What is the main takeaway regarding Emerson's order trends?

The primary message is a significant acceleration in order growth during March 2014, reaching nearly 10% on a trailing three-month average. This indicates a recovery in demand, particularly for large industrial projects and capital goods, across several key segments.

Despite strong order growth, why is Q2 sales growth expected to be below expectations?

Sales growth in the second quarter is anticipated to be about 2 percentage points lower than previously guided due to several factors. These include orders received later in the quarter than initially projected, the lingering impact of disruptive weather in North America, and a slower-than-expected pace of large project implementation in the process industry.

What factors are negatively impacting Emerson's second-quarter earnings?

Emerson's reported second-quarter earnings are expected to be affected by two main items: losses stemming from currency volatility and Emerson's share of weak operating results and restructuring costs related to its equity investment in Artesyn Embedded Technologies.

Will the challenges in Q2 affect Emerson's full-year outlook?

No, the company explicitly states that despite the impact of lower sales and specific earnings headwinds in the second quarter, the broad order acceleration provides support for sales, earnings, and cash flow. As a result, Emerson is reaffirming its full-year guidance provided earlier in the year.

EMR 8-K: Earnings & Results & Regulation FD

Summary

Emerson Electric Co. (EMR) filed an 8-K on April 23, 2014, to provide updates on its March 2014 order trends and to reaffirm its full-year financial guidance. The company reported an acceleration in trailing three-month order growth, reaching nearly 10% in March, primarily driven by strong performance in its Process Management, Industrial Automation, and Network Power segments. This improvement was attributed to increased large industrial projects, recovering capital goods demand, and favorable conditions in Europe and Asia, partially offset by harsh North American weather impacting earlier demand. Despite the positive order momentum, Emerson indicated that second-quarter sales growth would be approximately 2 percentage points below prior expectations due to delayed orders, weather impacts, and slower project implementation in the process industry. Additionally, second-quarter earnings were negatively affected by currency volatility and losses from its investment in Artesyn Embedded Technologies. Nevertheless, the company reiterated its full-year guidance, anticipating that the broad order acceleration will support overall sales, earnings, and cash flow expectations for the fiscal year.

Key Highlights

1Trailing three-month order trends accelerated to nearly 10% in March 2014, showing a significant improvement.
2Process Management, Industrial Automation, and Network Power segments were key drivers of order growth, fueled by large industrial projects and recovering capital goods demand.
3Favorable market conditions were noted in Europe and Asia, contributing to the order acceleration.
4Harsh North American weather impacted demand earlier in the quarter but was offset by strong performance in the latter half of March.
5Second-quarter sales growth is expected to be approximately 2 percentage points below prior expectations due to order timing and external factors.
6Second-quarter earnings will be impacted by currency volatility and restructuring costs associated with the Artesyn Embedded Technologies investment.
7Emerson reaffirmed its full-year financial guidance, expecting the strong March orders to support overall annual performance.

EMERSON ELECTRIC CO 8-K Report, Financial Results (Apr 23, 2014)

Summary

Key Highlights

Frequently Asked Questions