Restructuring Takes Center Stage for Emerson Electric

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Restructuring Takes Center Stage for Emerson Electric PART 1 OF 3

Restructuring, Margin Improvements Save the Day for Emerson Electric’s Latest Results

Emerson Electric’s 4Q16 earnings release

Emerson Electric (EMR), the diversified industrial conglomerate (IYJ) that makes a variety of electrical and electronic products released its 4Q16 earnings on November 1. Although the consensus estimate for the company’s adjusted EPS (earnings per share) was $0.89, Emerson posted adjusted EPS of $0.96, which is 3.2% higher than in 4Q15.

EMR’s revenues in 4Q were $5.5 billion, which is $60 million higher than consensus estimates and but 5.4% lower than in 4Q15. Earnings rose despite lower sales as margins in some of the segments witnessed substantial expansions in the fourth quarter.

Restructuring, Margin Improvements Save the Day for Emerson Electric&#8217;s Latest Results

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However, excluding the results of discontinued operations related to the divestiture of the Network Power segment, Emerson’s segment margins were flat at 19.3%. The company’s earnings release resulted in a positive price action of 0.63%, and the stock closed at $51 that day.

Emerson Electric’s full-year results

Emerson Electric’s sales in fiscal 2016 (fiscal year ending September 30) fell 9% to $20.2 billion due to continuing weakness in certain key end markets such as oil and gas (XOP) and the industrials sector (XLI). Segment margins in the year suffered a contraction of 40 basis points to 16.9% as the deleveraging impact due to reduced volumes offset restructuring benefits and margin improvements in some of the segments.

Emerson’s restructuring expenses this year were $112 million, which is above the company forecast of $90 million–$100 million range. Due to the benefits from restructuring, adjusted earnings per share fell just 6% to $2.98, as compared to the 9% fall in sales.

For more on industrial (IYJ) companies, investors can look into Market Realist’s mergers and acquisitions series on Stanley Black & Decker (SWK), Rockwell Collins (COL), and Honeywell (HON).

Continue to the next part for a segment-wise breakdown of Emerson’s latest performance.


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