8-KRegulation FD

EMERSON ELECTRIC CO 8-K Report, Regulation FD Disclosure (Apr 29, 2019)

Filed April 29, 2019For Securities:EMR

Summary

Emerson Electric Co. (EMR) provided an update on its three-month trailing orders for the period ending March 2019. Overall, the company experienced a 2% increase in total trailing three-month orders, with underlying orders (excluding currency fluctuations) up 4%. This moderation from the first two months of the quarter (where underlying orders were in the 5-10% range) was primarily driven by a slowdown in the Commercial & Residential Solutions segment, which saw flat underlying orders after accounting for currency impacts. The Automation Solutions segment showed resilience, with underlying orders up 7%. Growth was broad-based globally, particularly in systems, maintenance, and repair spending. However, moderating order growth in the Americas was noted, partly due to upstream oil & gas customers pausing investment decisions amidst price volatility, although recovery is anticipated with stabilized oil prices. Concerns were also raised about pipeline capacity constraints in North America potentially pacing investment over the next 3-6 months. The North America Industrial Solutions business also experienced a slowdown due to softer short-cycle demand and channel inventory adjustments. The Commercial & Residential Solutions segment's flat underlying orders were impacted by a continued, though improving, negative trend in Asia Climate Technologies, partially offset by China's demand. Excluding this business, underlying orders in Commercial & Residential Solutions were up low-single digits, supported by stable North American AC and global cold chain markets. However, weather and pre-buy inventory ahead of price increases also unfavorably impacted North American order pace. Emerson also announced its Q2 2019 earnings call for May 7, 2019.

Key Highlights

  • 1Total Emerson trailing three-month orders increased by 2%, with underlying orders (excluding currency impact) up 4%.
  • 2Automation Solutions segment showed robust underlying order growth of 7%, with positive trends across all world areas, driven by systems, maintenance, and repair spending.
  • 3Commercial & Residential Solutions segment experienced flat underlying orders, with a continued recovery plan in Asia Climate Technologies.
  • 4Underlying orders growth in Automation Solutions moderated in March from prior months, influenced by upstream oil & gas customers pausing investment.
  • 5Pipeline capacity constraints in North American oil and gas regions are a watch item for the next 3-6 months.
  • 6North America Industrial Solutions business slowed due to softer short-cycle demand and channel inventory re-balancing.
  • 7Emerson will report Q2 2019 results on May 7, 2019.

Frequently Asked Questions

Emerson reported that total trailing three-month orders increased by 2% compared to the prior year. Underlying orders, which exclude the impact of currency translation, were up 4%. This indicates a slight moderation in growth during March compared to the first two months of the quarter.

The Automation Solutions segment demonstrated strong performance with underlying orders up 7%, showing broad-based global strength. In contrast, the Commercial & Residential Solutions segment had flat underlying orders. While Asia Climate Technologies continued its recovery, it remained negative, offsetting positive trends elsewhere in the segment like North American air conditioning and global cold chain markets.

In the Automation Solutions segment, while underlying growth was positive globally, it moderated in March. This was partly due to upstream oil & gas customers in the Americas pausing investment decisions amidst oil price volatility. Additionally, pipeline capacity constraints in key North American oil and gas regions are a potential pacing factor for investment over the next 3-6 months. Softer short-cycle demand and channel inventory adjustments also affected the North America Industrial Solutions business.

Emerson is scheduled to report its second quarter 2019 results before the market opens on Tuesday, May 7, 2019, and will host an investor conference call that same day.