Core Insights - Emerson Electric reported revenue of $4.43 billion for the quarter ended March 2025, a year-over-year increase of 1.3% and an EPS of $1.48, up from $1.36 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] - The company’s stock has returned +13.9% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change, and currently holds a Zacks Rank 3 (Hold) [3] Financial Performance Metrics - Net Sales- Eliminations: -$18 million, better than the -$19.67 million average estimate, representing a +5.9% year-over-year change [4] - Net Sales- Software And Control- Total: $1.42 billion, exceeding the average estimate of $1.35 billion, with a year-over-year change of +6.7% [4] - Net Sales- Intelligent Devices- Total: $3.03 billion, slightly below the average estimate of $3.06 billion, showing a -1.1% year-over-year change [4] - Net Sales- Software and Control- Test & Measurement: $359 million, above the average estimate of $355.83 million, with a -2.2% year-over-year change [4] - Net Sales- Intelligent Devices- Safety & Productivity: $339 million, below the average estimate of $355.61 million, reflecting a -7.1% year-over-year change [4] - Net Sales- Intelligent Devices- Measurement & Analytical: $1 billion, below the average estimate of $1.02 billion, with a -1.1% year-over-year change [4] - Net Sales- Intelligent Devices- Final Control: $1.07 billion, matching the average estimate, with a +2.1% year-over-year change [4] - Net Sales- Intelligent Devices- Discrete Automation: $615 million, slightly above the average estimate of $610.20 million, showing a -2.7% year-over-year change [4] - EBIT- Intelligent Devices- Total: $725 million, below the average estimate of $746.93 million [4] - EBIT- Intelligent Devices- Measurement & Analytical: $266 million, below the average estimate of $275.70 million [4] - EBIT- Intelligent Devices- Discrete Automation: $117 million, slightly below the average estimate of $120.07 million [4] - EBIT- Software and Control- Test & Measurement: -$24 million, significantly below the average estimate of $133.64 million [4]

Group 1 - Emerson Electric reported quarterly earnings of $1.48 per share, exceeding the Zacks Consensus Estimate of $1.42 per share, and up from $1.36 per share a year ago [1] - The earnings surprise for the quarter was 4.23%, and the company has surpassed consensus EPS estimates in all four of the last quarters [2] - The company posted revenues of $4.43 billion for the quarter, surpassing the Zacks Consensus Estimate by 1.18%, and up from $4.38 billion year-over-year [3] Group 2 - Emerson Electric shares have declined approximately 13.4% since the beginning of the year, compared to a decline of 4.7% for the S&P 500 [4] - The current consensus EPS estimate for the upcoming quarter is $1.55 on revenues of $4.52 billion, and for the current fiscal year, it is $5.94 on revenues of $17.8 billion [8] - The Manufacturing - Electronics industry, to which Emerson Electric belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [9]

