10-QPeriod: Q3 FY2024

EMERSON ELECTRIC CO Quarterly Report for Q3 Ended Jun 30, 2024

Filed August 7, 2024For Securities:EMR

Summary

Emerson Electric Co. reported a mixed financial performance for the nine months ended June 30, 2024. While net sales increased by 16% year-over-year to $12.87 billion, driven by the acquisition of National Instruments (NI) and growth in the Software and Control segment, earnings from continuing operations attributable to common stockholders saw a significant decline of 30% to $1.06 billion. This decrease was primarily impacted by a substantial pretax loss of $279 million recognized on the definitive agreement to sell its Copeland note receivable, which adjusted the carrying value to reflect the transaction price. Despite the reported dip in GAAP earnings, adjusted diluted earnings per share from continuing operations showed a robust increase of 27% to $4.01, indicating underlying operational strength. The company is navigating significant portfolio changes, including the ongoing divestiture of its remaining stake in Copeland and the integration of NI. The outlook for fiscal year 2024 anticipates continued sales growth and an adjusted earnings per share range of $5.45 to $5.50, suggesting management's confidence in future performance, though investors should remain cognizant of the impacts from ongoing strategic realignments and integration costs.

Financial Highlights

55 data points
Beta

Revenue

$4.38B

52.8% Gross Margin

Net Income

$329.00M

7.5% Net Margin

EPS (Diluted)

$0.57

Total Assets

$45.59B

Cash & Equivalents

$2.30B

Free Cash Flow

$998.00M

Financial Statements
Beta
Revenue$4.38B
Cost of Revenue$2.07B
Gross Profit$2.31B
SG&A Expenses$1.25B
Operating Income$344.00M
Net Income$329.00M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)571.90M
Shares Outstanding (Diluted)574.80M

Key Highlights

  • 1Net sales for the nine months ended June 30, 2024, increased by 16% to $12.87 billion, significantly boosted by the National Instruments (NI) acquisition and growth in the Software and Control segment.
  • 2Earnings from continuing operations attributable to common stockholders decreased by 30% to $1.06 billion for the nine months ended June 30, 2024, largely due to a $279 million pretax loss related to the agreement to sell the Copeland note receivable.
  • 3Adjusted diluted earnings per share from continuing operations showed strong growth, increasing by 27% to $4.01 for the nine months ended June 30, 2024, indicating positive underlying operational performance.
  • 4The company expects to close the sale of its remaining 40% non-controlling equity interest in Copeland and its note receivable by the end of August 2024, generating approximately $2.9 billion in after-tax cash proceeds intended for debt reduction.
  • 5The acquisition of National Instruments (NI) significantly impacted financial results, contributing 9% to net sales growth in the third quarter and adding $1.1 billion in sales for the first nine months, though it also resulted in higher amortization and integration costs.
  • 6The fiscal year 2024 outlook projects consolidated net sales growth of approximately 15% and an adjusted earnings per share range of $5.45 to $5.50.
  • 7Cash provided by operating activities increased to $2.25 billion for the nine months ended June 30, 2024, supported by strong operational performance and favorable working capital changes, while free cash flow from continuing operations was $1.99 billion.

Frequently Asked Questions

The primary driver for the decrease in GAAP net earnings from continuing operations is a pretax loss of $279 million recognized in the second quarter of fiscal 2024. This loss was incurred to adjust the carrying value of the Copeland note receivable to $1.9 billion, reflecting the agreed-upon transaction price for its sale. This adjustment significantly impacted reported earnings.

The acquisition of NI, completed in October 2023, has significantly boosted net sales, contributing 9% to third-quarter growth and $1.1 billion to nine-month sales. However, it also led to higher amortization expenses (including $419 million for intangibles in the first nine months) and integration costs, which have impacted profitability metrics and financial statements. The company is reporting NI as the 'Test & Measurement' segment within its Software and Control business group.

Emerson has entered into definitive agreements to sell its remaining 40% non-controlling equity interest in Copeland for $1.5 billion and its note receivable for $1.9 billion, with an expected closing by the end of August 2024. The combined after-tax cash proceeds of approximately $2.9 billion are intended to be used to pay down existing debt obligations.

GAAP (Generally Accepted Accounting Principles) earnings per share reflect the reported profitability according to accounting standards, which can include significant one-time items or non-operational charges. Adjusted earnings per share, as presented by Emerson, exclude certain items such as amortization of intangibles, restructuring costs, acquisition-related costs, and specific gains or losses (like the Copeland note receivable loss). This provides a view of the underlying operational performance, which in this period showed a substantial increase (27% for the nine months) despite the GAAP decline.