Emerson Q3: Weak Orders In MRO, Discrete Automation

Core Viewpoint - Emerson is transitioning into a stronger growth industrial technology company with a focus on software, control, sustainability, decarbonization, and energy transitions, despite facing short-term challenges in organic revenue growth and order intake [2][18]. Group 1: Financial Performance - Emerson reported only 3% organic revenue and order growth in Q3, indicating a deceleration compared to previous quarters [3][5]. - The company anticipates 6% organic revenue growth and 9.5% acquisition growth for FY24 [8]. - The forecast for FY24 includes a decline of 1% in Discrete Automation revenue, while other segments are expected to grow by 6%, leading to an overall growth of 4.6% in the Intelligent Devices segment [12]. Group 2: Market Challenges - Weakness in the maintenance, repair, and operations (MRO) and discrete automation markets has been highlighted, with a slow recovery expected in the discrete automation market [3][5]. - High-interest rates have caused delays in general industrial projects, contributing to weak demand in discrete automation and MRO [5][18]. - The automotive sector, a significant end-market for Emerson, has experienced a year-over-year decline in 2024 due to weak consumer consumption, impacting growth in discrete automation and test & measurement portfolios [5][18]. Group 3: Future Projections and Valuation - The company projects a growth rate of 7% from FY25 onwards, assuming a recovery in the Intelligent Devices business and continued growth in Software & Control [13]. - A DCF analysis estimates free cash flow from equity to be $5,360 million in 2024, with a target price of $140 per share based on future cash flows [16][15].