10-QPeriod: Q2 FY2022

EMERSON ELECTRIC CO Quarterly Report for Q2 Ended Mar 31, 2022

Filed May 4, 2022For Securities:EMR

Summary

Emerson Electric Co. reported a strong third quarter for fiscal year 2022, with net sales increasing by 8% to $4.8 billion, driven by robust performance across both its Automation Solutions and Commercial & Residential Solutions platforms. Underlying sales, which exclude currency fluctuations, acquisitions, and divestitures, saw an even more impressive 10% rise, indicating healthy organic growth. Net earnings available to common stockholders grew by 20% to $674 million, translating to a 22% increase in diluted earnings per share (EPS) to $1.13. The company's financial health remains solid, with an increased cash position and a healthy interest coverage ratio. A significant event during the quarter was the company's announcement of its intention to exit business operations in Russia, a move that represents approximately 1.5% of consolidated annual sales. Furthermore, Emerson continues to advance its strategic acquisition of Aspen Technology, Inc., having issued substantial debt to fund its contribution to the transaction.

Financial Highlights

53 data points
Beta

Revenue

$3.29B

44.8% Gross Margin

Net Income

$674.00M

20.5% Net Margin

EPS (Diluted)

$1.13

Total Assets

$29.50B

Cash & Equivalents

$6.93B

Free Cash Flow

$375.00M

Financial Statements
Beta
Revenue$3.29B
Cost of Revenue$1.81B
Gross Profit$1.48B
SG&A Expenses$888.00M
Operating Income$428.00M
Net Income$674.00M
EPS (Basic)$1.13
EPS (Diluted)$1.13
Shares Outstanding (Basic)593.30M
Shares Outstanding (Diluted)596.50M

Key Highlights

  • 1Net sales increased by 8% year-over-year to $4.8 billion, with underlying sales up 10%, demonstrating broad-based demand.
  • 2Diluted earnings per share (EPS) rose 22% to $1.13, while adjusted diluted EPS increased to $1.29 from $1.07, reflecting strong operational performance.
  • 3Automation Solutions segment sales grew 5% (7% underlying), driven by Measurement & Analytical Instrumentation and Industrial Solutions, with strong performance in North America and China.
  • 4Commercial & Residential Solutions segment sales increased 13% (14% underlying), with notable growth in Climate Technologies, fueled by strong global demand.
  • 5The company announced its intention to exit business operations in Russia, a market representing approximately 1.5% of consolidated annual sales.
  • 6Cash and equivalents significantly increased to $6.9 billion from $2.4 billion at the start of the fiscal year, bolstered by debt issuances for the AspenTech transaction and cash received from the Vertiv subordinated interest.
  • 7The company provided an optimistic full-year outlook, expecting consolidated net sales to grow 8-10% and EPS to range between $4.77-$4.92.

Frequently Asked Questions

Sales growth was driven by strong performance across both the Automation Solutions and Commercial & Residential Solutions segments. Underlying sales, which exclude currency impacts, showed a robust 10% increase, indicating healthy organic demand in key product offerings and geographies, particularly in North America and China.

Emerson announced its intention to exit business operations in Russia, which historically accounts for approximately 1.5% of consolidated annual sales. As of March 31, 2022, Russian operations had net assets of approximately $50 million and accumulated foreign currency translation losses of about $145 million, which will be recognized as a non-cash charge upon exit. The company is still assessing the full financial consequences.

Emerson is actively working towards the AspenTech transaction, which is expected to create a diversified, high-performance industrial software leader. The company has issued $3 billion in debt to fund its contribution to the transaction. The guidance for fiscal year 2022 includes estimated transaction fees and interest expense related to this debt, though it excludes the operational impact of the acquired business until closing, expected in the second calendar quarter of 2022.

Emerson anticipates continued strong performance, projecting consolidated net sales growth of 8% to 10% for the full year, with underlying sales up 9% to 11%. Diluted EPS is expected to be between $4.77 and $4.92, and adjusted diluted EPS between $4.95 and $5.10. The company also expects robust operating cash flow of approximately $3.6 billion and free cash flow of about $3.0 billion.