Can Emerson (EMR) Surprise this Earnings Season? - Analyst Blog

Emerson Electric Co. EMR is set to report its second-quarter fiscal 2014 results on May 6 before the market opens. The company delivered in-line earnings results in the preceding quarter. Let's consider some important issues that may affect the upcoming results.

Growth Factors in the Past Quarter

Emerson is well positioned to benefit from the long-term global trends of infrastructure spending and improved energy efficiency. This is because as the emerging economies grow, they are increasingly investing in the infrastructure necessary to support a modern economy. Emerson's Industrial Automation and Process Management division have been receiving contracts, driven by the strong growth potential in the end markets of these two divisions. This apart, Emerson has been restructuring its portfolio for the past three months primarily to focus on the growing oil and gas and chemical markets.

In addition, Emerson is expected to benefit from the steady adoption of central air conditioning in Asia, spurred by the emerging middle class and broader energy efficiency initiatives. Moreover, the company's residential segment and especially its air conditioning, professional tools and food waste disposer businesses are likely to benefit from increasing investments in North America.

Earnings Whispers?

Our proven model does not conclusively show that Emerson is likely to beat estimates this quarter. This is because a stock needs to have both positive Earnings ESP and Zacks Rank #1, 2 or 3 for this to happen. That is not the case here.

Zacks ESP: Emerson has a Zacks ESP of -3.66%.

Zacks Rank: Emerson's Zacks Rank #3 (Hold), when combined with a -3.66% ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies with the right combination of elements needed to post an earnings beat this quarter:

Energy Transfer Equity, L.P. ETE has an Earnings ESP of +28.13% and holds a Zacks Rank #2 (Buy).

EnterpriseProducts Partners L.P. EPD has an Earnings ESP of +2.70% and holds a Zacks Rank #2 (Buy).

Targa Resources Partners LPNGLS has an Earnings ESP of +2.50% and holds a Zacks Rank #2 (Buy).