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Emerson Electric Co. (EMR) 2022 Investor Conference (Transcript)
EMREmerson(EMR)2022-11-30 18:24

Summary of Emerson Electric Co. 2022 Investor Conference Company Overview - Company: Emerson Electric Co. (NYSE: EMR) - Size: 14billionautomationcompany−∗∗CoreFocus∗∗:Pure−playautomationwithasignificantvalue−creationopportunity[9][10]KeyThemesandStrategicFocus1.∗∗TransformationJourney∗∗:−Emersonhasundergoneatransformationoverthepast22months,focusingonportfoliomanagementandoperationalperformance[2][3]−Thecompanyhasdivestedslowergrowthbusinessesandinvestedinhigh−growthareaslikeAspenTech[2][11]2.∗∗ValueCreationPrinciples∗∗:−∗∗People−CentricApproach∗∗:Emphasisoncultureanditsimportancetovaluecreation[3][6]−∗∗OperationalPerformance∗∗:Commitmenttodifferentiatedoperationalperformancedespitemacrochallenges[3][4]−∗∗PortfolioManagement∗∗:Aligningtheportfoliowithsecularmarkettrendstosupportgrowth[4][6]3.∗∗FinancialCommitments∗∗:−Underlyingsalesgrowthtargetof414 billion automation company - **Core Focus**: Pure-play automation with a significant value-creation opportunity [9][10] Key Themes and Strategic Focus 1. **Transformation Journey**: - Emerson has undergone a transformation over the past 22 months, focusing on portfolio management and operational performance [2][3] - The company has divested slower growth businesses and invested in high-growth areas like AspenTech [2][11] 2. **Value Creation Principles**: - **People-Centric Approach**: Emphasis on culture and its importance to value creation [3][6] - **Operational Performance**: Commitment to differentiated operational performance despite macro challenges [3][4] - **Portfolio Management**: Aligning the portfolio with secular market trends to support growth [4][6] 3. **Financial Commitments**: - Underlying sales growth target of 4% to 7% through the cycle [6] - Incremental margins of 35% on sales growth [6] - Double-digit adjusted EPS growth and strong free cash flow conversion at about 100% [6][9] Financial Performance Highlights - **2022 Results**: - Underlying sales growth of 9% - Adjusted EBITDA margin improvement of 140 basis points - EPS growth of 16% [8] - **2023 Guidance**: - Midpoint underlying sales growth of 7.5% - Adjusted EPS growth forecast of 4 to 4.15[8][9]MarketOpportunitiesandGrowthDrivers1.∗∗TotalAddressableMarket(TAM)∗∗:−Emersonoperatesina4.15 [8][9] Market Opportunities and Growth Drivers 1. **Total Addressable Market (TAM)**: - Emerson operates in a 230 billion TAM, providing ample opportunity for organic growth and M&A [10] - Focus on high-growth markets such as energy transition, industrial software, and life sciences [11][29] 2. Breakthrough Growth Platforms: - 30% of sales are from high-growth platforms, expected to grow in double digits [17] - Key markets include industrial software, test and measurement, factory automation, and smart grid solutions [27][29][32][35] 3. Innovation Focus: - Increased R&D spending to drive innovation, with a goal to rejuvenate and accelerate breakthrough innovations [21][22] - New Chief Technology Officer appointed to lead innovation efforts [19][20] Sustainability Initiatives - Sustainability as a Core Value: - Emerson's sustainability portfolio is integral to its competitive advantage [54] - Commitment to net-zero targets by 2050, with interim targets approved by the Science Based Targets Initiative [57][58] - Greening of Emerson: - Achieved a 20% carbon intensity reduction target six years early [56] - Aiming for 100% renewable electricity by 2030 [59] Operational Excellence - Management Process Evolution: - Shift from a traditional management system to one that fosters innovation and growth [44][45] - Focus on centralizing functions and enhancing factory automation to drive efficiency [40][41] - Cost Management: - $650 million in annualized savings achieved through restructuring [38] - Ongoing commitment to eliminate platform overhead and rightsizing corporate structure [39] Conclusion - Emerson Electric Co. is positioned for significant growth through strategic portfolio management, operational excellence, and a strong commitment to sustainability. The company aims to leverage its technological capabilities and market opportunities to deliver robust financial performance and shareholder value in the coming years.