Summary
Emerson Electric Co. (EMR) filed an 8-K on May 17, 2016, to provide an off-cycle update on its 3-month order trends and discuss the implications for its fiscal year 2016 outlook. The report highlights a continued decline in orders, particularly in Process Management and Industrial Automation, impacted by low oil prices and reduced industrial capital spending. While overall orders were down 2% for the trailing three months ending April 2016 (with underlying orders down 5%), currency translation provided a 3% tailwind. Despite the weaker order performance, Emerson reiterated its expectation that fiscal 2016 earnings per share (EPS) will remain within the previously communicated range, attributing this to ongoing cost reduction efforts. However, the company now anticipates that fiscal 2016 underlying sales will be at the lower end of its previously guided range. Investors should note that Emerson has transitioned its detailed segment analysis to quarterly releases but may issue limited updates like this one periodically. Management is scheduled to present at the Electrical Products Group Conference on May 18, 2016, with materials to be available on the company's investor relations website.
Key Highlights
- 1Trailing 3-month orders (ending April 2016) decreased by 2%, with underlying orders down 5%, reflecting market pressures from low oil prices and reduced industrial capital spending.
- 2Process Management and Industrial Automation segments showed significant order declines, with Process Management orders down 10% to 5% and Industrial Automation down 10% to 5% in April.
- 3Network Power and Climate Technologies showed mixed performance, with Network Power orders in the 10% to 15% range in March and April, while Climate Technologies saw orders dip in April.
- 4Currency translation was a favorable factor, contributing a 3% increase to orders.
- 5Emerson now expects fiscal 2016 underlying sales to be at the lower end of its previously communicated range due to the ongoing order trends.
- 6Despite weaker sales outlook, the company reaffirmed its fiscal 2016 EPS guidance, citing continued cost reduction efforts.
- 7Emerson will be presenting at the Electrical Products Group Conference on May 18, 2016, with presentation materials to be posted online.