Core Insights - Emerson Electric Co. has experienced poor momentum over the last three months, receiving a D+ momentum grade for the period [1] Valuation Methods - Various methods exist for sell-side analysts to determine a company's "fair" value, including DCF, multiples approach, and reverse valuation [1] - The DCF method requires precise assumptions, which can lead to biases, while the multiples approach assumes peer companies are fairly priced, a notion often unsupported by historical data [1] - Reverse valuation starts from the market price and discount rate, revealing the free cash flow assumptions embedded in the price, providing a direct reality check on market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to assess what truly belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE [1] - The analysis disregards working capital and debt changes, focusing on three key numbers: earnings, amortization, and investments [1] Forecasting Approach - The H-model is applied for forecasts, featuring a 10-year two-stage growth fade with terminal growth equal to the risk-free rate, represented by the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear picture of the business's true worth [1]

Core Insights - Emerson Electric Co. has experienced poor momentum over the last three months, receiving a D+ momentum grade for the period [1] Valuation Methods - Various methods exist for sell-side analysts to determine a company's "fair" value, including DCF, multiples approach, and reverse valuation [1] - The DCF method requires precise assumptions, which can introduce bias, while the multiples approach assumes peer companies are fairly priced, a notion often unsupported by historical data [1] - Reverse valuation starts from the market price and discount rate, revealing the free cash flow assumptions embedded in the price, providing a direct reality check on market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to assess what truly belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE [1] - The analysis disregards working capital and debt changes, focusing on three key figures: earnings, amortization, and investments [1] Forecasting Approach - The H-model is applied for forecasts, featuring a 10-year two-stage growth fade with terminal growth equal to the risk-free rate, represented by the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear picture of the business's true worth [1]

Core Viewpoint - Emerson Electric (EMR) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [4][6]. - For Emerson Electric, the recent increase in earnings estimates suggests an improvement in the company's underlying business, likely leading to a rise in stock price [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [7]. - The upgrade of Emerson Electric to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [9][10]. Earnings Estimate Revisions for Emerson Electric - Emerson Electric is projected to earn $6.00 per share for the fiscal year ending September 2025, with no year-over-year change, but the Zacks Consensus Estimate has increased by 0.7% over the past three months [8].

Group 1 - Emerson Electric (EMR) is currently ranked 2 (Buy) in the Zacks Rank, indicating a positive outlook for the stock [3] - The Zacks Consensus Estimate for EMR's full-year earnings has increased by 0.7% over the past three months, reflecting stronger analyst sentiment [4] - Year-to-date, EMR has gained approximately 8.5%, outperforming the average return of 6.1% for the Industrial Products sector [4] Group 2 - Emerson Electric is part of the Manufacturing - Electronics industry, which consists of 15 companies and is currently ranked 64 in the Zacks Industry Rank [6] - Stocks in the Manufacturing - Electronics industry have gained about 12.6% year-to-date, indicating that EMR is slightly underperforming its industry [6] - Mitsui & Co. (MITSY), another stock in the Industrial Products sector, has a year-to-date return of 20.8% and is ranked 1 (Strong Buy) [5]

