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