10-QPeriod: Q2 FY2018

EMERSON ELECTRIC CO Quarterly Report for Q2 Ended Mar 31, 2018

Filed May 2, 2018For Securities:EMR

Summary

Emerson Electric Co. (EMR) reported strong financial results for the period ending March 31, 2018, showcasing robust growth driven by strategic acquisitions and favorable market conditions. Net sales increased significantly year-over-year, boosted by the Automation Solutions segment, which saw substantial growth from the acquisition of the valves & controls business. The Commercial & Residential Solutions segment also performed well, with growth in Climate Technologies partially offset by the divestiture of the residential storage business. Profitability improved considerably, with net earnings and earnings per share showing substantial increases, aided by higher sales, operational efficiencies, and the positive impact of U.S. tax reform. The company's financial condition remains strong, with ample liquidity and a clear strategy for deploying capital. Emerson also provided a positive outlook for the full fiscal year 2018, anticipating continued sales growth and earnings per share within a projected range, underscoring management's confidence in the company's strategic direction and market position.

Financial Highlights

53 data points
Beta

Revenue

$4.25B

42.8% Gross Margin

Net Income

$482.00M

11.3% Net Margin

EPS (Diluted)

$0.76

Total Assets

$19.79B

Cash & Equivalents

$2.44B

Free Cash Flow

$399.00M

Financial Statements
Beta
Revenue$4.25B
Cost of Revenue$2.43B
Gross Profit$1.82B
SG&A Expenses$1.03B
Operating Income$482.00M
Net Income$482.00M
EPS (Basic)$0.76
EPS (Diluted)$0.76
Shares Outstanding (Basic)632.60M
Shares Outstanding (Diluted)636.00M

Key Highlights

  • 1Net sales for the six months ended March 31, 2018, increased by 19% to $8.1 billion, driven by acquisitions and underlying sales growth.
  • 2Automation Solutions segment sales grew 31% for the six months, largely due to the significant acquisition of the valves & controls business, alongside strong underlying demand.
  • 3Net earnings attributable to common stockholders for the six months increased by 46% to $874 million, compared to $601 million in the prior year.
  • 4Diluted earnings per share from continuing operations rose 20% to $1.37 for the six months, reflecting improved profitability and operational performance.
  • 5The company completed several acquisitions during the period, including Paradigm and Cooper-Atkins, to strengthen its product portfolio and market reach.
  • 6The effective tax rate decreased due to the U.S. Tax Cuts and Jobs Act of 2017, which lowered the corporate income tax rate.
  • 7Emerson provided a positive full-year 2018 outlook, projecting consolidated net sales to increase by approximately 13% and earnings per share between $3.10 and $3.20.

Frequently Asked Questions

The substantial increase in net sales was driven by a combination of factors. Acquisitions, notably the valves & controls business, contributed significantly to top-line growth. Additionally, underlying sales increased due to higher volume and favorable global demand across key end markets like energy-related and general industrial sectors.

Acquisitions played a crucial role in boosting both sales and earnings. The acquisition of the valves & controls business, in particular, significantly enhanced the Automation Solutions segment's revenue. While these acquisitions also introduced some dilution and integration costs, their overall contribution to sales growth and market expansion was positive.

Emerson Electric provided a positive outlook for the full fiscal year 2018. The company expects consolidated net sales to increase by approximately 13%, with underlying sales up around 7%. Earnings per share are projected to be between $3.10 and $3.20, indicating continued growth and profitability for the year.

The Tax Cuts and Jobs Act resulted in a lower U.S. corporate income tax rate, which favorably impacted Emerson's effective tax rate. In the first quarter of fiscal year 2018, the company recognized a net tax benefit of $43 million due to the revaluation of deferred tax liabilities to the lower rate, partially offset by taxes on deemed repatriation of foreign earnings.