How much of Emerson's sales growth came from acquisitions rather than organic business?

Reported net sales grew 17% in the quarter, but underlying sales growth (excluding currency and significant acquisitions/divestitures) was 8%. The gap of roughly 10 points reflects acquisitions, primarily the National Instruments business now in Test & Measurement and the consolidation of AspenTech.

Why did GAAP EPS decline even though Adjusted EPS rose 25%?

GAAP EPS fell 5% to $0.87 mainly because intangibles amortization more than doubled to $322 million from $168 million, and the company recorded a loss on its Copeland equity-method investment, a loss on a business divestiture and acquisition-related fees. Adjusted EPS excludes these items, so it rose to $1.36 from $1.09.

How did the balance sheet and cash position change?

Cash and equivalents dropped from $8.05 billion at September 30, 2023 to $2.32 billion at March 31, 2024, largely due to about $8.3 billion in acquisition payments. Short-term borrowings rose to $3.16 billion, and goodwill and other intangibles increased substantially. Free cash flow of $675 million in the quarter and guidance of about $2.7 billion for fiscal 2024 indicate the company expects to rebuild cash over time.

What does the new board appointment signal for investors?

Calvin Butler, President and CEO of Exelon, was elected to the board effective August 1, 2024, expanding the board to 12 members and joining the Corporate Governance and Nominating Committee. The board described the appointment as part of its ongoing refreshment process and linked it to Emerson's focus on power generation, transmission, distribution and energy transition markets.

EMR 8-K: Earnings & Results, Leadership Changes & More

01—Abstract

Summary

Summary of the 8-K filed May 8, 2024. Cited figures are marked; the original filing is the authoritative source.

Emerson Electric (NYSE: EMR) reported fiscal second-quarter 2024 results (quarter ended March 31, 2024) with net sales up 17% reported and 8% underlying to $4.376 billion^a, and Adjusted EPS up 25% to $1.36 versus $1.09 a year earlier.

Growth was heavily shaped by portfolio changes: the acquisition of National Instruments (reflected in the new Test & Measurement segment) and the consolidation of AspenTech, which together added roughly 10 points of acquisition-driven growth to Emerson's total sales. Underlying orders declined 1%, but management said this was in line with its low-single-digit growth expectations for the first half of fiscal 2024. Adjusted segment EBITA margin expanded 140 bps to 26.0%, led by Intelligent Devices and the Measurement & Analytical business, though GAAP pretax margin compressed 210 bps to 14.9% due to heavier intangibles amortization ($322 million^b vs. $168 million), a loss on the Copeland equity-method investment, and a loss on a business divestiture.

GAAP EPS fell 5% to $0.87^c because of these non-cash and one-time charges, while operating cash flow rose 32% to $757 million and free cash flow to $675 million. The balance sheet shows a significant shift: cash fell from $8.05 billion to $2.32 billion and goodwill and intangibles rose sharply, reflecting the cash-funded NI acquisition (about $8.3 billion in purchases of businesses in the six-month period), with short-term borrowings increasing to $3.16 billion. Management raised its underlying sales growth outlook to 5.5%-6.5% for fiscal 2024 and guided Adjusted EPS to $5.40-$5.50, while reported net sales growth guidance is 15%-16%.

The company also declared a quarterly dividend of $0.525^d per share and separately announced that Exelon CEO Calvin Butler will join the board effective August 1, 2024. For investors, the key takeaways are the strong margin and cash-flow execution and the raised underlying growth outlook, weighed against soft underlying orders, a substantially more leveraged balance sheet and the dilutive effect of acquisition-related amortization on GAAP earnings. Because much of the headline growth is inorganic, investors should focus on underlying sales, orders trends and free cash flow conversion when evaluating the company's organic momentum.

02—Key points

Key Highlights

Net sales rose 17% to $4.376 billion (8% underlying), with acquisitions contributing roughly 10 points of growth, including NI and AspenTech consolidation.
Adjusted EPS grew 25% to $1.36 from $1.09, while GAAP EPS declined 5% to $0.87 due to amortization, Copeland equity losses and divestiture losses.
Adjusted segment EBITA margin expanded 140 bps to 26.0%, with Intelligent Devices margin up to 25.6% and AspenTech margin reaching 40.6% on an adjusted basis.
Underlying orders declined 1%, though management described this as in line with expectations for the first half of fiscal 2024.
Operating cash flow increased 32% to $757 million and free cash flow increased 32% to $675 million.
Fiscal 2024 guidance was updated: underlying sales growth raised to 5.5%-6.5%, Adjusted EPS guided to $5.40-$5.50, and FCF guided to about $2.7 billion.
Cash fell to $2.32 billion from $8.05 billion and short-term borrowings rose to $3.16 billion, following roughly $8.3 billion in acquisition spending; a quarterly dividend of $0.525 was declared.

03—Questions

Frequently Asked Questions

How much of Emerson's sales growth came from acquisitions rather than organic business?
Reported net sales grew 17% in the quarter, but underlying sales growth (excluding currency and significant acquisitions/divestitures) was 8%. The gap of roughly 10 points reflects acquisitions, primarily the National Instruments business now in Test & Measurement and the consolidation of AspenTech.
Why did GAAP EPS decline even though Adjusted EPS rose 25%?
GAAP EPS fell 5% to $0.87 mainly because intangibles amortization more than doubled to $322 million from $168 million, and the company recorded a loss on its Copeland equity-method investment, a loss on a business divestiture and acquisition-related fees. Adjusted EPS excludes these items, so it rose to $1.36 from $1.09.
Is Emerson's organic demand weakening?
Underlying orders declined 1% year over year in the quarter. Management said this was consistent with its low-single-digit growth expectations for the first half of fiscal 2024, and it pointed to continued strength in process and hybrid end markets.
How did the balance sheet and cash position change?
Cash and equivalents dropped from $8.05 billion at September 30, 2023 to $2.32 billion at March 31, 2024, largely due to about $8.3 billion in acquisition payments. Short-term borrowings rose to $3.16 billion, and goodwill and other intangibles increased substantially. Free cash flow of $675 million in the quarter and guidance of about $2.7 billion for fiscal 2024 indicate the company expects to rebuild cash over time.
What does the new board appointment signal for investors?
Calvin Butler, President and CEO of Exelon, was elected to the board effective August 1, 2024, expanding the board to 12 members and joining the Corporate Governance and Nominating Committee. The board described the appointment as part of its ongoing refreshment process and linked it to Emerson's focus on power generation, transmission, distribution and energy transition markets.

04—Continue

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