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Emerson Electric Co EMR

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Economic Moat




Emerson Moves Along Slightly Ahead of Our Expectations as We Raise Its Fair Value Estimate

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Wide-moat rated Emerson Electric slightly outperformed our expectations in its fiscal fourth quarter. On the strength of this outperformance, particularly on its top line, we raise our fair value estimate by $2. Combined with an extra $2 due to time value of money, we raise our fair value estimate to $74 per share from $70 per share. We now expect $17.1 billion of sales for full-year 2021, GAAP operating margins of 15.5%, yet similar adjusted EPS of $3.48 and $2.5 billion of free cash flow, and a ROIC of 16.8% (which represents a 60-basis-point improvement from 2020). Nevertheless, we expect a more detailed review after Emerson issues its 10-K, which results in further adjustment to the upside with an additional year in our explicit forecast when we roll our model. Given what we see as a conservative forecast, our projections sit at the top end of the guidance range; we think it sets up management for a highly probable beat and raise if economic activity recovers even further ahead of expectations, as has been the case thus far.

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Company Profile

Business Description

Emerson Electric is a multi-industrial conglomerate that operates under two business platforms: Automation Solutions and Commercial and Residential Solutions. The latter is further subdivided into two operating segments: climate technologies, which sells HVAC and refrigeration products and services, as well as tools and home products, which sells tools and compressors, among other products and services. Commercial and residential solutions boasts several household brands, including Copeland, InSinkErator, and RIDGID. Automation solutions is most known for its process manufacturing solutions, which consists of measurement instrumentation, as well as valves and actuators, among other products and services. About half of the firm’s geographic sales take place in the United States.

8000 West Florissant Avenue, P.O. Box 4100
St. Louis, MO, 63136
T +1 314 553-2000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2020
Fiscal Year End Sep 30, 2021
Stock Type High Yield
Employees 83,500