Tags: Emerson | Electric | cautious | EMR

Emerson Electric Cautious Regarding Ongoing Global Malaise

By Greg Brown   |   Monday, 25 Jun 2012 02:08 PM

Emerson Electric (EMR) has its fingers into dozens of industries around the planet, thanks to its role in providing tools and equipment needed for manufacturing, research, telecoms, and building. A global recovery would suit the company well at this point, however, EMR management is cautious regarding the ongoing malaise.

Emerson Electric designs and supplies products and technology and delivers engineering services and solutions in a wide range of industrial, commercial and consumer markets around the world. It is organized into the following business segments:

‌• Process management: providing measurement, control and diagnostic capabilities for automated industrial processes producing items such as foods, fuels, medicines and power.

‌• Industrial Automation: bringing integrated manufacturing solutions to diverse industries worldwide.

‌• Network Power: providing power conditioning and reliability and environmental control to help keep telecommunication systems, data networks and other critical business applications continuously operating.

‌• Climate Technologies: enhancing household and commercial comfort as well as food safety and energy efficiency through air conditioning and refrigeration technology.

‌• Tools and Storage: providing tools for professionals and homeowners, home and commercial storage systems, and appliance solutions.

“The big issue that we face here, I think, in the next six to 12 months is the global economy continues to slide, slide a little bit downwards, a little bit weaker,” Emerson CEO David Farr recently told analysts.

“The U.S. economy is holding in and what I call a very moderate growth, maybe 2 percent, 2.5 percent, and certain segments are not seeing much growth. But the U.S. economy is growing; it is the global engine of growth right now. And I don't see the rest of the world coming back too much in the second half.”

Emerson Electric has a market cap of $33.53 billion in a sector, electrical equipment, where the average company size is $2.29 billion. Its trailing 12-month P/E ratio is 14.65 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.31, compared to 0.47 for the sector.

Its projected earnings per share growth for the coming year is 15.29 percent, compared to a sector average of 16.44 percent.

Well positioned


Analysts are generally positive on EMR, with buy or outperform calls from Oppenheimer & Company, Morgan Stanley, Goldman Sachs, and B.P. Bernstein.

“We think EMR is well positioned to benefit from any strengthening in the global economy, particularly from spending on infrastructure,” S&P analysts wrote in mid-June.

“However, orders rates across EMR's business units have slowed over the past few quarters, particularly from Europe and China. Still, backlog in the later-cycle segments, like process management, continue to expand.”

Emerson Electric next reports on May 1, 2013.

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