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Emerson (EMR) Fiscal Q4 Earnings: Will It Disappoint?

Emerson Electric Co.EMR is slated to report fourth-quarter fiscal 2015 results on Nov 3, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 1.20%. However, the company has a negative average earnings surprise of 0.99% in the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors to Consider

During the quarter, Emerson bought premium provider of flow assurance and production optimization software, Yggdrasil . Also, the company completed the buyout of premium flame and open path gas detectors manufacturer Spectrex Inc . Both the acquisitions are integrated with Emerson's leading business unit, Emerson Process Management. On the other hand, Emerson completed the divestiture of its InterMetro business to Ali Group to strategically restructure its portfolio to enhance focus on core markets and diminish exposure to the non-core domain. We anticipate such portfolio streamlining efforts to contribute towards top-line growth in the fourth-quarter of fiscal 2015.

However, over the past few quarters, Emerson has been troubled by certain issues in business. The company has been suffering from low revenues over the last few quarters due to the negative effect of currency fluctuations.

In the third quarter of fiscal 2015, Emerson's underlying sales had to bear the negative impact of currency translations of around 5%. In particular, weak euro and yen as compared to the strong dollar continues to be a major concern. Emerson faced much operational issues in these weak currency markets due to strong competition. Going forward, the company expects appreciation of the dollar to weigh to its quarterly earnings in the fourth quarter as well.

Additionally, Emerson's business is being affected by the current volatility in the oil and gas market, with oversupply continuing to pressure the prices and spending levels. Specifically, activity in upstream oil and gas slowed due to reductions in industry capital budgets. This is negatively affecting the company's order rates in power generating alternators and electrical distribution businesses. The company anticipated oil and gas market uncertainties to persist in fourth quarter too.

Moreover, Emerson has been suffering from sluggishness in the industrial market mainly in the U.S. and China. This has affected the company's order rates and pulled down the sales figure in the third-quarter of fiscal 2015. Apart from this, weakness in Telecommunications Power, Climate Technologies and Data Center businesses affected Emerson's top-line growth in the last reported quarter. The company projected such headwinds to weigh on the underlying sales growth in the fourth quarter of fiscal 2015 as well.

Earnings Whispers?

Our proven model does not conclusively show that Emerson will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP : Emerson currently has an ESP of -1.03% for the quarter. This is because the Most Accurate estimate of 96 cents per share stands below the Zacks Consensus Estimate of 97 cents.

Zacks Rank : Emerson's Zacks Rank #4 (Sell), when combined with a negative ESP, lowers the predictive power of ESP and makes an earnings beat unlikely.

Notably, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

AECOM ACM has an Earnings ESP of +1.03% and a Zacks Rank #3.

Chicago Bridge & Iron Company N.V. CBI has an Earnings ESP of +0.65% and a Zacks Rank #3.

AerCap Holdings N.V. AER has an Earnings ESP of +5.30% and a Zacks Rank #3.

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EMERSON ELEC CO (EMR): Free Stock Analysis Report

CHICAGO BRIDGE (CBI): Free Stock Analysis Report

AECOM TECH CORP (ACM): Free Stock Analysis Report

AERCAP HLDGS NV (AER): 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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