Buckingham Downgrades Emerson Electric To Sell
Emerson Electric Co. (NYSE: EMR) has plans of purchasing Pentair Plc’s (NYSE: PNR) Valves & Controls business. Buckingham Research Group’s Joshua Pokrzywinski downgraded the rating on Emerson Electric from Neutral to Underperform, while reducing the price target from $49 to $44.
Analyst Pokrzywinski believes that Emerson Electric’s purchase of Pentair's [Rated: Neutral, PT: $62] V&C business adds “definitive risk” to its earnings over the next several years. Emerson Electric’s dividend sustainability would likely be at risk.
The purchase dilutes the company’s portfolio quality, Pokrzywinski commented. He added, “While the assets are cyclically depressed, we believe the strategic overlap is less than ideal with EMR's Process portfolio in that V&C will not pull through the high quality DCS and instrumentation categories but could amount to bundling on standard/ commoditized valves.”
Pokrzywinski believes that the commoditized nature of about 25 percent of the V&C portfolio curtails the sales synergy opportunity and margin upside, uncles there is a substantial increase in oil prices. Moreover, this makes the initial 10 percent synergy target “appear aggressive in light of the restructuring PNR had already undertaken.”
Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email firstname.lastname@example.org with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!
Latest Ratings for EMR
|Jan 2017||Goldman Sachs||Upgrades||Sell||Neutral|
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.