Emerson Electric Company EMR has managed to impress investors with its recent growthmomentum driven by favorable trends in energy-related, hybrid and general industrial markets. The company is also enjoying strong demand in the Heating Ventilation and Air-Conditioning (HVAC), and refrigeration markets.
We believe that the company's restructuring activities, solid portfolio of new products and accretive acquisitions will continue to boost growth, going ahead.
Buoyed by these growth drivers, Emerson's shares have had an impressive run on the bourse over the past year. Shares of Emerson have gained 11%, better than the industry 's growth of 4.4%. We expect the company's remarkable traction across markets to continue in the quarters ahead.
Given this backdrop, let's delve deeper to find out the key factors that make this Zacks Rank #2 (Buy) company an attractive proposition for investors right now.
Factors to Consider
Emerson is well positioned to benefit from global infrastructure growth as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending. Also, the company's products such as data centers, manufacturing plants and office buildings are considered to be the key components for building infrastructure. Furthermore, environmental regulations are driving the need for new products, thus adding to the company's strength. Moving ahead, Emerson believes telecommunications infrastructure demand will continue to be one of the strongest growth drivers.
Moreover, the company is optimistic about the prospects of its Commercial & Residential Solutions segment as it is witnessing improving trends in the United States, Europe and Asian construction markets.
In light of the recent optimistic order trends and recovering end markets, the company raised its sales and earnings outlook for fiscal 2018. The Automation Solutions segment is expected to witness solid growth driven by favorable trends in power and life sciences. This apart, thriving HVAC, refrigeration markets and construction-related demand in key-end markets is anticipated to boost growth for the company.
Meanwhile, the company's focus on launching new products and technologies enables it to gain a competitive advantage over peers. Further, Emerson's impressive track record of clinching lucrative contracts in the energy infrastructure will prove conducive to its top-line performance, going ahead. We believe that such lucrative contract wins are likely to remain key growth drivers in the coming days. In addition, the company's restructuring activities from last few years have helped it to drive efficiency and growth.
Strong MRO (maintenance, repair and overhaul) services demand, along with small and mid-sized projects focused on expansion and optimization of existing facilities, have also contributed to the company's top line. This apart, the company is on a constant lookout for small bolt-on and strategic acquisitions to restore its sales, up to $20 billion and cash flow back to over $3.2 billion, over a span of next five years. Going ahead, strategic acquisitions and positive trends in certain business areas might prove conductive to the company.
Other Stocks to Consider
Some other top-ranked stocks from the same space are A. O. Smith Corporation AOS , Regal Beloit Corporation RBC and Capstone Turbine Corporation CPST . Each of the stocks carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
A. O. Smith delivered an average positive earnings surprise of 3.9% in the trailing four quarters, having beaten estimates thrice.
Regal Beloit has a decent earnings surprise history, with an average positive surprise of 2.9%. The company surpassed estimates twice in the trailing four quarters.
Capstone Turbine delivered an average positive surprise of 20.8%, having beaten estimates twice in the trailing four quarters.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Capstone Turbine Corporation (CPST): Free Stock Analysis Report Emerson Electric Co. (EMR): Free Stock Analysis Report A. O. Smith Corporation (AOS): Free Stock Analysis Report Regal Beloit Corporation (RBC): Free Stock Analysis Report To read this article on Zacks.com click here.