data points
Beta

Revenue

$5.55B

39.7% Gross Margin

Net Income

$454.00M

8.2% Net Margin

EPS (Diluted)

$0.62

Total Assets

$23.77B

Cash & Equivalents

$2.53B

Free Cash Flow

$439.00M

Financial Statements
Beta
Revenue$5.55B
Cost of Revenue$3.35B
Gross Profit$2.21B
SG&A Expenses$1.39B
Operating Income$454.00M
Net Income$454.00M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)722.30M
Shares Outstanding (Diluted)726.90M

Key Highlights

  • 1Net sales increased 5% to $5.6 billion for the quarter ended December 31, 2012, compared to $5.3 billion in the prior year period.
  • 2Net earnings attributable to common stockholders rose significantly by 22% to $454 million, with diluted EPS increasing to $0.62 from $0.50.
  • 3The Process Management segment was a key driver of growth, with sales up 24% and earnings up 75% due to strong demand in energy and chemical sectors.
  • 4Operating cash flow showed substantial improvement, increasing 66% to $554 million, contributing to a strong free cash flow of $439 million.
  • 5The company provided a positive fiscal 2013 outlook, projecting sales growth of 2-5% and EPS between $3.53 and $3.63.
  • 6Despite overall growth, Industrial Automation and Network Power segments experienced sales declines due to weakness in their respective end markets.

Frequently Asked Questions

The primary driver of sales growth was the Process Management segment, which saw a 24% increase driven by robust demand in global oil and gas, chemicals, and power end markets. Favorable year-over-year comparisons, due to prior year supply chain disruptions, also contributed. Additionally, Climate Technologies experienced growth, and Commercial & Residential Solutions showed solid underlying sales growth.

Profitability improved significantly. Net earnings attributable to common stockholders increased by 22% to $454 million, and diluted earnings per share grew by 24% to $0.62. This was largely due to higher sales volumes, improved gross margins driven by operational leverage and cost reduction actions, and strong performance in the Process Management segment.

Emerson expects continued growth for fiscal year 2013, projecting reported and underlying sales to grow between 2% and 5%. The company anticipates an improvement in EBIT margin and reported pretax earnings margin. Earnings per share are forecasted to be in the range of $3.53 to $3.63. A significant portion of this improvement is expected in the first half of the year, partly due to the favorable comparison against the prior year's supply chain disruption.

Cash flow generation was strong. Cash provided by operating activities increased by 66% to $554 million, driven by higher earnings and better working capital management. Free cash flow was also robust, reaching $439 million, an increase of $235 million from the prior year's quarter. This strong cash flow allows Emerson to fund capital expenditures, pay dividends, and repurchase shares.