10-QPeriod: Q1 FY2025

EMERSON ELECTRIC CO Quarterly Report for Q1 Ended Dec 31, 2024

Filed February 5, 2025For Securities:EMR

Summary

Emerson Electric Co. reported a significant increase in earnings for the second quarter of fiscal year 2025, driven by strong operational performance and the positive impact of certain one-time items from the prior year. Net sales saw a modest increase of 1%, reaching $4.2 billion, with underlying sales growing by 2%. The company's profitability, however, experienced a dramatic surge, with net earnings attributable to common stockholders more than quadrupling to $585 million, leading to diluted EPS from continuing operations of $1.02, a substantial jump from $0.29 in the prior year. This dramatic improvement is partly attributed to the absence of significant acquisition-related inventory step-up amortization expenses that impacted the prior year's cost of sales and margins. Financially, Emerson demonstrated solid cash flow generation, with operating cash flow from continuing operations at $777 million, a significant increase year-over-year. The company also continues to execute on its capital allocation strategy, returning capital to shareholders through share repurchases and dividends, although a substantial increase in share repurchases, amounting to $899 million in the quarter, contributed to a decrease in cash and equivalents. Looking ahead, Emerson provided its fiscal year 2025 outlook, projecting sales growth and robust earnings per share, excluding the impact of the proposed acquisition of the remaining stake in AspenTech.

Financial Highlights

54 data points
Beta

Revenue

$4.17B

53.5% Gross Margin

Net Income

$585.00M

14.0% Net Margin

EPS (Diluted)

$1.02

Total Assets

$42.61B

Cash & Equivalents

$2.83B

Free Cash Flow

$694.00M

Financial Statements
Beta
Revenue$4.17B
Cost of Revenue$1.94B
Gross Profit$2.23B
SG&A Expenses$1.22B
Operating Income$585.00M
Net Income$585.00M
EPS (Basic)$1.03
EPS (Diluted)$1.02
Shares Outstanding (Basic)568.50M
Shares Outstanding (Diluted)571.10M

Key Highlights

  • 1Net sales increased 1% to $4.2 billion, with underlying sales up 2%, driven by price and volume increases.
  • 2Net earnings attributable to common stockholders surged by 312% to $585 million, and diluted EPS from continuing operations rose to $1.02 from $0.29 year-over-year.
  • 3Gross margin improved significantly to 53.5% from 46.5% in the prior year, aided by the absence of $231 million in acquisition-related inventory step-up amortization.
  • 4Selling, general, and administrative (SG&A) expenses decreased by 4% and as a percentage of sales, benefiting from cost reduction actions and the prior year's acquisition-related costs.
  • 5Operating cash flow from continuing operations increased by $333 million to $777 million, reflecting higher earnings and improved receivables performance.
  • 6The company announced a definitive agreement to acquire the remaining 43% of AspenTech for $7.2 billion, expected to close in the first half of calendar year 2025.
  • 7Emerson provided its fiscal year 2025 outlook, expecting diluted EPS from continuing operations between $4.42 and $4.62, and adjusted diluted EPS between $5.85 and $6.05.

Frequently Asked Questions

The substantial increase in net earnings, particularly from continuing operations, was driven by a combination of strong operational performance, favorable pricing, and cost control measures. Critically, the prior year's results were impacted by $231 million in acquisition-related inventory step-up amortization, the absence of which in the current period significantly boosted gross margins and overall profitability. Additionally, other deductions, net, decreased substantially due to lower restructuring and acquisition/divestiture costs compared to the prior year.

Emerson announced an agreement to acquire the remaining outstanding shares of AspenTech not already owned for $7.2 billion in an all-cash transaction. The company expects to finance this acquisition using a combination of cash on hand and debt financing. The transaction is anticipated to close in the first half of calendar year 2025, after which AspenTech will become a wholly owned subsidiary of Emerson.

Emerson forecasts consolidated net sales growth from continuing operations of 1.5% to 3.5% for fiscal year 2025, with underlying sales expected to increase by 3% to 5%. Diluted earnings per share from continuing operations are projected to be between $4.42 and $4.62, with adjusted diluted EPS expected to range from $5.85 to $6.05. The outlook assumes certain levels of share repurchases and dividend payments, and notably excludes the impact of the proposed AspenTech acquisition and any potential divestiture of the Safety & Productivity segment.

In the Intelligent Devices segment, sales grew 1% to $2.8 billion, with earnings up 16% driven by strong operational performance and favorable foreign currency. The Software and Control segment saw sales increase by 3% to $1.35 billion, primarily due to strong growth in AspenTech. Earnings for this segment surged by 434%, benefiting from higher AspenTech sales, improved pricing, cost savings, and lower acquisition-related costs compared to the prior year. Test & Measurement sales saw a decline of 6%, while Control Systems & Software and AspenTech showed growth.