10-QPeriod: Q3 FY2022

EMERSON ELECTRIC CO Quarterly Report for Q3 Ended Jun 30, 2022

Filed August 9, 2022For Securities:EMR

Summary

Emerson Electric Co. (EMR) reported a strong third quarter for fiscal year 2022, with net sales increasing by 7% year-over-year to $5.0 billion. This growth was driven by solid performance across its segments, particularly Commercial & Residential Solutions, and the significant contribution from the recent acquisition of AspenTech. Net earnings attributable to common stockholders rose by a substantial 47% to $921 million, translating to a 48% increase in diluted earnings per share to $1.54. The company demonstrated effective cost management, with Selling, General, and Administrative (SG&A) expenses decreasing as a percentage of sales, despite inflationary pressures. Significant strategic initiatives, including the AspenTech acquisition and the planned divestiture of the InSinkErator business, are reshaping Emerson's portfolio. While facing some macroeconomic headwinds, such as supply chain constraints and unfavorable foreign currency translation, Emerson's underlying sales growth and robust earnings performance indicate operational resilience and strategic progress.

Financial Highlights

54 data points
Beta

Revenue

$3.46B

45.8% Gross Margin

Net Income

$921.00M

26.6% Net Margin

EPS (Diluted)

$1.54

Total Assets

$37.04B

Cash & Equivalents

$2.53B

Free Cash Flow

$681.00M

Financial Statements
Beta
Revenue$3.46B
Cost of Revenue$1.88B
Gross Profit$1.59B
SG&A Expenses$894.00M
Operating Income$226.00M
Net Income$921.00M
EPS (Basic)$1.55
EPS (Diluted)$1.54
Shares Outstanding (Basic)592.80M
Shares Outstanding (Diluted)596.20M

Key Highlights

  • 1Net sales increased 7% to $5.0 billion for the third quarter, driven by strong underlying sales growth and the AspenTech acquisition.
  • 2Net earnings attributable to common stockholders surged 47% to $921 million, with diluted EPS growing 48% to $1.54.
  • 3The acquisition of AspenTech significantly contributed to sales growth and created a new, impactful software segment.
  • 4Commercial & Residential Solutions saw robust sales growth of 8%, driven by strong performance in both Climate Technologies and Tools & Home Products.
  • 5The company successfully managed SG&A expenses, which decreased as a percentage of sales due to operational leverage and lower stock compensation.
  • 6Emerson announced the agreement to sell its InSinkErator business for $3.0 billion, signaling ongoing portfolio optimization.
  • 7The company provided a positive full-year outlook, expecting consolidated net sales to increase 7-8% and adjusted EPS to be between $5.05 and $5.15.

Frequently Asked Questions

The acquisition of AspenTech, completed in May 2022, significantly boosted Emerson's net sales, contributing 4% to the overall growth in the third quarter. It also created a new 'AspenTech' business segment, enhancing the company's industrial software capabilities. The acquisition is expected to drive future growth and profitability for the company.

Net sales growth was primarily driven by strong underlying sales across most segments, particularly Commercial & Residential Solutions, combined with the revenue contribution from the AspenTech acquisition. The substantial increase in net earnings was due to higher sales volume, effective price realization, favorable mix, cost efficiencies in SG&A, and the positive impact of the AspenTech acquisition, partially offset by inflationary pressures and unfavorable foreign currency translation.

The announced agreement to sell the InSinkErator business for $3.0 billion is a key strategic move aimed at further optimizing Emerson's portfolio. This divestiture aligns with the company's strategy to focus on its core automation and sustainable technology solutions, potentially unlocking value and allowing for reinvestment in higher-growth areas.

Emerson is managing inflationary pressures through a combination of price increases and cost-saving initiatives. While these pressures, along with supply chain and logistics constraints (including the impact of lockdowns in China), affected gross margins, the company's pricing actions and operational efficiencies helped mitigate some of the impact. The company continues to work on securing materials and managing its supply chain effectively.