Emerson Electrifies Q2 With Earnings Beat, Tightens FY Sales Growth Outlook

Zinger Key Points
  • Emerson's net sales surged 17% YoY, surpassing estimates.
  • Emerson revises FY24 net sales growth forecast to 15%-16%, adjusted EPS guidance to $5.40-$5.50.

Emerson Electric Co EMR shares are trading lower after the company reported second-quarter FY24 net sales growth of 17% Y/Y to $4.38 billion, beating the consensus of $4.29 billion.

Underlying sales were up 8% Y/Y, and underlying orders declined by 1% Y/Y in the quarter.

Sales by Segments: Final Control $1.05 billion (+6% Y/Y), Measurement & Analytical $1.01 billion (+14% Y/Y), Discrete Automation $632 million (-8% Y/Y); Safety & Productivity $365 million (+1% Y/Y), Control Systems & Software $687 million (+11% Y/Y), AspenTech $278 million (+21% Y/Y), and Test & Measurement $367 million.

Adjusted Total Segment EBITA was $1.14 billion compared to $924 million in the prior year quarter, and the margin improved by 140 bps to 26.0%.

Adjusted EPS improved 25% Y/Y to $1.36, beating the consensus of $1.25.

Emerson’s operating cash for the quarter totaled $757 million, compared to $575 million in the prior year, and free cash flow was $675 million (+32% Y/Y).

Emerson held cash and equivalents of $2.32 billion as of March-end.

Dividend: Emerson declared a quarterly cash dividend per share of $0.525, payable on June 10 to stockholders of record on May 17.

Outlook: For the third quarter, Emerson Electric expects net sales growth of 11%-12.5%, with underlying sales growth of 3%-4.5% and adjusted EPS of $1.38-$1.42 versus the consensus of $1.44

For FY24, Emerson Electric revised its net sales growth outlook to 15% – 16% (prior: 14.5% -17%), with underlying sales growth to 5.5%-6.5% (from 4.5%-6.5% earlier) and adjusted EPS to $5.40-$5.50 (from $5.30-$5.45) vs. consensus $5.39.

Emerson expects an operating cash flow of $3.1 billion and an FCF of $2.7 billion for FY24.

Investors can gain exposure to the stock via ProShares S&P Kensho Smart Factories ETF MAKX and Gabelli Automation ETF GAST.

Price Action: EMR shares are up 1.74% at $109.27 at the last check Wednesday.

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