Tags: EMR | Emerson Electric | conglomerate | technology | stocks | investing

Emerson Electric: An Industrial Powerhouse

By Dan Weil   |   Tuesday, 24 May 2011 02:55 PM

With the global economy in recovery mode, now is a good time to be an industrial conglomerate. So it’s no surprise that Emerson Electric (EMR) is thriving, especially given its focus on emerging markets.

The company makes air conditioning compressors, motors, and backup power equipment for computer server centers.

Emerson is divided into five units: process management, which accounts for 31 percent of sales; network power, which accounts for 23 percent; climate technologies 20 percent; industrial automation, 17 percent; and tools and storage, 10 percent.

Net income jumped 38 percent in the fiscal second quarter ended March 31 to $556 million from $405 million a year earlier. Sales gained 18 percent to $5.85 billion.

"This was an excellent quarter for the company in a very challenging and uncertain environment," Emerson CEO David Farr said in a conference call with analysts after the report. "We have operating issues, (but) one thing Emerson can do is fix operating issues."

Challenges and strengths

Rising commodity prices and slack demand in China for telecommunications equipment held back results. High inflation and rising interest rates hit Chinese telecom demand.

Weakness in the telecom sector hurts Emerson because it makes uninterruptible power systems for large computer networks. Network power represented the only Emerson unit to show lower earnings, but even its revenue soared 20 percent.

Emerson was able to increase its full-year profit forecast slightly, as the global economic recovery remains in place.

Analysts see strength ahead for Emerson too. “We forecast that fiscal year 2011 sales will advance more than 13 percent,” writes Standard & Poor’s analyst Mathew Christy. “This projection is based on our expectation for higher demand and the benefits associated with acquisitions.”

He also expects operating profit margins to rise to 17.3 percent this fiscal year and thinks Emerson will reap the rewards of greater operating leverage and cost cutting.

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With the global economy in recovery mode, now is a good time to be an industrial conglomerate. So it s no surprise that Emerson Electric (EMR) is thriving, especially given its focus on emerging markets. The company makes air conditioning compressors, motors, and backup...
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