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.