Financial Data and Key Metrics Changes - Underlying sales in Q4 2025 increased by 4%, with full-year underlying sales growth at 3%, slightly below expectations due to softer demand in Europe and China [6][7] - Adjusted earnings per share (EPS) for Q4 was $1.62, and for the full year, adjusted EPS was $6, reflecting a 9% increase year over year [7][15] - Free cash flow for the year reached $3.24 billion, up 12% year over year, exceeding guidance [7][16] - The company expects sales growth of 5.5% for fiscal 2026, with underlying sales growth of approximately 4% [7][24] Business Line Data and Key Metrics Changes - The software and control segment grew by 5%, while intelligent devices increased by 2% [18] - Process and hybrid businesses were up 4%, and discrete businesses finished the year slightly up at 1% [18] - Test and measurement orders surged by 27% in Q4, contributing significantly to overall orders growth [6][9] Market Data and Key Metrics Changes - Underlying orders grew by 6% in Q4, with strong performance in North America, India, and the Middle East and Africa, while demand in Europe and China remained soft [8][14] - The backlog at the end of the year was $7.4 billion, up 3% year over year, positioning the company well for 2026 [19] - The company reported strong growth in LNG, power, and life sciences, collectively up 11% year over year [14][16] Company Strategy and Development Direction - The company is focused on capital allocation priorities, planning to return approximately $2.2 billion to shareholders through share repurchases and dividends [7][8] - Emerson aims to achieve adjusted segment EBITDA margin of approximately 28% in 2026, reflecting strong operational execution [24] - Continued investment in technology and innovation is emphasized, with 8% of sales allocated to R&D in 2025 [12][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, driven by sustained demand for automation technologies and digital transformation [6][7] - The company anticipates a challenging environment in Europe and China but expects strong growth in the Americas and India [22][24] - Management highlighted the importance of maintaining a healthy capital cycle and the resilience of MRO spending across the installed base [8][14] Other Important Information - The company achieved record gross profit margin of 52.8% and adjusted segment EBITDA margin of 27.6% [15] - Significant progress was made in integrating Aspen Tech, realizing $50 million in synergies in 2025, with plans to achieve $100 million in run rate synergies by the end of 2026 [16][19] Q&A Session Summary Question: Clarification on software renewal impact - Management confirmed that the software renewal dynamic is an accounting issue affecting revenue recognition, with no impact on free cash flow [35][40] Question: Orders growth in different segments - Orders in process and hybrid remained resilient at mid-single digits, while discrete orders recovered to high single digits driven by test and measurement [45] Question: Visibility on first half versus second half growth - Management indicated strong visibility for second half growth, with a projected 6% growth rate, excluding the software renewal dynamic [52][54] Question: Trends in test and measurement and discrete automation - Test and measurement is expected to see high single-digit growth, while discrete automation remains weak, particularly in automotive [66][67] Question: Impact of changing subsidy environment on sustainability projects - Management noted a significant reduction in the outlook for sustainability projects, but this did not impact the current backlog [72][73] Question: Power generation market visibility - The company added approximately $1 billion in projects to its project funnel, indicating robust activity in power generation and modernization [85]