01—Abstract
Summary
Summary of the 8-K filed November 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Emerson reported fiscal fourth-quarter and full-year 2024 results (year ended September 30, 2024) that were strong on the top line and adjusted profitability but weak on a GAAP basis.
Full-year net sales rose 15% to $17.5 billiona, with underlying growth of 6%, supported largely by the Test & Measurement acquisition, which contributed $1.46 billion of sales. Underlying orders grew 2% in both the quarter and the year. Adjusted segment EBITA margin expanded 100 basis points to 26.0%, and adjusted EPS rose 24% to $5.49.
Management cited $100 millionb of Test & Measurement synergies realized in the first year. GAAP results were materially weaker. Full-year GAAP EPS from continuing operations fell 29% to $2.82, and pretax earnings dropped to $2.02 billion from $2.90 billion, reflecting $1.27 billion of intangibles amortization (up from $678 million), a $279 million loss on the Copeland note receivable, and a $231 million inventory step-up charge.
Fourth-quarter GAAP EPS fell 29% to $0.97c while adjusted EPS rose 15% to $1.48. Cash generation was strong, with operating cash flow up 22% to $3.32 billion and free cash flow up 23% to $2.90 billion. Cash and equivalents declined to $3.6 billion from $8.1 billion after roughly $8.3 billion of acquisition spending.
For fiscal 2025, Emerson guided to net sales growth of 3.5% to 5.5%, underlying growth of 3% to 5%, adjusted EPS of $5.85 to $6.05d, GAAP EPS of $4.42 to $4.62, operating cash flow of $3.6 to $3.7 billion, and free cash flow of $3.2 to $3.3 billion. The outlook excludes the proposed portfolio transactions announced the same day, which are not described in this filing. The company also raised its quarterly dividend to $0.5275 per share and plans about $2.0 billion of share repurchases in fiscal 2025.
02—Key points
Key Highlights
- FY2024 net sales of $17.49B, up 15% reported and 6% underlying; Q4 net sales of $4.62B, up 13% reported and 4% underlying.
- Adjusted EPS rose 24% to $5.49 for FY2024 and 15% to $1.48 in Q4, while GAAP EPS from continuing operations fell 29% to $2.82 (FY) and $0.97 (Q4), driven by intangibles amortization and one-time charges.
- Adjusted segment EBITA margin reached 26.0% for FY2024 (+100 bps) and 26.2% in Q4 (+70 bps); GAAP pretax margin compressed to 11.5% for the year from 19.1%.
- Free cash flow grew 23% to $2.90B for FY2024, and operating cash flow grew 22% to $3.32B, showing strong cash conversion despite the acquisition-related charges.
- Underlying orders grew 2% in both Q4 and the full year, a modest demand signal compared with sales growth.
- FY2025 guidance calls for adjusted EPS of $5.85–$6.05 and free cash flow of $3.2–$3.3B, excluding the pending portfolio transactions, plus about $2.0B of share repurchases and a dividend increase to $0.5275 per quarter.
- Balance sheet shifted materially: cash fell to $3.6B from $8.1B, goodwill rose to $18.1B, and other intangibles rose to $10.4B, increasing future amortization and impairment considerations; the Copeland note receivable was eliminated after a $279M loss.
03—Questions
Frequently Asked Questions
Why did GAAP earnings decline sharply while adjusted earnings grew?
GAAP results absorbed large non-cash and one-time items that Emerson excludes from adjusted EPS. Intangibles amortization rose to $1.27B for the year from $678M, largely from the Test & Measurement acquisition. The company also recorded a $279M loss on the Copeland note receivable, a $231M inventory step-up charge, $220M of acquisition and divestiture costs, and a $48M loss on divestitures. Excluding these, adjusted EPS grew 24%.
How strong is organic growth, and what is driving it?
Underlying sales growth was 6% for the year and 4% in Q4, excluding currency and acquisitions and divestitures. Measurement & Analytical led with 14% underlying growth for the year, and Control Systems & Software grew 10%. Discrete Automation declined 5%, and AspenTech grew 5% for the year but declined 13% in Q4. Underlying orders grew only 2%, which suggests growth may moderate.
What is the outlook for fiscal 2025?
Emerson guided to net sales growth of 3.5%–5.5% and underlying growth of 3%–5% for the year, with Q1 underlying growth of 2%–3%. Adjusted EPS is projected at $5.85–$6.05 for the year and $1.25–$1.30 for Q1. GAAP EPS is projected at $4.42–$4.62, reflecting roughly $1.23 of amortization and about $0.16 of restructuring costs. The guidance excludes the impact of the proposed portfolio transactions announced alongside the results.
How is Emerson returning capital to shareholders?
Emerson raised its quarterly dividend to $0.5275 per share, payable December 10, 2024, and the 2025 outlook assumes about $1.2 billion of dividend payments. The company expects about $2.0 billion of share repurchases in fiscal 2025, roughly $1.0 billion of which is planned for Q1. In fiscal 2024, Emerson repurchased only $435 million of common stock, compared with $2.0 billion in fiscal 2023.
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