Emerson(EMR)2025-02-05 16:33Financial Data and Key Metrics Changes - The company reported underlying sales growth of 2%, with process and hybrid businesses up approximately 5%, while discrete businesses were down approximately 4% [46] - Adjusted earnings per share (EPS) grew 13% year-over-year to 694 million, representing a margin of approximately 17% and an increase of 89% compared to Q1 2024 [23][50] - Gross profit margin reached a record 53.5%, reflecting the value of the transformed portfolio [21] - Adjusted segment EBITDA margin improved by 340 basis points to 28%, driven by strong operational performance [22][48] Business Line Data and Key Metrics Changes - Underlying orders were up 1% year-over-year, led by healthy processing hybrid markets, which were up low-single digits [18] - Software solutions saw a robust underlying demand with 10% growth in annual contract value (ACV), led by double-digit growth from control systems and software [11] - The discrete business, including safety and productivity, was down approximately 4%, with expectations for a recovery in the second half of the year [46][52] Market Data and Key Metrics Changes - Demand in China remained muted, with strength in power offset by weakness in chemical and discrete end markets [20] - Orders growth was led by robust demand in the Middle East and strength in the U.S., particularly from maintenance, repair, and operations (MRO) business [19] - The backlog increased slightly to 1 billion of share repurchases in the quarter as guided [23] - The impact of tariffs has been minimal due to proactive measures taken since 2018, with expectations for de minimis impact from Canada and Mexico [16][17] Q&A Session Summary Question: Could you provide specifics on Mexico's exposure to tariffs? - Management feels comfortable with the understanding of exposure related to potential tariffs in Mexico and is prepared to implement price and surcharge activities if necessary [61] Question: Can you distinguish between the discrete businesses' performance expectations? - Management indicated that the commentary applies across both legacy discrete and test and measurement businesses, with some strength in semiconductors and MRO, but caution in factory automation and automotive [64] Question: What is the impact of foreign exchange on sales and EPS? - The foreign exchange headwind impacted sales, but there was a benefit to EPS due to transactional FX that did not occur in the current year [70][71] Question: What is the outlook for order growth and book-to-bill ratios? - Management does not forecast orders publicly but indicated that book-to-bill was greater than one in the first quarter and expects it to be about one for the full year [127] Question: How does the company view the LNG market and its win rates? - The lifting of the moratorium on new LNG permits is expected to significantly impact investments, with strong win rates in North America and the Middle East [115][116] Question: What are the expectations for margins moving forward? - Management confirmed that while cost reductions will continue, the mix dynamic that drove high margins in Q1 is expected to temper as the year progresses [141][144]