Emerson Electric Company
) reported third-quarter fiscal 2013 earnings of $194 million or
27 cents per share compared with net income of $770 million or
$1.04 per share in the year-ago period. The year-over-year
decline was due to a sluggish macroeconomic environment and tough
comparisons compared to last year.
However, excluding the charges related to the divestiture of
embedded computing and power business, the company reported
non-GAAP EPS of 97 cents compared with $1.04 in the year-earlier
quarter, missing the Zacks Consensus Estimate by 2
Total revenue in the quarter was down 2% year over year to
$6.3 billion. Organic sales during the quarter dropped 1% due the
impact of divestitures of 1 %, with sales from the U.S. and Asia
down 3% each and Europe down 6%. Top-line growth was impacted by
mixed results across the end markets and geographies.
In addition, slow economic growth due to stalled business
investment, particularly in mature markets, affected top-line
growth. Revenues were below the Zacks Consensus Estimate of $6.4
segment's net and underlying sales surged a sales nudged up 3%.
The rise was mainly due to good performances in the energy and
chemical end markets.
On a geographical basis, the segment's sales grew 8% growth in
Asia, remained flat in Europe and fell 6% in the U.S., all on a
year-over-year basis. Orders increased 8% due to solid growth in
the systems and solutions business, strong demand improvement in
North America and double-digit rise in sales in China.
segment reported revenues and underlying sales decline of 7%,
with the U.S. sales down 6%, Europe down 13% and Asia's sales
remaining flat year over year, as end markets for global capital
goods remained weak. The power generating alternators was the
worst performing sub-category in the segment. However, channel
inventory destocking is slowing which indicates that orders
should turn positive.
revenues as well as underlying sales contracted 5% each, with the
U.S. sales down 1%, Asia down 13% and Europe down 4% year over
year, due to mix business demand trends. The computing and power
business also declined double-digits, reflecting weak and
fluctuating demand for technology equipment and mobile
Furthermore, underlying sales fell marginally in the network
power systems business, as an increase in demand for data center
infrastructure was more than offset by the weak global
Both overall revenues and organic sales in the
division fell 2%, with the U.S., Europe and Asia registering
decreases in revenues. After a robust performance from the U.S.
residential air conditioning business in the previous quarter,
the segment reported lackluster growth in the said quarter as
mild weather and inventory de-stocking affected consumers'
Additionally, commercial air conditioning and global
refrigeration demand remained weak, with particular weakness in
the transportation business.
Revenues in the
Commercial & Residential Solutions
segment contracted 2%, attributable to a 6% deduction from the
Knaack business divestiture. Organic sales rose 4%, driven by a
6% increase in the U.S., led by strong demand in residential end
Operating margins fell to 8% during the quarter from 17.8% in
the year-ago period, due to high goodwill impairment charges. Net
margins fell to 3% from 11.9 % reported in the prior-year
Balance Sheet & Cash Flow
Exiting the quarter, the company had cash and cash equivalents
of $2.8 billion with a long-term debt of $4.1 billion. Net cash
from operating activities during the nine month period were $2.1
billion compared with $1.7 billion during the prior-year
Along with its earnings release, Emerson announced that it has
inked a deal with Platinum Equity to sell 51% stake in its
computing and power business. The company cited weaker demand
from the technology equipment and mobile device markets as one of
primary reasons for the divesture.
Along with the earnings release, the company lowered its
guidance for fiscal 2013, given the sluggish economic growth.
Further, the order trend had no signs of improvement in the
Therefore, Emerson has narrowed its guidance and now expects
earnings to be in the range of $3.48 to $3.55, excluding the
goodwill and tax charges related to the embedded computing and
power business, down from its previous range of $3.48 to $3.58 a
Both revenues and underlying sales growth is now expected to
be approximately 1% lower than its previous guidance of 1.5% to
2.5%, with EBIT and pre-tax margin projected to be flat year over
The company expects operating cash flow to be approximately
$3.4 billion with free cash flow of approximately $2.7
Emerson currently has a Zacks Rank # 3 (Hold). However, other
companies that can be considered at the moment are
Alamo Group, Inc.
CECO Environmental Corp
Calgon Carbon Corporation
), all having Zacks Rank #1 (Strong Buy).
ALAMO GROUP INC (ALG): Free Stock Analysis
CALGON CARBON (CCC): Free Stock Analysis
CECO ENVIRNMNTL (CECE): Free Stock Analysis
EMERSON ELEC CO (EMR): Free Stock Analysis
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