10-QPeriod: Q1 FY2019

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2018

Filed February 6, 2019For Securities:EMR

Summary

Emerson Electric Co. reported solid performance for the first quarter of fiscal year 2019, ending December 31, 2018. Net sales increased by 9% to $4.1 billion, with acquisitions contributing 6% and underlying sales growing 4.5%. This growth was driven by demand across industrial end markets, particularly in North America, and favorable trends in professional tools. Net earnings for common stockholders rose 19% to $465 million, leading to a diluted earnings per share of $0.74, a 21% increase from the prior year. The company saw strong performance in its Automation Solutions segment, with sales up 9% driven by both acquisitions and underlying demand. The Commercial & Residential Solutions segment also showed growth, up 7%, despite a slight decline in the Climate Technologies sub-segment due to softer demand in China. This segment's performance was bolstered by acquisitions, notably in the Tools & Home Products area. The company's outlook for fiscal year 2019 remains positive, with projected consolidated net sales growth of 7-10%.

Financial Highlights

52 data points
Beta

Revenue

$4.15B

42.5% Gross Margin

Net Income

$465.00M

11.2% Net Margin

EPS (Diluted)

$0.74

Total Assets

$20.43B

Cash & Equivalents

$1.25B

Free Cash Flow

$168.00M

Financial Statements
Beta
Revenue$4.15B
Cost of Revenue$2.39B
Gross Profit$1.76B
SG&A Expenses$1.08B
Net Income$465.00M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)623.90M
Shares Outstanding (Diluted)627.80M

Key Highlights

  • 1Net sales increased by 9% year-over-year to $4.1 billion, driven by a 4.5% increase in underlying sales and 6% from acquisitions.
  • 2Net earnings for common stockholders grew 19% to $465 million, resulting in a 21% increase in diluted EPS to $0.74.
  • 3The Automation Solutions segment reported a 9% sales increase, supported by broad-based global demand and acquisitions.
  • 4The Commercial & Residential Solutions segment's sales rose 7%, aided by acquisitions despite some weakness in Climate Technologies due to softer demand in China.
  • 5Operating cash flow decreased by $124 million to $323 million, impacting free cash flow, which fell to $168 million due to increased capital expenditures and lower operating cash flow.
  • 6The company repurchased a significant amount of its stock in December 2018, totaling 7.35 million shares for approximately $57.83 per share.
  • 7Emerson reaffirmed its fiscal year 2019 outlook, expecting consolidated net sales growth of 7-10% and diluted EPS between $3.60 and $3.75.

Frequently Asked Questions

Sales growth was driven by a combination of factors: a 4.5% increase in underlying sales reflecting broad-based global demand in energy-related and industrial markets and favorable trends for professional tools, and a 6% contribution from recent acquisitions. Acquisitions in the Automation Solutions and Tools & Home Products segments were particularly impactful.

Profitability improved significantly. Net earnings for common stockholders increased by 19% to $465 million, and diluted earnings per share saw a 21% rise to $0.74. This improvement was partly due to higher sales, gross margin expansion, and a notable decrease in incentive stock compensation expense.

Emerson provided a positive outlook for the full fiscal year 2019. Consolidated net sales are expected to grow between 7% and 10%, with underlying sales anticipated to increase by 4% to 7%. Reported earnings per share are projected to be in the range of $3.60 to $3.75. The company expects operating cash flow of approximately $3.2 billion and free cash flow of approximately $2.5 billion.

Recent acquisitions played a significant role in sales growth, contributing approximately 6% to the total sales increase. The acquisition of Aventics boosted the Automation Solutions segment, while the acquisition of Textron's tools and test equipment business strengthened the Tools & Home Products segment. While these acquisitions contributed to revenue, they also had a dilutive impact on segment margins in the short term.