Emerson’s Price Target Cut at Baird Following Q2 Results

On November 6, 2024, Ken Newman from KeyBanc set a price target of $140 for Emerson Electric Co. (NYSE:EMR). At the time, the stock was trading at $117.27, suggesting a potential upside of about 19.38%. Emerson Electric is a global leader in automation equipment, industrial software, and engineering products. It competes with companies like Honeywell and Siemens.

Recently, Emerson's stock price surged by 7%, making it one of the top performers in the S&P 500. This increase followed the company's announcement of strong sales and profit figures for its fiscal fourth quarter. The stock is now priced at $127.52, reflecting an 8.37% increase with a change of $9.85.

The stock's price has fluctuated between $123.35 and $127.74 today, with $127.74 marking its highest price over the past year. The lowest price for the stock in the past year was $84.61. Emerson's market capitalization stands at approximately $73 billion, indicating its significant presence in the market.

Emerson also made headlines with a bold buyout bid for AspenTech, which could further enhance its market position. The trading volume for the day is 4,323,472 shares on the New York Stock Exchange, showing strong investor interest.

• Emerson Electric Co. (NYSE:EMR) reported an EPS of $1.48, beating the Zacks Consensus Estimate.
• The company's revenue reached $4.62 billion, indicating a 13% year-over-year increase.
• Valuation metrics such as a P/E ratio of 39.22 and a price-to-sales ratio of 3.97 reflect investor confidence in Emerson's growth prospects.

Emerson Electric Co. (NYSE:EMR) is a global technology and engineering company providing innovative solutions for customers in industrial, commercial, and residential markets. The company operates through various segments, with Intelligent Devices being a key driver of growth. Emerson competes with other industrial giants like Honeywell and General Electric in delivering automation solutions and services.

On November 5, 2024, Emerson reported earnings per share (EPS) of $1.48, surpassing the Zacks Consensus Estimate of $1.47. This marks an improvement from the $1.29 EPS reported in the same quarter last year. The company's revenue reached approximately $4.62 billion, exceeding the estimated $4.57 billion. This growth reflects a 13% year-over-year increase in sales, primarily driven by the strong performance of its Intelligent Devices segment.

Emerson's financial health is further highlighted by its valuation metrics. The company has a price-to-earnings (P/E) ratio of 39.22, indicating that investors are willing to pay $39.22 for every dollar of earnings. The price-to-sales ratio stands at 3.97, suggesting that investors are paying $3.97 for every dollar of sales. These figures reflect investor confidence in Emerson's growth prospects.

The company's enterprise value to sales ratio is 4.47, and its enterprise value to operating cash flow ratio is 47.26. These metrics provide insight into Emerson's valuation in relation to its sales and cash flow from operations. Additionally, the earnings yield of 2.55% offers a perspective on the return on investment for shareholders.

Emerson maintains a moderate debt-to-equity ratio of 0.49, indicating a balanced approach to leveraging debt. The current ratio of 1.16 suggests that the company has a reasonable level of liquidity to cover its short-term liabilities. Furthermore, Emerson has announced an increase in its quarterly cash dividend to $0.5275 per share, payable on December 10, 2024, as highlighted by PR Newswire.

Analyst at Mizuho Securities raised their rating on Emerson (NYSE:EMR) from Neutral to Buy, with an increased price target of $118.00. This upgrade comes in response to rising market multiples and the prospects of a re-rating following Emerson's transformational portfolio actions. These actions are expected to drive growth and improve margins, particularly from 2024 onwards.

Despite the understanding of bearish arguments, Emerson's shares have underperformed due to drastic changes in its portfolio. However, there's a sense that investor concerns may start to diminish, leading to increased engagement in 2024. Emerson is positioned as a "barbell" investment, where its long-cycle process/hybrid segment provides a stable growth source, complemented by the recovery of the "short-cycle" divisional orders/sales expected to start around mid-year.

This short-cycle end, including discrete automation, T&M, and productivity, The analysts also raised the 2024 earnings per share (EPS) estimate to $5.20 from $5.10, citing potential for additional upside. Additionally, they set a new 2025 EPS estimate at $5.80, based on mid-single-digit growth expectations.

RBC Capital raised its price target on Emerson Electric Co. (NYSE:EMR) following the company’s annual analyst meeting, where CEO Lal Karsanbhai and team outlined the company’s new automation pure-play roadmap.

Fiscal 2023 guidance was reiterated. The analysts said they liked hearing that 30% of the portfolio is levered to double-digit growth secular tailwinds and that the company is focused on expanding in four key adjacencies (industrial software, test & measurement, factory automation, and smart grid solutions).

Investors remain most focused on where Emerson will redeploy its balance sheet following the Climate Technologies and InSinkErator deals, but RBC Capital analysts remain confident that management will continue to pursue diligent capital deployment and strategic fit.

RBC Capital analysts provided their views on Emerson Electric Co. (NYSE:EMR) upcoming NYC Investor Day, scheduled on Nov 29. With the $14 billion Climate Tech divestiture announced on Oct 31, the analysts expect the focus of the Investor Day to be on the long-term positioning of the pure-play automation company and some perspective/timeline on how the 25% “earnings hole” will be filled.

The analysts expect the company to elaborate on the drivers of its through-the-cycle metrics provided last quarter, namely its 4%-7% organic growth, 23% adjusted segment EBITDA margins, and 100% free cash flow conversion. Recall that the automation segment underwent a sizable restructuring in 2019-2021, driving out $520 million in cost savings.

Emerson Electric Co. (NYSE:EMR) reported its Q2 results last week, with EPS of $1.29 coming in better than the consensus estimate of $1.18. Revenue was $4.79 billion, compared to the consensus estimate of $4.71 billion.

Automation Solutions orders grew 17% to $6.4 billion and backlog grew $0.4 billion sequentially and approximately $0.9 billion year-to-date after rising 16% in 2021.

The pipeline for LNG investment is pulling forward nicely, with 250 million tons per annum of capacity this decade, compared to 125 million each of the past two decades.

The company provided its full 2022-year outlook, expecting EPS to range from $4.95 to $5.10, compared to the consensus estimate of $5.01.

Analysts at Oppenheimer provided their views following the results, adjusting their 2022 EPS estimate to $5.10 from $5.00 and 2023 EPS estimate to $5.55 from $5.45. The analysts lowered their price target to $110 from $115, while reiterating their outperform rating.