Financial Data and Key Metrics Changes - Emerson reported underlying orders growth of 4%, exceeding expectations, with all regions showing positive results, including China [6][12] - Underlying sales were up 2%, with Process and Hybrid businesses growing mid-single digits, while adjusted earnings per share increased by 9% year over year to $1.48 [12][24] - Free cash flow was $738 million, reflecting a 14% increase year over year, with a free cash flow margin of 17% [24][25] Business Line Data and Key Metrics Changes - Process and Hybrid markets grew by 6%, while Discrete businesses turned positive with Test and Measurement orders up 8% [6][14] - Software and Control segment grew by 7%, driven by higher software sales, while Intelligent Devices remained flat due to safety and productivity issues [22] - The Industrial Software business saw an 11% year-over-year increase in annual contract value (ACV), supported by strong demand for AspenTech's offerings [21] Market Data and Key Metrics Changes - Demand for Process and Hybrid businesses remained strong, particularly in energy and LNG projects, with significant capital investment noted in regions like the Middle East, Africa, and India [14][18] - The Americas experienced mid-single-digit growth, while Europe saw low single-digit growth, with continued momentum in Energy Transition and Life Sciences [18][19] - The company expects mid-single-digit growth in Process and Hybrid sales in the second half, with a more muted recovery anticipated in factory automation and automotive sectors [20][36] Company Strategy and Development Direction - Emerson is focused on integrating AspenTech as a key priority for 2025, targeting $100 million in cost synergies by 2028 [10] - The company has completed its portfolio transformation, retaining the Safety and Productivity business due to its strong profitability and cash generation potential [11] - Emerson aims to maintain disciplined capital allocation, prioritizing reinvestment in the business, dividends, and share repurchases while targeting bolt-on acquisitions under $1 billion [39][96] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's plans for the year, guiding for underlying sales growth of approximately 4% and raising the midpoint of adjusted EPS guidance to between $5.90 and $6.05 [9][34] - The management noted that while there are signs of tariff-induced impacts, they have not seen widespread indications affecting demand [16][32] - The company anticipates a favorable spending environment in LNG and power sectors, driven by energy security and self-reliance commitments [16][36] Other Important Information - Emerson's gross exposure to tariffs is estimated at $245 million for 2025, which the company expects to fully mitigate through pricing actions and operational adjustments [7][31] - The company reported a backlog of $7.5 billion, with a book-to-bill ratio of 1.04, indicating a healthy order flow [22] Q&A Session Summary Question: What is improving in discrete automation? - Management highlighted recovery in Test and Measurement driven by Aerospace and Defense, while noting continued weakness in automotive sectors, particularly in China and Germany [42][44] Question: How real is the pharmaceutical spending? - Management confirmed that the commitments from pharmaceutical companies are genuine, with early projects emerging in the life sciences sector [46][48] Question: What can be done with AspenTech now that the deal is closed? - Management expressed excitement about the growth opportunities with AspenTech, emphasizing the potential for double-digit ACV growth and enhanced collaboration with existing Emerson platforms [53][55] Question: Will tariff impacts be offset by the end of the fiscal year? - Management confirmed that they expect to completely cover the tariff impacts by the end of fiscal 2025 [57][59] Question: Why retain the Safety and Productivity business? - Management concluded that retaining the business would provide the best value for shareholders, given its strong profitability and alignment with U.S. manufacturing trends [66][68] Question: What data points indicate softness in China? - Management noted that softness is primarily in the chemical sector, with some positive signs in power generation and marine business [70][72] Question: What is the outlook for Test and Measurement? - Management indicated strong growth in Aerospace and Defense and a recovery in semiconductors, while automotive remains a concern [92][94]

Q2 2025 Performance Highlights - Emerson's underlying orders grew by 4%, with positive contributions from all regions[7] - Process and hybrid businesses increased by 6%, while Test & Measurement (T&M) rose by 8%[7] - Underlying sales grew by 2%, reaching the top of the guided range[7] - Adjusted EPS exceeded the high end of guidance by $006, reaching $148[7, 13] - Free cash flow reached $738 million[13] - Adjusted Segment EBITA Margin was 280%[13] Updated 2025 Guidance - The company expects underlying sales to grow by approximately 4%[9] - The adjusted EPS midpoint is raised to a range of $590 - $605[9] - Free cash flow is updated to $31 billion - $32 billion[9] - The company plans to return $23 billion to shareholders through dividends and share repurchases[9] Tariff Impact and Mitigation - Emerson faces approximately $245 million in tariff exposure for 2025, but expects to fully mitigate the earnings impact[11]

