Emerson (EMR) Q3 Earnings & Revenues Top Estimates, Up Y/Y

Emerson (NYSE:EMR) Electric Co.’s EMR third-quarter fiscal 2021 (ended Jun 30, 2021) adjusted earnings of $1.09 per share beat the Zacks Consensus Estimate of 98 cents. On a year-over-year basis, the bottom line improved 36.3%.

Inside the Headlines

Emerson’s net sales were $4,697 million in the quarter, reflecting an increase of 20% from the year-ago quarter. Underlying sales were up 15%, while acquired assets and currency translation had 1% and 4% of positive impacts on sales, respectively. The top line beat the Zacks Consensus Estimate of $4,602 million.

The company reports net sales under two segments — Automation Solutions and Commercial & Residential Solutions. Fiscal third-quarter segmental results are briefly discussed below:

Automation Solutions’ net sales were $2,947 million, increasing 13.8% year over year. Underlying sales of the segment increased 8%. Commercial & Residential Solutions generated net sales of $1,757 million in the fiscal third quarter, up 32.4% year over year. Underlying sales were up 29%. Under the segment, Climate Technologies’ sales increased 30.7% to $1,268 million, and that from Tools & Home Products jumped 37% to $489 million.

Gross Margin

In the quarter under review, Emerson's cost of sales increased 18.2% year over year to $2,715 million. It represented 57.8% of net sales compared with 58.7% in the year-ago quarter. Gross margin was 42.2%, up 90 basis points. Selling, general and administrative (SG&A) expenses increased 14.9% to $1,073 million. As a percentage of sales, SG&A expenses were 22.8% compared with 23.9% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting third-quarter fiscal 2021, Emerson had cash and cash equivalents of $2,860 million, up from $2,342 million in the previous quarter. Long-term debt balance increased 0.2% sequentially to $5,835 million. During the first nine months of fiscal 2021, the company repaid debts of $305 million.

In the first nine months of fiscal 2021, it generated net cash of $2,720 million from operating activities, reflecting an increase of 46.7% from the year-ago period. Capital expenditure was $350 million, up from $329 million.

During the first nine months of fiscal 2021, the company paid out dividends amounting to $909 million and repurchased shares worth $268 million.

Outlook

For fiscal 2021 (ending September 2021), it anticipates net sales growth of 9-10%. Underlying sales are expected to grow in the range of 5-6%.

Adjusted earnings per share are predicted to be $4.07 for fiscal 2021.

Emerson expects Automation Solutions’ net sales to grow in the range of 5-6%, while Commercial & Residential Solutions’ net sales are projected to increase 17-18%.

The company anticipates generating operating cash flow of $3.6 billion, with free cash flow of $3 billion.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks are AZZ (NYSE:AZZ) Inc. AZZ, Brady Corporation BRC and Franklin Electric Co (NASDAQ:FELE)., Inc. FELE. While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Franklin Electric carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 21.24%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 1.58%, on average, in the trailing four quarters.

Franklin Electric delivered an earnings surprise of 21.08%, on average, in the trailing four quarters.

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