Emerson Electric Company
) reported fiscal first-quarter 2014, ended Dec 31, 2014,
earnings of 67 cents per share compared with 62 cents per share
in the year-ago period. The earnings were in line with Zacks
Consensus Estimate of 67 cents per share.
The year-over-year growth was driven by increasing demand and
improving macroeconomic conditions across most of the regions.
Moreover, the company's business is benefiting from the
accelerated growth conditions in the emerging markets.
Total revenue in the quarter was up 1% year over year to
$5,606 million. Organic sales in the quarter increased 3% despite
a negative impact from the divestitures. The company's revenues
from the U.S. and Asia were up 3% and 10% respectively while
those in Europe remained flat year over year. In addition,
accelerated economic growth driven by increasing demand,
particularly in the emerging markets is reflected in the top-line
development. Revenues beat the Zacks Consensus Estimate of $5,573
segment's net sales surged by 8% while its underlying sales
increased by 5%. The rise was mainly due to good performances in
the energy and chemical end markets. On a geographical basis, the
segment's sales grew 14% in Asia, 3% in Europe and 6% in the
U.S., all on a year-over-year basis.
segment reported 1% increase in revenues driven by the positive
impact from the currency translation. However, underlying sales
in the U.S. remained flat year over year, sales in Europe went
down 5% and Asia's sales rose up 9%, while end markets for global
capital goods remained weak. The power generating alternators
remained flat due to persistently sluggish demands. However,
recovering macroeconomic environment indicates that orders might
revenues contracted 11% despite a 2% increase in the underlying
sales. The revenues were lowered by a 12% negative impact from
the divesture of embedded computing and power business. The
segment's underlying sales demand was mixed in different regions.
The U.S. and Asia's underlying sales were up by 2% each driven by
the growth in telecommunications industry across the globe. The
company's datacenter business performed well in Europe but was
offset by sluggish demand in Asia and the U.S. The business is
likely to benefit in the near term led by the ongoing recovery in
Europe and increasing scope for growth in Asia.
Revenues in the
division increased 5% year over year driven by the company's
transport refrigeration and residential air conditioning
businesses. Sales in the U.S. declined marginally. However,
the revenues from Europe and Asia increased by 5% and 13%
respectively with sales in China increasing by more than 20%.
After a robust performance in Asia and Europe, the segment
reported order growth of 8% in the quarter.
Revenues in the
Commercial & Residential Solutions
segment increased 3%, attributable to improvement in professional
tools, food waste disposers, and storage businesses. Sales in the
U.S. increased 2% year over year and it was up by 6% in the
Balance Sheet & Cash Flow
Exiting the quarter, the company had cash and cash equivalents
of $2.7 billion with a long-term debt of $3.8 billion. Net cash
from operating activities during the reported quarter were $691
million compared with $639 million during the prior-year
Along with the earnings release, the company has reaffirmed
its outlook for fiscal 2014. The company continues to expect the
earnings per share to be in the range $3.68-$3.80 reflecting an
increase of 4% to 7% or an increase of 33% to 38% on a reported
The underlying sales are likely to grow in the range of 3-5%
while net sales can lie anywhere between a decline of 1% to an
increase of 1% given the impact of acquisitions, divestitures,
and currency translation on the business.
The company expects the operating margins to increase by 0.5%
driven by change in business mix and increasing volumes. However,
the increasing strategic investments made by the company might
prove to be a drag for the company's margins.
In the quarter, Emerson completed divesting its embedded
computing and power business while it made some strategic
acquisitions including that of Appleton Group valued at $574
million. Previously, Appleton Group was a part of the company's
joint venture with
). The company also acquired the Virgo and Enardo businesses in
Emerson currently holds a Zacks Rank # 3 (Hold). However,
other companies that can be considered at the moment include
Franklin Electric Co., Inc.
Eaton Corp. plc
) both having Zacks Rank #2 (Buy).
EMERSON ELEC CO (EMR): Free Stock Analysis
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