Financial Performance - For Q2 fiscal 2025, net sales were $4.4 billion, up 1% year-over-year, with underlying sales increasing by 2%[63]. - Earnings from continuing operations attributable to common stockholders were $485 million, down 11%, with diluted earnings per share at $0.86, down 9% from $0.95 in the prior year[64][75]. - Adjusted diluted earnings per share from continuing operations increased to $1.48, up 9% from $1.36 in the prior year, reflecting strong operating results[64][75]. - Gross profit for Q2 fiscal 2025 was $2.37 billion, a 4% increase from the prior year, with a gross margin of 53.5%, up 1.3 percentage points[69][70]. - Net sales for the first six months of 2025 were $8,608 million, a 1% increase compared to 2024, with Software and Control sales up 5%[84]. - Gross profit for the first six months of 2025 was $4,606 million, reflecting a 10% increase and a gross margin of 53.5%, up 4.0 percentage points[84]. - Earnings from continuing operations before income taxes increased by 58% to $1,404 million, with a margin of 16.3%[88]. - Diluted EPS from continuing operations rose to $1.88, a 52% increase compared to $1.24 in 2024[90]. - Adjusted EBITA from continuing operations was $2,239 million, a 10% increase, with a margin of 26.0%[95]. Segment Performance - Intelligent Devices sales decreased by 1% to $3.03 billion, with underlying sales flat due to slightly lower volume offset by higher prices[80]. - Software and Control sales reached $1,421 million in Q2 2025, a 7% increase year-over-year, driven by a 10% growth in Control Systems & Software[81]. - Earnings for Software and Control increased by $151 million, up 240%, with a margin improvement of 10.4 percentage points[81]. - Intelligent Devices sales were $5.9 billion in the first six months of 2025, flat compared to the prior year, with underlying sales increasing 1 percent[97]. - Software and Control sales increased to $2,773 million in the first six months of 2025, reflecting a 5 percent increase compared to the prior year[98]. - Earnings for Intelligent Devices rose to $1,412 million, an increase of $86 million or 6 percent, with a margin increase of 1.5 percentage points to 24.0 percent[97]. - Adjusted EBITA for Software and Control increased by 27 percent to $886 million, with an adjusted EBITA margin of 32.0 percent, up 5.6 percentage points[98]. Expenses and Margins - Selling, general and administrative (SG&A) expenses decreased to $1.28 billion, down 1% year-over-year, with SG&A as a percentage of sales at 28.9%, a decrease of 0.7 percentage points[69][70]. - SG&A expenses decreased by $67 million to $2,506 million, with SG&A as a percentage of sales down to 29.1%[86]. Tax and Currency Impact - The effective tax rate for Q2 fiscal 2025 was 32%, impacted by $49 million of discrete tax items related to the AspenTech transaction[74]. - The effective tax rate for the first six months of 2025 was 27%, impacted by discrete tax items related to the AspenTech transaction[89]. - Foreign currency translation had a 1% unfavorable impact on sales, with underlying sales up 2% in both the U.S. and internationally[69]. Future Outlook - The company expects consolidated net sales from continuing operations to increase approximately 4 percent for fiscal year 2025[107]. - Earnings per share for fiscal year 2025 are projected to be between $4.05 and $4.20, with adjusted earnings per share expected to be between $5.90 and $6.05[107]. - The company plans to return approximately $2.3 billion to shareholders through share repurchases and dividend payments in fiscal 2025[108]. - The company anticipates a targeted reduction in net debt of approximately $1 billion over the next 6-12 months[102]. Debt and Capital Structure - Total debt-to-total capital ratio increased to 42.7 percent as of March 31, 2025, reflecting increased borrowings for the AspenTech transaction[100].

