10-QPeriod: Q2 FY2021

EMERSON ELECTRIC CO Quarterly Report for Q2 Ended Mar 31, 2021

Filed May 5, 2021For Securities:EMR

Summary

Emerson Electric Co. reported solid financial results for the second quarter and the first half of fiscal year 2021, demonstrating resilience and strategic growth. Net sales increased by 6% in the second quarter and 3% for the first half, driven by a notable rebound in Commercial & Residential Solutions and a modest recovery in Automation Solutions. The acquisition of Open Systems International (OSI) contributed to growth, particularly within the Automation Solutions segment. Profitability showed strong improvement, with net earnings attributable to common stockholders rising 9% for the quarter and 19% for the first half. This was supported by effective cost management, including significant savings from restructuring initiatives, and favorable pricing, which helped offset increased stock compensation expenses and acquisition-related charges. The company also benefited from a lower effective tax rate and strategic equity investment gains during the period. Emerson reaffirmed its positive fiscal year 2021 outlook, anticipating continued demand improvement and solid earnings growth.

Financial Highlights

52 data points
Beta

Revenue

$4.43B

42.0% Gross Margin

Net Income

$561.00M

12.7% Net Margin

EPS (Diluted)

$0.93

Total Assets

$23.80B

Cash & Equivalents

$2.34B

Free Cash Flow

$707.00M

Financial Statements
Beta
Revenue$4.43B
Cost of Revenue$2.57B
Gross Profit$1.86B
SG&A Expenses$1.05B
Net Income$561.00M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)599.40M
Shares Outstanding (Diluted)602.80M

Key Highlights

  • 1Net sales increased 6% year-over-year to $4.4 billion for the second quarter, with underlying sales up 2%.
  • 2Net earnings attributable to common stockholders increased 9% to $561 million, resulting in diluted EPS of $0.93, up 11%.
  • 3The Commercial & Residential Solutions segment showed robust growth, with sales up 13% in Q2, driven by strong demand across all geographies and product lines.
  • 4Automation Solutions experienced a 3% sales increase in Q2, with underlying sales down slightly but showing sequential improvement, boosted by the OSI acquisition and recovery in certain markets.
  • 5The company generated strong operating cash flow of $1.6 billion for the first six months of the fiscal year, a significant increase from the prior year, leading to robust free cash flow.
  • 6Emerson reaffirmed its full-year 2021 guidance, projecting consolidated net sales growth of 6-9% and EPS between $3.55 and $3.65.
  • 7Significant cost savings from restructuring and cost reset actions continue to positively impact operating margins.

Frequently Asked Questions

The acquisition of Open Systems International (OSI) contributed to sales growth, particularly within the Automation Solutions segment, adding 1% to net sales in the second quarter and 1% for the first half of the fiscal year. However, it also resulted in acquisition accounting charges and fees, which had a dilutive effect on earnings per share during the initial integration period.

The Commercial & Residential Solutions segment experienced strong growth driven by robust demand for residential-oriented products and solutions, particularly in North America, as well as favorable global market conditions for cold chain solutions. Growth was observed across all businesses and geographies within this segment.

Profitability is being enhanced by significant savings from restructuring and cost reset actions, along with favorable pricing. These benefits are helping to offset increased stock compensation expenses (due to a higher stock price compared to the prior year) and acquisition-related charges. Additionally, a lower effective tax rate and gains from the sale of an equity investment contributed positively to earnings per share.

Emerson maintains a conservative financial structure, with total debt-to-total capital at 44.4% as of March 31, 2021. The company generated strong operating cash flow of $1.6 billion in the first six months, leading to robust free cash flow of $1.4 billion. Emerson plans to deploy $500 million to $1 billion in share repurchases and acquisitions (excluding OSI) in fiscal 2021, indicating a strategic approach to capital allocation.