10-QPeriod: Q1 FY2021

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2020

Filed February 3, 2021For Securities:EMR

Summary

Emerson Electric Co. (EMR) reported solid financial results for the quarter ended December 31, 2020, demonstrating resilience amidst ongoing economic uncertainties. Net sales remained flat year-over-year at $4.2 billion, bolstered by a 1% contribution from foreign currency translation and the recent acquisition of Open Systems International, Inc. (OSI). While underlying sales saw a 2% decrease, this was primarily driven by challenges in Automation Solutions, particularly in North America, which were partially offset by robust growth in Commercial & Residential Solutions. Net earnings attributable to common stockholders saw a significant increase of 36% to $445 million, translating to a 40% rise in diluted earnings per share to $0.74. This performance was driven by effective cost management, including significant savings from restructuring initiatives that more than offset deleverage from lower Automation Solutions volumes. The company also benefited from lower restructuring and advisory fees, an investment gain, a lower tax rate, and share repurchases. Emerson's financial condition remains strong, with a solid balance sheet and robust operating cash flow, positioning the company for continued strategic investments and growth.

Financial Highlights

52 data points
Beta

Revenue

$4.16B

41.4% Gross Margin

Net Income

$445.00M

10.7% Net Margin

EPS (Diluted)

$0.74

Total Assets

$23.68B

Cash & Equivalents

$2.20B

Free Cash Flow

$686.00M

Financial Statements
Beta
Revenue$4.16B
Cost of Revenue$2.44B
Gross Profit$1.72B
SG&A Expenses$998.00M
Net Income$445.00M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)598.50M
Shares Outstanding (Diluted)601.90M

Key Highlights

  • 1Net sales for the quarter were flat at $4.2 billion, with underlying sales down 2% year-over-year.
  • 2Net earnings attributable to common stockholders increased significantly by 36% to $445 million.
  • 3Diluted earnings per share rose 40% to $0.74, compared to $0.53 in the prior year.
  • 4The acquisition of Open Systems International, Inc. (OSI) contributed 1% to net sales.
  • 5Commercial & Residential Solutions segment saw robust sales growth of 13%, driven by strong demand in residential and cold chain markets.
  • 6Automation Solutions segment sales decreased by 6%, impacted by demand challenges in North American automation markets.
  • 7Operating cash flow increased by $384 million to $808 million, reflecting favorable operating working capital and higher earnings.

Frequently Asked Questions

The increase in net earnings was primarily driven by significant savings from the company's restructuring and cost reset actions, which more than offset deleverage on lower sales volume in the Automation Solutions segment. Additionally, lower restructuring and advisory fees, an investment gain, a lower effective tax rate, and share repurchases contributed positively to the earnings.

The acquisition of OSI, completed on October 1, 2020, contributed 1% to net sales in the quarter. While it boosted sales in the Automation Solutions segment, the company also recognized first-year acquisition accounting charges and fees related to OSI totaling $0.03 per share, which offset some of the benefits.

Emerson expects consolidated net sales to be up 4-8% for the full year, with underlying sales flat to up 4%. The company anticipates earnings per share to be in the range of $3.29 to $3.49. Operating cash flow is projected to be approximately $3.15 billion, and free cash flow is expected to be around $2.55 billion. The company also plans for share repurchases and acquisition activity totaling $500 million to $1 billion.

The Commercial & Residential Solutions segment showed strong performance with sales up 13%, driven by robust demand for residential-oriented products and solutions. The Automation Solutions segment experienced a 6% sales decrease, primarily due to ongoing demand challenges in North American automation markets, although certain product lines and international regions showed improvement.