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Emerson (EMR) Closes Buyout of Software Supplier, ProSys

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Emerson Electric Co.EMR recently acquired ProSys, a global supplier of software and services that facilitates increased production and safety for chemical, pulp & paper, oil & gas, as well as refining industries. ProSys' unique technologies and proficiency will enable Emerson to aid customers in improving plant performance, safety and profitability by optimizing human as well as automation resources.

Acquisition Rationale

The acquisition complements Emerson's buyout of MYNAH Technologies in May 2017. ProSys' portfolio consists of solutions that aid management of alarms crucial to plant production, as well as handling changing plant states.

ProSys' software portfolio supports Emerson's Operational Certainty program, which allows industrial companies to realize Top Quartile performance in areas such as safety, reliability as well as production. ProSys' technologies, when combined with Emerson's added expertise will enable operators to navigate plant systems safely and efficiently. This will also allow customers to accommodate the changing state and age of the industrial workforce.

Our Take

Emerson has been executing restructuring activities since 2015 to drive efficiency and growth. The company has taken a series of concerted efforts to develop a better brand with significant customer focus. It has also devised cost cutting and divestment plans to unlock greater benefits in the coming quarters. All of its segments garnered significant savings from restructuring actions. Notably, this Zacks Rank #3 (Hold) company has returned 22.1% in the past six months, outperforming the industry 's average gain of 11.6%.

The company's ardent eye for acquisitions is anticipated to be conducive to core business. The company is on a constant lookout for small bolt-on and strategic acquisitions to restore sales, up to $20 billion and cash flow back to over $3.2 billion, over a span of next five years. Recently, the company completed the buyout of Pentair Valves & Controls and a business unit of Pentair plc. Further, the company expanded global capabilities in fresh food monitoring, with the acquisitions of Locus Traxx and PakSense. We believe such strategic buyouts will supplement the top-line performance, going forward. This apart, the company's diligent efforts for launching new products and technologies helps it to gain a competitive advantage over peers.

However, the fact remains that, prolonged softness in the oil and gas markets has affected both capital spending and operational expenditure of clients, which in turn are hurting Emerson's operations. Moreover, the company's operations have been suffering as a result of slow spending in general industrial markets. This has affected its order rates across the related segments, consequently pulling down the company's top line.

Stocks to Consider

Some better-ranked stocks from the same space include Deere & Company DE , Barnes Group, Inc. B and Donaldson Company, Inc. DCI . While Deere & Company sports a Zacks Rank #1 (Strong Buy), Barnes Group and Donaldson Company carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Deere & Company has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 19.5%.

Barnes Group has outpaced estimates thrice in the preceding four quarters, with an average earnings surprise of 9.0%.

Donaldson Company has surpassed estimates thrice in the preceding four quarters, with an average positive earnings surprise of 5.2%.

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Emerson Electric Company (EMR): Free Stock Analysis Report

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Donaldson Company, Inc. (DCI): Free Stock Analysis Report

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


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

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