10-QPeriod: Q1 FY2018

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2017

Filed February 7, 2018For Securities:EMR

Summary

Emerson Electric Co. (EMR) reported strong performance for the first quarter of fiscal year 2018, ending December 31, 2017. Net sales increased by a significant 19% year-over-year to $3.8 billion, driven by a combination of underlying sales growth of 7% and strategic acquisitions, partially offset by a divestiture. The Automation Solutions segment was a key growth driver, with sales up 31% largely due to the acquisition of valves & controls and positive trends in energy and industrial markets. Net earnings attributable to common stockholders surged by 27% to $392 million, resulting in diluted earnings per share of $0.61, a 27% increase. This performance reflects not only operational improvements but also the positive impact of the recent U.S. tax reform, which provided a net tax benefit. The company also provided an optimistic outlook for the full fiscal year 2018, projecting consolidated net sales growth of 11-13% and earnings per share between $3.05 and $3.15.

Financial Highlights

52 data points
Beta

Revenue

$3.82B

42.3% Gross Margin

Net Income

$392.00M

10.3% Net Margin

EPS (Diluted)

$0.61

Total Assets

$19.86B

Cash & Equivalents

$3.10B

Free Cash Flow

$351.00M

Financial Statements
Beta
Revenue$3.82B
Cost of Revenue$2.20B
Gross Profit$1.61B
SG&A Expenses$995.00M
Operating Income$392.00M
Net Income$392.00M
EPS (Basic)$0.61
EPS (Diluted)$0.61
Shares Outstanding (Basic)638.20M
Shares Outstanding (Diluted)640.50M

Key Highlights

  • 1Net sales increased 19% to $3.8 billion, driven by 7% underlying sales growth and acquisitions, partly offset by divestitures.
  • 2Automation Solutions segment showed robust growth with sales up 31%, significantly boosted by the acquisition of valves & controls business.
  • 3Net earnings attributable to common stockholders rose 27% to $392 million, with diluted EPS up 27% to $0.61.
  • 4The company recognized a net tax benefit of $43 million ($0.07 per share) due to the Tax Cuts and Jobs Act of 2017.
  • 5Operating cash flow from continuing operations increased by $37 million to $447 million.
  • 6Free cash flow from continuing operations improved by $41 million to $351 million.
  • 7Full-year fiscal 2018 outlook projects consolidated net sales growth of 11-13% and EPS of $3.05-$3.15.

Frequently Asked Questions

The 19% increase in net sales to $3.8 billion was primarily driven by a 7% increase in underlying sales due to improving trends in energy-related and general industrial markets, along with contributions from strategic acquisitions, most notably the valves & controls business. The divestiture of the residential storage business had a negative impact, but the net effect of acquisitions and underlying growth was strongly positive.

The Tax Cuts and Jobs Act enacted in December 2017 provided a net tax benefit of $43 million, or $0.07 per share, in the first quarter. This benefit arose from the revaluation of net deferred income tax liabilities due to the lower corporate tax rate, partially offset by the tax on deemed repatriation of accumulated foreign earnings.

Emerson Electric Co. provided an optimistic outlook for fiscal year 2018, expecting consolidated net sales to grow by 11% to 13%, with underlying sales expected to increase by 5% to 7%. Diluted earnings per share are projected to be in the range of $3.05 to $3.15, which includes benefits from U.S. tax reform and acquisition accounting.

Operating cash flow from continuing operations increased by $37 million to $447 million, driven by higher earnings. Free cash flow from continuing operations also saw a notable increase of $41 million to $351 million, indicating strong cash generation capabilities. This cash flow was used to fund dividends, capital expenditures, acquisitions, and common stock purchases.