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What to Expect from Emerson Electric’s 1Q17 Earnings

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Part 3
What to Expect from Emerson Electric’s 1Q17 Earnings PART 3 OF 3

Analysts Expect Emerson Electric’s Revenues to Fall in 1Q17

Emerson Electric’s revenue estimates

Emerson Electric (EMR) reported about $4.7 billion in consolidated revenues for 1Q16. Analysts estimate that EMR will report $3.2 billion in 1Q17 revenues, which is about a 33% fall on a YoY (year-over-year) basis. However, as mentioned in the earlier part of this series, EMR made some major divestments in 2H16 as a strategic part of repositioning its overall portfolio.

Analysts Expect Emerson Electric’s Revenues to Fall in 1Q17

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Also, the company made six acquisitions in 2016, four in Process Management’s final control and measurement devices businesses and two in the Climate Technologies segment. The revenue from the new acquisitions is expected to offset the fall in revenue from the company’s divested business to some extent. According to company filings, the discontinued operations had combined annual sales of about $5.7 billion in 2016. Out of the $5.7 billion, $4.4 billion came from EMR’s Network Power Systems and the remaining $1.3 billion came from the Power Generation, Motors, and Drivers business.

Margin estimates

Analysts Expect Emerson Electric’s Revenues to Fall in 1Q17

In 1Q16, Emerson Electric’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was about $775 million, while its EBITDA margin was 16.4%. For 1Q17, analysts expect EMR to report about $595 million in EBITDA and 18.8% as its EBITDA margin. However, Emerson’s EBITDA margins are expected to be lower than the margins of peers such as Rockwell Automation (ROK), Honeywell International (HON), and AMETEK (AME).

2017 guidance

Currently, EMR expects its 2017 adjusted EPS (earnings per share) to be in the range of $2.35 to $2.50. In contrast, the company reported adjusted EPS of $2.45 for 2016. EMR’s 2017 EPS guidance excludes the impact of the company’s pending acquisition of Pentair’s Valves & Controls business.

At the midpoint of its current EPS guidance, EMR’s 2017 adjusted EPS is expected to be about 1% less than its 2016 adjusted EPS. The expected fall is primarily due to an anticipated decrease in the company’s 2017 sales. For 2017, EMR expects its sales to be about 1%–3% lower than its 2016 sales.

If you’re interested in trading in dividend-based ETFs, you can look at the SPDR S&P Dividend ETF (SDY). SDY’s major holdings include HCP (HCP) with a weight of 2.7%, AT&T (T) with a weight of 1.8%, and Caterpillar (CAT) with a weight of 1.7%.

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