10-QPeriod: Q2 FY2025

EMERSON ELECTRIC CO Quarterly Report for Q2 Ended Mar 31, 2025

Filed May 7, 2025For Securities:EMR

Summary

Emerson Electric Co. (EMR) reported its fiscal second-quarter and first-half 2025 results, marked by the completion of its acquisition of the remaining shares of Aspen Technology, Inc. (AspenTech) for approximately $7.2 billion. While net sales saw a modest increase, earnings from continuing operations attributable to common stockholders declined year-over-year for the quarter, primarily due to higher acquisition and divestiture costs related to the AspenTech transaction. However, adjusted diluted earnings per share from continuing operations showed positive growth, indicating strength in underlying operations. The company reaffirmed its full-year fiscal 2025 outlook, projecting continued sales growth and a significant increase in earnings per share, with a strategic focus on deleveraging through strong operating cash flows. The company's portfolio transformation is now complete with the AspenTech acquisition, which is expected to be accretive to earnings. Management highlighted strong performance in the Software and Control segment, driven by AspenTech's integration, and the Intelligent Devices segment demonstrated resilience. Despite increased debt levels resulting from the acquisition, Emerson anticipates maintaining investment-grade credit ratings and plans to reduce net debt by approximately $1 billion in the coming months.

Financial Highlights

55 data points
Beta

Revenue

$4.43B

53.5% Gross Margin

Net Income

$485.00M

10.9% Net Margin

EPS (Diluted)

$0.86

Total Assets

$41.98B

Cash & Equivalents

$1.89B

Free Cash Flow

$154.00M

Financial Statements
Beta
Revenue$4.43B
Cost of Revenue$2.06B
Gross Profit$2.37B
SG&A Expenses$1.28B
Operating Income$485.00M
Net Income$485.00M
EPS (Basic)$0.86
EPS (Diluted)$0.86
Shares Outstanding (Basic)563.00M
Shares Outstanding (Diluted)565.40M

Key Highlights

  • 1Completion of the $7.2 billion acquisition of the remaining shares of Aspen Technology, Inc. (AspenTech) on March 12, 2025, consolidating it as a wholly owned subsidiary.
  • 2Q2 FY2025 Net Sales increased 1% to $4.4 billion, with underlying sales up 2%.
  • 3Q2 FY2025 Earnings from continuing operations attributable to common stockholders decreased 11% to $485 million, while Diluted EPS from continuing operations fell 9% to $0.86, impacted by acquisition-related costs.
  • 4Adjusted Diluted EPS from continuing operations increased 9% to $1.48 in Q2 FY2025, showcasing underlying operational strength.
  • 5Six-month FY2025 Net Sales grew 1% to $8.6 billion, and Earnings from continuing operations attributable to common stockholders surged 50% to $1.07 billion.
  • 6Total debt-to-capital ratio increased to 42.7% as of March 31, 2025, due to increased borrowings for the AspenTech acquisition, with a target to reduce net debt by $1 billion in the next 6-12 months.
  • 7The company reaffirmed its full-year fiscal 2025 outlook, expecting Diluted EPS of $4.05-$4.20 and Adjusted EPS of $5.90-$6.05, with projected operating cash flow of $3.5-$3.6 billion.

Frequently Asked Questions

The acquisition of Aspen Technology (AspenTech) for approximately $7.2 billion was completed on March 12, 2025. This transaction significantly increased Emerson's debt levels, with the total debt-to-capital ratio rising to 42.7% as of March 31, 2025. While it led to higher acquisition and divestiture fees, impacting reported earnings and EPS in the quarter, the company expects AspenTech to be accretive to earnings. The company plans to reduce net debt by approximately $1 billion over the next 6-12 months.

For the second quarter of fiscal 2025, net sales increased by 1% to $4.4 billion, driven by a 2% increase in underlying sales. For the first six months of fiscal 2025, net sales also grew by 1% to $8.6 billion, with underlying sales up 2%. The Software and Control segment, boosted by AspenTech's integration, showed strong sales growth, while the Intelligent Devices segment experienced a slight decline in Q2 but was flat year-to-date.

Emerson expects continued growth for fiscal year 2025. Consolidated net sales from continuing operations are projected to increase by approximately 4%, with underlying sales also expected to rise by about 4%. The company anticipates Diluted Earnings Per Share (EPS) to be in the range of $4.05 to $4.20, and Adjusted EPS to be between $5.90 and $6.05. Strong operating cash flow is expected, with projections of $3.5 to $3.6 billion, and free cash flow between $3.1 and $3.2 billion.

Emerson has increased its financial leverage to fund the AspenTech acquisition, as evidenced by the rise in its debt-to-capital ratios. The company has secured additional credit facilities and increased commercial paper borrowings. To manage this, Emerson plans to utilize its strong operating cash flows and disciplined capital allocation to reduce net debt by approximately $1 billion over the next 6 to 12 months, while aiming to maintain its investment-grade credit ratings.