Industry Overview - The Zacks Manufacturing - Electronics industry is positioned to benefit from stable demand in electronic services, advanced manufacturing technologies, and product innovation efforts, with a surge in e-commerce activities aiding growth [1] - The industry comprises companies manufacturing electronic products such as battery chargers, power transmission products, and water-treatment products, with a focus on customer support and after-market services [3] Current Challenges - A slowdown in the manufacturing sector and supply-chain issues are negatively impacting some industry participants, with the Manufacturing Purchasing Manager's Index at 49.1% indicating contraction [2][4] - Supply-chain disruptions, particularly regarding electrical and electronic components, remain a concern, as reflected in slower deliveries reported by the ISM [4] Market Trends - Despite manufacturing slowdowns, demand in key end markets remains stable, with electronics manufacturers benefiting from the adoption of advanced manufacturing technologies [5] - The industry is experiencing positive momentum in the medical and life sciences markets, driven by strong demand for products and solutions [5] Technological Advancements - Industry players are increasingly digitizing operations to gain insights into performance, demand cycles, and supply-chain issues, enhancing competitiveness through improved productivity and product quality [6] Industry Performance - The Zacks Manufacturing - Electronics industry holds a Zacks Industry Rank of 84, placing it in the top 35% of 243 Zacks industries, indicating bullish near-term prospects [7][8] - The industry's earnings estimates for 2025 have increased by 0.1% over the past year, reflecting analysts' confidence in earnings growth potential [9] Comparative Performance - Over the past year, the industry has outperformed the broader sector with an 8.9% growth compared to the sector's 1.6% rise, but underperformed the S&P 500, which increased by 17.5% [11] Valuation Metrics - The industry is currently trading at a forward 12-month Price-to-Earnings (P/E) ratio of 22.44X, slightly below the S&P 500's 23.39X but above the sector's 19.75X [14] Notable Companies - Franklin Electric is well-positioned due to strong demand in the Water Systems segment, with a 0.5% increase in earnings estimates for 2025 [18][19] - Powell Industries benefits from strength in the oil and gas markets, with shares rising 34.4% in the past year [22][23] - Emerson Electric is experiencing solid momentum in its Final Control business, with a slight increase in earnings estimates [25] - Eaton Corporation is benefiting from rising demand in AI-data centers and global reindustrialization trends, with an 8.1% increase in share price over the past year [28][29]

Core Viewpoint - Emerson Electric is set to report its earnings on November 5, 2025, with expectations of a 9.46% growth in EPS and a 5.74% increase in revenue compared to the same quarter last year [2]. Group 1: Earnings Performance - The upcoming earnings release is anticipated to show an EPS of $1.62 and revenue of $4.88 billion [2]. - Full-year Zacks Consensus Estimates predict earnings of $6 per share and revenue of $18.04 billion, indicating a year-over-year earnings growth of 9.29% and no change in revenue [3]. Group 2: Analyst Estimates and Market Sentiment - Recent modifications to analyst estimates for Emerson Electric suggest evolving short-term business trends, with positive revisions indicating a favorable business outlook [3]. - The Zacks Rank system, which reflects estimate changes, currently rates Emerson Electric as 3 (Hold) [5]. Group 3: Valuation Metrics - Emerson Electric has a Forward P/E ratio of 20.01, which is lower than the industry average of 24 [6]. - The company’s PEG ratio stands at 2.25, compared to the Manufacturing - Electronics industry average of 1.96 [7]. Group 4: Industry Context - The Manufacturing - Electronics industry is part of the Industrial Products sector, which has a Zacks Industry Rank of 82, placing it in the top 34% of over 250 industries [7]. - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8].

Core Viewpoint - Emerson Electric Co. is a global technology and engineering company with a market cap of $73.4 billion, providing innovative solutions across various markets, focusing on automation technologies, control systems, and software to enhance productivity and sustainability [1] Financial Performance - Emerson Electric is expected to announce its fiscal Q4 2025 results on November 5, with analysts predicting an adjusted EPS of $1.62, reflecting a 9.5% increase from $1.48 in the same quarter last year [2] - For fiscal 2025, analysts forecast an adjusted EPS of $6, representing a growth of 9.3% from $5.49 in fiscal 2024 [3] Stock Performance - Over the past 52 weeks, Emerson Electric's shares have increased by 19.5%, outperforming the S&P 500 Index's gain of 15.1% and the Industrial Select Sector SPDR Fund's return of 11.5% [4] Recent Developments - Despite reporting a better-than-expected Q3 2025 adjusted EPS of $1.52, shares fell by 4.7% due to net sales of $4.55 billion falling short of consensus expectations, and the company narrowed its full-year sales growth outlook to approximately 3.5% from 4% [5] Analyst Ratings - The consensus view on Emerson Electric stock is cautiously optimistic, with a "Moderate Buy" rating from 24 analysts; 15 suggest a "Strong Buy," one a "Moderate Buy," seven recommend a "Hold," and one a "Moderate Sell" [6] - The average analyst price target for Emerson Electric is $151.04, indicating a potential upside of 13.7% from current levels [6]

