10-QPeriod: Q1 FY2014

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2013

Filed February 5, 2014For Securities:EMR

Summary

Emerson Electric Co. reported a modest increase in net sales to $5.606 billion for the first quarter of fiscal 2014, a 1% rise compared to the prior year. This growth was primarily driven by underlying sales increases, slightly offset by the divestiture of a controlling interest in its embedded computing and power business. Net earnings attributable to common stockholders also saw a slight increase of 2% to $462 million, leading to a 5% rise in diluted earnings per share to $0.65. The company experienced improved performance in its Process Management segment, which was boosted by acquisitions and strong demand in key end markets. However, the Network Power segment saw a significant sales decrease, largely due to the aforementioned divestiture. Financially, Emerson demonstrated strong operating cash flow generation of $691 million, which was utilized to fund capital expenditures, dividends, and significant share repurchases. The company also made strategic acquisitions, notably in the Process Management segment, to bolster its portfolio. Despite a slight increase in total debt and a decrease in the interest coverage ratio, Emerson maintains a conservative financial structure and sufficient liquidity to meet its obligations and pursue strategic growth initiatives.

Financial Highlights

51 data points
Beta

Revenue

$5.61B

39.9% Gross Margin

Net Income

$462.00M

8.2% Net Margin

EPS (Diluted)

$0.65

Total Assets

$24.12B

Cash & Equivalents

$2.74B

Free Cash Flow

$455.00M

Financial Statements
Beta
Revenue$5.61B
Cost of Revenue$3.37B
Gross Profit$2.24B
SG&A Expenses$1.44B
Net Income$462.00M
EPS (Basic)$0.65
EPS (Diluted)$0.65
Shares Outstanding (Basic)703.50M
Shares Outstanding (Diluted)708.10M

Key Highlights

  • 1Net sales increased by 1% to $5.606 billion, with underlying sales growing by over 3%.
  • 2Net earnings attributable to common stockholders rose by 2% to $462 million.
  • 3Diluted earnings per share (EPS) increased by 5% to $0.65.
  • 4The Process Management segment showed strong growth with an 8% increase in sales, aided by acquisitions and robust demand in oil and gas/chemical markets.
  • 5The Network Power segment experienced an 11% decrease in sales, primarily due to the divestiture of the embedded computing and power business.
  • 6Operating cash flow improved by 8% to $691 million.
  • 7The company completed significant acquisitions in the Process Management segment (Virgo and Enardo) and acquired the remaining interest in EGS Electrical Group LLC.
  • 8Share repurchases increased substantially to $390 million, supported by proceeds from a divestiture.

Frequently Asked Questions

The revenue increase was primarily driven by underlying sales growth of over 3%, particularly strong in the Process Management segment. Acquisitions also contributed positively to the top line, though these were partially offset by the divestiture of the embedded computing and power business, which negatively impacted the overall reported sales comparison.

Net earnings attributable to common stockholders increased by 2%, and diluted EPS grew by 5%. The profitability was positively influenced by strong performance in the Process Management segment, materials cost containment, and lower pension expense. However, higher selling, general, and administrative (SG&A) expenses and unfavorable mix in some segments partially offset these gains.

Emerson completed the divestiture of a 51% controlling interest in its embedded computing and power business. Concurrently, the company made strategic acquisitions in the Process Management segment, including Virgo Valves and Controls and Enardo LLC, and later acquired the remaining noncontrolling interest in EGS Electrical Group LLC (now Appleton Group).

Operating cash flow increased by 8% to $691 million, demonstrating strong cash generation. This cash flow supported capital expenditures, dividends, and significant share repurchases. While total debt increased and the interest coverage ratio slightly decreased, the company maintained a conservative financial structure and adequate liquidity.