Financial Performance - Net sales for Q2 2025 were $4,432 million, a 1% increase from $4,376 million in Q2 2024[1] - Adjusted earnings per share (EPS) rose by 9% to $1.48 in Q2 2025, compared to $1.36 in Q2 2024[1] - Operating cash flow increased by 13% to $825 million in Q2 2025, up from $733 million in Q2 2024[1] - Free cash flow for Q2 2025 was $738 million, reflecting a 14% increase from $651 million in Q2 2024[1] - Adjusted segment EBITA margin improved to 28.0% in Q2 2025, up from 26.0% in Q2 2024[1] - Net earnings for the six months ended March 31, 2025, increased to $1,022 million from $635 million in 2024, representing a growth of 60.7%[17] - Total sales for the quarter ended March 31, 2025, were reported at $4,432 million, a 1% increase compared to $4,376 million in 2024[21] - Adjusted total segment EBITA for the quarter ended March 31, 2025, was $1,240 million, up from $1,139 million in 2024, reflecting a margin increase from 26.0% to 28.0%[28] - Adjusted EBITA for Q2 2025 was $1,143 million, representing a 25.8% margin compared to $1,072 million and a 24.5% margin in Q2 2024[36] - GAAP pretax earnings for Q2 2025 were $629 million, with a margin of 14.2%, down from $711 million and 16.3% in Q2 2024[36] Cash Flow and Investments - Operating cash flow expectations for fiscal 2025 are updated to between $3.5 billion and $3.6 billion[3] - Free cash flow expectations for fiscal 2025 are projected to be between $3.1 billion and $3.2 billion[3] - Cash provided by operating activities for the six months ended March 31, 2025, was $1,018 million, a decrease from $1,158 million in 2024[17] - Cash used in investing activities for the six months ended March 31, 2025, was $264 million, significantly lower than $8,489 million in 2024, indicating reduced investment activity[17] - The company’s ending cash and equivalents decreased to $1,887 million as of March 31, 2025, down from $2,318 million in 2024[17] Acquisitions and Integration - The completion of the AspenTech acquisition was noted, with significant progress on integration[2] - The company acquired AspenTech on March 12, 2025, integrating it as an independent business unit within the Control Systems & Software segment[23] Shareholder Returns - The company plans to return approximately $2.3 billion to shareholders through $1.1 billion in share repurchases and $1.2 billion in dividends[3] Sales Growth and Market Performance - Sales growth in the Americas for the six months ended March 31, 2025, was 3%, while Europe experienced a decline of 2%[26] - The Control Systems & Software segment reported sales of $2,055 million for the six months ended March 31, 2025, an increase of 8% from $1,897 million in 2024[25] - The company experienced a 2% underlying sales growth in Q2 2025, with a favorable foreign exchange impact of 1%[40] - The underlying sales growth guidance for 2025 is projected at 3.5% - 4.5%[40] Costs and Expenses - Acquisition/divestiture fees and related costs for Q2 2025 amounted to $168 million, compared to $20 million in Q2 2024[36] - Amortization of intangibles for Q2 2025 was $278 million, down from $322 million in Q2 2024[36] - Restructuring and related costs for Q2 2025 were $22 million, slightly up from $21 million in Q2 2024[41]

Industry Overview - The Zacks Manufacturing - Electronics industry is poised for growth due to steady demand in electronic services, increased adoption of advanced manufacturing technologies, and product innovation efforts [1] - A surge in e-commerce activities is expected to further support the industry's growth [1] Current Challenges - A slowdown in manufacturing activities and a contraction in new orders may negatively impact industry performance [2] - The Manufacturing Purchasing Manager's Index fell to 48.7% in April, indicating contraction, while the New Orders Index registered 47.2% for the third consecutive month [4] Market Trends - Despite manufacturing slowdowns, demand remains stable in key end markets, particularly in medical and life sciences, driven by the integration of advanced electronic components [5] - The industry is benefiting from technological advancements and digitization, enhancing operational productivity and product quality [6] Industry Performance - The Zacks Manufacturing - Electronics industry currently holds a Zacks Industry Rank of 66, placing it in the top 27% of 246 Zacks industries, indicating bullish near-term prospects [7][8] - Over the past year, the industry has underperformed compared to the broader sector and the S&P 500, losing 17.7% against the sector's decline of 7% and the S&P 500's growth of 9.7% [10] - However, the industry rebounded in the past month with a 15.1% increase, outperforming both the sector's and S&P 500's growth [10] Valuation Metrics - The industry is currently trading at a forward 12-month Price-to-Earnings (P/E) ratio of 21.19X, slightly above the S&P 500's 20.97X and the sector's 17.94X [13] Notable Companies - **Eaton Corporation plc (ETN)**: Benefits from improving end market conditions and strong demand in AI data centers, with shares rebounding 18.3% in the past month [19][20] - **Emerson Electric Co. (EMR)**: Witnessing solid momentum in its Intelligent Devices and Software segments, with shares gaining 0.9% in the past year [23][25] - **EnerSys (ENS)**: Positioned to benefit from product innovation and trends like 5G expansion, with shares rebounding 11.9% in the past month [28][29] - **Powell Industries, Inc. (POWL)**: Experiencing favorable trends in oil, gas, and petrochemical markets, with shares gaining 21.1% in the past year [32][34]