Core Viewpoint - JPMorgan has raised the price target for Emerson Electric Co. (EMR) from $135 to $151 while maintaining a Neutral rating, reflecting a cautious outlook for the electrical equipment sector but noting more appealing valuations [2]. Company Overview - Emerson Electric Co. is an American manufacturing company that provides a diverse range of products and services across commercial, industrial, and consumer markets [1]. - The company has undergone significant transformation in recent years, focusing on process and industrial automation, industrial software, and related fields such as automated testing and measurement [3]. Financial Performance - Emerson has a strong track record of rewarding shareholders, boasting 67 consecutive years of dividend growth. The current quarterly dividend is $0.5275 per share, resulting in a dividend yield of 1.64% as of October 16 [4].

Core Insights - Zacks Premium offers tools for investors to enhance their stock market strategies and confidence [1] - The Zacks Style Scores provide a framework for evaluating stocks based on value, growth, and momentum characteristics [2][3][4][5][6] Zacks Style Scores - The Style Scores categorize stocks into Value, Growth, Momentum, and a combined VGM Score, with ratings from A to F indicating potential performance [3][4][5][6] - Value Score focuses on identifying undervalued stocks using financial ratios [3] - Growth Score assesses a company's financial health and future growth potential [4] - Momentum Score evaluates stocks based on price trends and earnings estimate changes [5] - VGM Score combines the three styles to identify stocks with the best overall potential [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to help investors build successful portfolios [7] - Stocks rated 1 (Strong Buy) have historically outperformed the S&P 500, with an average annual return of +23.81% since 1988 [8] - A large number of stocks can have high Zacks Ranks, making it essential to use Style Scores for selection [9] Stock Example: Emerson Electric (EMR) - Emerson Electric is a diversified global engineering and technology company with significant operations in the Americas, AMEA, and Europe [12] - EMR holds a Zacks Rank of 3 (Hold) and has a VGM Score of B, with a strong Momentum Style Score of A [13] - Recent earnings estimates for EMR have been revised upward, indicating positive momentum [13][14]

Core Insights - Emerson Electric (EMR) stock closed at $129.77, showing a +1.24% change, outperforming the S&P 500 which declined by 0.16% [1] - Over the past month, EMR shares have decreased by 5.51%, underperforming the Industrial Products sector's loss of 0.75% and the S&P 500's gain of 1.14% [2] Earnings Performance - Upcoming earnings per share (EPS) for Emerson Electric are projected at $1.61, reflecting an 8.78% increase year-over-year, with quarterly revenue expected to be $4.89 billion, up 5.93% from the previous year [3] - For the full year, earnings are estimated at $6 per share and revenue at $18.05 billion, indicating a +9.29% change in earnings and no change in revenue from the prior year [4] Analyst Estimates and Stock Performance - Recent changes in analyst estimates are crucial for understanding near-term business trends, with positive revisions indicating optimism about the business outlook [4] - The Zacks Rank system, which considers estimate changes, currently ranks Emerson Electric at 3 (Hold), with a 0.19% increase in the consensus EPS estimate over the past month [5][6] Valuation Metrics - Emerson Electric has a Forward P/E ratio of 19.79, which is lower than the industry average Forward P/E of 23.15, suggesting a valuation discount [7] - The company has a PEG ratio of 2.23, compared to the Manufacturing - Electronics industry average PEG ratio of 1.91, indicating a higher expected earnings growth trajectory relative to its peers [8] Industry Context - The Manufacturing - Electronics industry, part of the Industrial Products sector, holds a Zacks Industry Rank of 80, placing it in the top 33% of over 250 industries [9] - Research indicates that industries in the top 50% of the Zacks Rank outperform those in the bottom half by a factor of 2 to 1 [9]