Emerson Electric Co.
CEO : Mr. Surendralal Lanca Karsanbhai
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q1 | -24.6% YoY | -31.0% | 164.2% | 2023-02-08 |
Frank Dellaquila says,
Strong Q1 Operational Results
- Underlying sales were within our expectations at 6%, driven by growth in software and control and Intelligent Devices.
- Net sales were up 7% with a four-point drag from currency and a five-point contribution from AspenTech.
- World area growth was led by the Americas, which was up 13%.
Market Performance
- Later cycle markets like energy and chemical are strong.
- Chemical investments and plant modernization and sustainability remain steady in North America and Asia.
- Hybrid sales were up high single-digits, led by continued investments in life sciences reshoring and metals and mining.
- Discrete sales were up mid single-digits as this earlier cycle business starts to lap more difficult comps.
Guidance
- 2023 full-year guidance for underlying sales growth remains at 6.5% to 8.5%.
- Net sales expectations have been increased to 8% to 10%.
- Expected adjusted earnings per share is between $0.95 and $1, a 13% increase at the mid-point of the guide.
- Expectation to cover the unexpected stock comp headwind that we had in the first quarter with excellent operational performance.
Backlog and Margin Expansion
- Backlog grew approximately $700 million during the quarter to $6.6 billion.
- Adjusted segment EBITDA margin improved by 130 basis points.
- North America mix contributed to the margin expansion, and price was accretive to margin in the quarter.
Free Cash Flow
- Free cash flow of $243 million was down 20% year-over-year, mainly due to trade working capital.
- Expectation of 100% free cash flow conversion for the full year.
Lal Karsanbhai says,
Strong Operational Quarter and Outlook
- The first quarter was very strong for Emerson with 5% underlying orders and 6% sequential underlying orders growth.
- Sales met expectations at 6% underlying growth, slightly impacted by shutdowns in China.
- The company’s project funnel continues to grow, exceeding $7 billion at the end of the quarter.
- The company remains confident about the strength of its markets from both a geographic and an industry perspective.
- The outlook for the second quarter and the year is strong.
Operational Excellence
- Emerson is committed to its operational excellence pillars and regionalization strategy.
- The company broke ground on a new state-of-the-art innovation and manufacturing hub in Saudi Arabia to spur innovation for the region and focus on the transition to clean energy segments like hydrogen and clean fuels.
- Emerson and AspenTech continue to succeed with joint customer solutions, providing an expanded differentiated product offering to customers.
- Emerson continues to diversify through life sciences and metals and mining markets.
Proposed Acquisition of National Instruments
- Emerson proposed to acquire National Instruments for $53 per share in cash.
- The company believes its premium all-cash proposal with no financing conditions or anticipated regulatory concerns is compelling and in the best interest of Emerson and NI shareholders.
- Emerson is committed to an acquisition of NI and is participating in the strategic review process.
Adjusted EPS Was Impacted by Below-the-Line Items
- Adjusted EPS was $0.78 for the quarter.
- Stock compensation was a $0.09 headwind versus 2022, driven by a 31% stock price increase throughout the quarter and its subsequent impact on the remaining mark-to-market plan.
- FX was worse than originally expected.
- Despite these headwinds, operations performed above guidance as the business continued to execute.
Completed $2 Billion Share Repurchase
- Emerson completed its committed $2 billion of share repurchase in the first quarter.
Q & A sessions,
Strong Operational Start to 2023
- Underlying sales met expectations at 6%
- Net sales were up 7% with a 4-point drag from currency and a 5-point contribution from AspenTech
- Americas led world area growth, up 13%
- Energy and chemical markets show strength
- Commercial business in safety and productivity experienced weakness, down 10%
Pricing Actions Drive Strong Price Realization
- Pricing actions from 2022 and additional actions taken in 2023 contributed 4 points to price
Backlog Growth and Improved Margins
- Backlog grew approximately $700 million during the quarter to $6.6 billion
- Adjusted segment EBITDA margin improved by 130 basis points
- Software and control margins were up 200 basis points, led by AspenTech
- Intelligent Devices had strong performance with 110 basis points of adjusted EBITDA expansion
2023 Outlook
- Expectation of mid to high-single digit growth in process, hybrid, and discrete markets
- Expected net sales to increase by 8% to 10% due to strength in end markets and robust backlog
- Currency expected to be less of a headwind at 2 points and expected contribution of 3.5 points from AspenTech
- Operating leverage, adjusted EPS, and free cash flow conversion maintained at previous guide
- Commercial exposure within Safety and Productivity expected to improve throughout the year
No bad stock 