Core Insights - Emerson Electric Co. (EMR) is expected to report growth in both revenue and earnings for the second quarter of fiscal 2025, with revenue estimated at $4.38 billion, reflecting a 0.1% increase year-over-year, and earnings per share projected at $1.42, a 4.4% rise from the previous year [1][3]. Group 1: Performance Expectations - The Intelligent Devices segment is anticipated to see a slight revenue decrease of 0.1% to $3.06 billion, influenced by strong performance in the final control business and solid momentum in power end markets [3][4]. - The Software and Control segment is expected to grow by 0.6% year-over-year to $1.34 billion, driven by robust growth in the Control Systems & Software business and increased license revenues from AspenTech [5]. Group 2: Recent Acquisitions - The acquisition of Afag and Flexim in Q4 of fiscal 2023 has enhanced Emerson's capabilities in factory automation and flow measurement, expanding its reach into high-demand markets such as battery manufacturing and automotive [6]. - The recent acquisition of National Instruments in October 2023 is likely to further strengthen Emerson's position in high-growth sectors, including semiconductors and electric vehicles [7]. Group 3: Cost and Margin Considerations - Rising costs associated with acquisitions and restructuring efforts may negatively impact EMR's margin performance, alongside potential foreign currency headwinds affecting profitability [8]. Group 4: Earnings Predictions - The company has a positive Earnings ESP of +2.42%, with the most accurate estimate at $1.45 per share, suggesting a strong likelihood of an earnings beat [10].

Core Viewpoint - Emerson Electric (EMR) is expected to report quarterly earnings of $1.42 per share, reflecting a 4.4% increase year-over-year, with revenues projected at $4.38 billion, a slight increase of 0.1% compared to the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised downward by 0.1% over the past 30 days, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts forecast 'Net Sales- Intelligent Devices- Total' at $3.06 billion, indicating a year-over-year change of -0.1% [5]. - 'Net Sales- Software And Control- Total' is expected to reach $1.35 billion, reflecting a 1% increase from the prior-year quarter [5]. - 'Net Sales- Intelligent Devices- Discrete Automation' is projected at $610.20 million, showing a decline of 3.5% from the year-ago quarter [5]. - 'Net Sales- Intelligent Devices- Safety & Productivity' is estimated at $355.61 million, down 2.6% year-over-year [6]. - 'Net Sales- Software and Control- Test & Measurement' is expected to be $355.83 million, indicating a 3% decrease from the prior-year quarter [6]. - 'Net Sales- Intelligent Devices- Final Control' is projected to reach $1.07 billion, reflecting a 1.8% increase from the prior-year quarter [7]. - 'Net Sales- Software and Control- Control Systems & Software' is expected at $696.17 million, indicating a 1.3% year-over-year change [7]. - 'Net Sales- Software and Control- AspenTech' is projected at $293.30 million, reflecting a 5.5% increase year-over-year [8]. - 'Net Sales- Intelligent Devices- Measurement & Analytical' is expected to be $1.02 billion, indicating a 0.7% increase from the prior-year quarter [8]. Stock Performance - Over the past month, Emerson Electric shares have recorded a return of +3.9%, contrasting with the Zacks S&P 500 composite's -0.5% change [8]. - Based on its Zacks Rank 3 (Hold), EMR is expected to perform in line with the overall market in the upcoming period [8].

Company Performance - Emerson Electric (EMR) closed at $105.28, reflecting a +0.22% change from the previous day, underperforming the S&P 500's gain of 0.74% [1] - Over the past month, EMR shares have decreased by 6.27%, outperforming the Industrial Products sector's decline of 6.87% but lagging behind the S&P 500's loss of 4.77% [2] Upcoming Financial Results - Emerson Electric is set to announce its earnings on May 7, 2025, with an expected EPS of $1.42, representing a 4.41% increase from the same quarter last year [3] - The consensus estimate projects revenue of $4.38 billion, indicating a 0.1% rise from the equivalent quarter last year [3] Full Year Projections - For the full year, Zacks Consensus Estimates forecast earnings of $5.93 per share and revenue of $17.79 billion, showing increases of +8.01% and +1.73% respectively from the previous year [4] - Recent analyst estimate revisions suggest a positive outlook for the company's business operations and profit generation capabilities [4] Valuation Metrics - Emerson Electric is currently trading at a Forward P/E ratio of 17.7, which is lower than the industry's average Forward P/E of 19.95 [7] - The company's PEG ratio stands at 2.08, compared to the Manufacturing - Electronics industry's average PEG ratio of 1.71 [7] Industry Context - The Manufacturing - Electronics industry is part of the Industrial Products sector and holds a Zacks Industry Rank of 56, placing it in the top 23% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]