10-QPeriod: Q1 FY2023

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2022

Filed February 8, 2023For Securities:EMR

Summary

Emerson Electric Co. reported strong performance in the quarter ending December 31, 2022, driven by significant gains from discontinued operations, primarily the divestiture of the InSinkErator business, which resulted in a substantial increase in net earnings. While net sales from continuing operations saw a modest increase, driven by growth in Intelligent Devices and Software & Control segments, earnings from continuing operations declined year-over-year. This decline was largely attributed to the absence of a significant gain from a subordinated interest in Vertiv realized in the prior year and increased expenses, including higher stock compensation and amortization costs related to the AspenTech acquisition. The company continues to actively manage its portfolio, with the pending sale of a majority stake in its Climate Technologies business expected to further reshape its operational footprint. Emerson is focusing on strategic deployment of capital, including significant share repurchases, while managing ongoing economic uncertainties.

Financial Highlights

55 data points
Beta

Revenue

$3.37B

48.0% Gross Margin

Net Income

$2.33B

69.1% Net Margin

EPS (Diluted)

$3.97

Total Assets

$36.24B

Cash & Equivalents

$2.27B

Free Cash Flow

$359.00M

Financial Statements
Beta
Revenue$3.37B
Cost of Revenue$1.75B
Gross Profit$1.62B
SG&A Expenses$1.03B
Operating Income$329.00M
Net Income$2.33B
EPS (Basic)$3.99
EPS (Diluted)$3.97
Shares Outstanding (Basic)583.60M
Shares Outstanding (Diluted)586.70M

Key Highlights

  • 1Net earnings common stockholders increased significantly to $2,331 million from $896 million in the prior year, primarily due to a $2.1 billion after-tax gain from the InSinkErator divestiture.
  • 2Net sales from continuing operations grew 7% to $3.4 billion, with underlying sales up 6%, driven by pricing and volume, though foreign currency translation had a negative impact.
  • 3Earnings from continuing operations attributable to common stockholders decreased by 56% to $329 million, and diluted EPS from continuing operations fell to $0.56 from $1.25, impacted by the absence of a prior year gain from Vertiv and increased expenses.
  • 4The Software and Control segment experienced significant sales growth of 30% due to the AspenTech acquisition, while the Intelligent Devices segment saw a 1% increase in sales.
  • 5The company repurchased $2.0 billion of its common stock during the quarter, a significant deployment of capital.
  • 6Emerson anticipates closing the sale of a majority stake in its Climate Technologies business in the first half of calendar year 2023, which will result in substantial cash proceeds and a retained non-controlling interest.

Frequently Asked Questions

The substantial increase in net earnings to $2,331 million was primarily driven by the gain recognized from the divestiture of the InSinkErator business, which yielded an after-tax gain of approximately $2.1 billion. This gain significantly boosted the reported net earnings for the period.

Earnings from continuing operations decreased by 56% year-over-year to $329 million, and diluted EPS from continuing operations fell to $0.56. This decline was influenced by the absence of a significant gain from a subordinated interest in Vertiv that was recognized in the prior year's quarter. Additionally, higher expenses, including increased stock compensation costs related to the rising stock price and amortization expenses from the AspenTech acquisition, also contributed to the decrease.

Emerson has agreed to sell a majority stake in its Climate Technologies business for $14.0 billion, a transaction expected to close in the first half of calendar year 2023. The company will receive approximately $9.5 billion in upfront cash and a $2.25 billion note, while retaining a 45% non-controlling interest in the new joint venture. This divestiture will reshape Emerson's portfolio and is expected to provide significant financial proceeds.

Emerson deployed $2.0 billion in share repurchases during the quarter and expects to return approximately $1.2 billion in dividends to shareholders throughout fiscal year 2023. The company's fiscal 2023 outlook includes significant earnings from discontinued operations, largely due to expected net gains from divestitures. The company maintains a strong financial position to support strategic initiatives and shareholder returns.