On Mar 13, 2014, we issued an updated research report on
Emerson Electric Co
). The company had earlier reported better-than-expected
quarterly results. The company benefited from accelerated growth
conditions in emerging markets. Emerson's Process Management also
performed well, driven by good performances in the energy and
chemical end markets.
Emerson delivered a positive earnings surprise in one of the
last four quarters, with an average beat of 1.00%. It reported
decent earnings in the first quarter of fiscal 2014, up 8.1% year
over year, but in line with the Zacks Consensus Estimate.
Additionally, management provided an encouraging outlook for
fiscal 2014. The company continues to expect earnings per share
in the range of $3.68-$3.80, reflecting an increase of 33% to 38%
on a reported basis.
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 operating margins to increase by 0.5%,
driven by change in business mix and increasing volumes. However,
increasing strategic investments might prove to be a drag for the
Emerson is well positioned to benefit from the long-term
global trends of infrastructure spending and improved energy
efficiency. As the emerging economies grow, these are
increasingly investing in infrastructure necessary to support a
modern economy. Emerson is expected to benefit from the steady
adoption of central air conditioning in Asia, driven by the
emerging middle class and broader energy efficiency
Moreover, the company's residential segment and especially its
air conditioning, professional tools and food waste disposer
businesses are likely to benefit from increasing investments in
North America. The company's cost cutting and restructuring
initiatives are also expected to be beneficial going forward. For
the last two years, the company is focusing on reducing costs,
while boosting profits and margins significantly.
Emerson currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Stocks that are worth considering within this sector are
Quanta Services Inc
), all carrying a Zacks Rank #2 (Buy).
EMERSON ELEC CO (EMR): Free Stock Analysis
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