Emerson Electric Gets An Upgrade From This Analyst As Fundamentals Are Accelerating

  • Morgan Stanley analyst Joshua Pokrzywinski upgraded the shares of Emerson Electric Co EMR from Equal-Weight to Overweight and raised the price target from $95 to $96.
  • Since the National Instruments Corporation NATI bid, shares are down 16% versus EE/MI and S&P 500, down 3% and 1%, respectively.
  • In the analyst's view, the NATI resolution potentially looks like a win-win for shares.
  • The analyst believes that EMR is unlikely to bid above $55/share versus its current $53/share offer or, more likely, will not win the bid.
  • RelatedEmerson Discloses $7.6B Offer For National Instruments - Reveals Several Private Attempts Made Over Last Eight Months
  • The analyst expects orders to accelerate, possibly as peers decelerate or decline.
  • Fundamentally, the analyst sees process capex accelerating as other industrial verticals start to moderate based on a comparatively low starting point.
  • Project FID announcements and EMR orders potentially soon after should come with IRA clarification in the coming months, added the analyst.
  • According to the analyst, LNG and Hydrogen together drive a more than 2% uplift to EMR's revenue CAGR through 2030.
  • Derated valuation, multiple fundamental tailwinds, and an advantaged M&A position vs. other acquirers with a higher cost of capital should substantially limit the downside, the analyst added.
  • The analyst's bull case assumes greater growth and margin expansion, and has EMR trading at a 21x multiple, a 3% premium to peers.
  • The analyst notes that most names above EMR on risk-adjusted risk/reward have substantial U.S. non-resi exposure with rising concerns of a lending freeze, suggesting more downside risk or a higher probability of the bear case than a month ago.
  • Price Action: EMR shares are trading higher by 1.77% at $83.73 on the last check Tuesday.
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