Emerson Electric Has Strong Link To World Economy

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Companies in the Diversified Operations group are often tied to the world economy.

Emerson Electric ( EMR ) fits that category. The company has 235 manufacturing locations worldwide, offering products for industrial, commercial and consumer markets.

The company has five business segments -- process management, industrial automation, network power, climate technologies and commercial/residential solutions.

In recessionary fiscal 2009, revenue dropped 19%. (The fiscal year ends in September.) The company rebounded with the economy, growing sales 5%, 15%, 1% and 1% in fiscal 2010-13. Perhaps that doesn't sound like much of a recovery, but that's pretty much in step with the hesitant recovery worldwide.

Earnings grew 6% and 8% on a year-ago basis in the past two quarters. Revenue advanced 2% and 1%.

Pretax margin was 15% in each of the past three years, above the previous six-year period's 12% to 14% range.

The company has taken some steps to help margins. In February 2012, CEO David Farr talked about a four-year realignment plan that would dump sluggish units totaling $2 billion to $3 billion of annual sales.

In September 2012, the company sold its Knaack unit, a van and truck storage business, for $115 million.

Last November, the company completed the sale of a majority stake in its embedded computer and power business to Platinum Equity, a private equity firm, for about $300 million.

Macquarie Research analyst Mike Wood said at the time that the unit had become commoditized, Reuters reported.

One thing that hasn't changed is Emerson's dividend policy. The company has increased its dividend 57 years in a row. The quarterly payout of 43 cents a share represents an annualized yield of 2.6%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: EMR

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