8-KEarnings & ResultsRegulation FD

EMERSON ELECTRIC CO 8-K Report, Financial Results (Apr 6, 2015)

Filed April 6, 2015For Securities:EMR

Summary

Emerson Electric Co. (EMR) filed an 8-K on April 6, 2015, reporting preliminary order trends for the three months ending February 2015 and providing an update on its second-quarter 2015 sales outlook. The company's order performance is showing a notable deceleration, with total orders down 10% for the trailing three-month period. This decline is attributed to a confluence of factors including the steep drop in oil prices, varied market demand across geographies, and a strong U.S. dollar, which alone accounted for a 7% negative impact through currency translation. While reported orders are weakening, the underlying order trend (excluding currency and M&A) is down in the low single digits. The Commercial & Residential Solutions segment showed modest growth, while Process Management orders were flat, but other segments like Industrial Automation and Network Power experienced decreases. Emerson expects second-quarter underlying sales to be approximately flat year-over-year, though reported GAAP sales are projected to decline by about 7% due to a significant 5% negative currency impact and a 2% impact from divestitures. Investors should note the increasing headwinds from currency and challenging commodity prices impacting the company's performance.

Key Highlights

  • 1Trailing three-month orders declined 10% year-over-year, significantly impacted by falling oil prices and a strong U.S. dollar.
  • 2Currency translation had a negative impact of 7% on the trailing three-month orders.
  • 3Underlying orders (excluding currency and divestitures) for the trailing three months were down low-single-digits.
  • 4Commercial & Residential Solutions segment experienced modest order growth.
  • 5Process Management segment orders were flat, but impacted by unfavorable currency translation.
  • 6Industrial Automation and Network Power segments experienced order decreases due to various market and currency factors.
  • 7The company expects second-quarter underlying sales to be approximately flat, with reported GAAP sales expected to be down approximately 7% due to currency and divestitures.

Frequently Asked Questions

The primary reasons cited for the decline in orders are the sharp drop in oil prices, mixed demand across different markets and geographies, and the significant strength of the U.S. dollar, which negatively impacts reported results through currency translation.

Currency translation is a significant headwind. For the trailing three-month period, it negatively impacted orders by 7%. The company anticipates a 5% negative currency translation impact on reported GAAP sales for the second quarter.

Emerson expects second-quarter underlying sales to be approximately flat compared to the prior year. However, reported GAAP sales are projected to be down approximately 7%, reflecting the negative impact of currency translation (5%) and divestitures (2%).

The Commercial & Residential Solutions segment showed modest order growth, while Process Management orders were flat. However, Industrial Automation and Network Power segments experienced decreases in orders. Climate Technologies also saw a decline, partly due to customers working through inventory.