01—Abstract
Summary
Summary of the 10-Q filed February 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Emerson Electric Co. (EMR) reported its fiscal second quarter results for the period ending December 31, 2023.
The company experienced a significant increase in net sales, driven largely by the acquisition of National Instruments (NI) and underlying organic growth. However, reported net earnings saw a substantial decrease compared to the prior year, primarily due to the absence of a large gain from the divestiture of InSinkErator in the prior year's quarter and the inclusion of acquisition-related costs and amortization from NI. Despite the decline in reported net earnings, adjusted diluted earnings per share from continuing operations showed strong growth, indicating improved operational performance excluding one-time items.
The company's strategic acquisitions and focus on core business segments position it for future growth, though investors should monitor the integration of NI and its impact on profitability and cash flow. The outlook for fiscal year 2024 remains positive, with expectations for continued sales growth and solid adjusted earnings per share.
02—Key points
Key Highlights
- Net sales increased by 22% year-over-year to $4.1 billion, driven by a 10% underlying sales growth and a 12% contribution from the National Instruments (NI) acquisition.
- Reported diluted earnings per share from continuing operations decreased to $0.25 from $0.56 in the prior year, impacted by the absence of discontinued operations gains and increased acquisition-related expenses.
- Adjusted diluted earnings per share from continuing operations showed significant growth, increasing by 56% to $1.22 from $0.78 in the prior year, reflecting improved operational performance.
- Gross margin declined by 1.5 percentage points to 46.5%, primarily due to acquisition-related inventory step-up amortization of $231 million.
- Other deductions, net, significantly increased to $487 million from $120 million, largely due to intangibles amortization related to the NI acquisition, restructuring costs, and acquisition/divestiture fees.
- The company repurchased 1.869 million shares for approximately $175 million during the quarter.
- Emerson provided a positive fiscal year 2024 outlook, expecting consolidated net sales from continuing operations to increase by 14.5% to 17% and adjusted diluted earnings per share from continuing operations to be in the range of $5.30 to $5.45.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Emerson Electric Co kept $0.03.
- Revenue$4.12B100.0%
- Cost of revenue−$2.20B53.5%
- Gross profit$1.92B46.5%
- Operating costs−$1.75B42.4%
- Operating income$169.0M4.1%
- Interest, other & tax−$27.0M0.7%
- Net income$142.0M3.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 7, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $4.12B$3.37B | +22.1% |
| Cost of Revenue | $2.20B$1.75B | +25.6% |
| Gross Profit | $1.92B$1.62B | +18.3% |
| SG&A Expenses | $1.28B$1.03B | +24.0% |
| Operating Income | $169.00M$329.00M | −48.6% |
| Net Income | $142.00M$2.33B | −93.9% |
| EPS (Basic) | $0.25$3.99 | −93.7% |
| EPS (Diluted) | $0.25$3.97 | −93.7% |
| Shares Outstanding (Basic) | 570.80M583.60M | −2.2% |
| Shares Outstanding (Diluted) | 573.30M586.70M | −2.3% |
05—Questions
Frequently Asked Questions
Why did reported net earnings decrease significantly year-over-year?
The significant decrease in reported net earnings is primarily due to the absence of a large gain from the divestiture of the InSinkErator business in the prior year's comparable quarter. The current quarter's earnings were impacted by acquisition-related costs and amortization, particularly from the National Instruments (NI) acquisition, which outweighed the underlying operational improvements.
What is the impact of the National Instruments (NI) acquisition on the company's results?
The acquisition of National Instruments (NI) contributed positively to net sales, adding 12% to the year-over-year growth. However, it also led to increased expenses, including amortization of intangibles, acquisition-related inventory step-up amortization, and restructuring costs, which negatively impacted reported earnings and gross margin in the current quarter.
What does 'Adjusted diluted earnings per share from continuing operations' represent, and why is it important?
Adjusted diluted earnings per share from continuing operations is a non-GAAP measure that excludes certain items such as amortization of intangibles, restructuring expenses, and acquisition-related costs. It is important because it provides a clearer view of the company's ongoing operational performance by removing the impact of one-time or non-recurring events, demonstrating strong underlying business growth and profitability in this quarter.
What is the company's outlook for the full fiscal year 2024?
Emerson expects full-year fiscal 2024 consolidated net sales from continuing operations to grow between 14.5% and 17%, with underlying sales up 4.5% to 6.5%. Adjusted diluted earnings per share from continuing operations are projected to be between $5.30 and $5.45. The company also anticipates strong operating and free cash flow from continuing operations.
06—Continue