Emerson’s 2Q16 Earnings Up on Efficiency Gains, Lower Share Count



Emerson’s earnings in 2Q16

Emerson Electric (EMR), a diversified industrial (IYJ) conglomerate that makes a variety of electrical and electronic products, released its 2Q16 earnings before the Market opened on May 3, 2016. Emerson’s earnings release resulted in a price action of -1%, and the stock closed at $54.67 on the day of the earnings release.

Several other industrial (RGI) conglomerates such as 3M (MMM), Stanley Black & Decker (SWK), Dover Corporation (DOV), and Honeywell International (HON) have also declared their earnings in the last two weeks.

In 2Q16, Emerson reported diluted earnings per share (or EPS) of $0.66 against estimates of $0.63. Earnings for 2Q16 reflected a growth of 1.5% over 2Q15’s diluted EPS of $0.65. Its diluted EPS grew despite a drop in sales due to a 6% lower share count.

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Restructuring efforts initiated by the company in February 2015 resulted in an EBIT (earnings before interest and taxes) margin expansion of 70 basis points. This restructuring also contributed to the rise in the company’s diluted EPS. Including restructuring costs of $56 million, Emerson’s reported EPS fell by 60% year-over-year to $0.57. The company’s reported EPS in 2Q15 totaled $1.42.

Management commentary 

On the recent quarterly performance call, David Farr, the chairman and CEO of Emerson, noted, “While pressure from global economic conditions continued, our second quarter results reflected varying levels of incremental improvement in our businesses.”

Farr added, “The restructuring efforts we initiated last February are generating the margin improvement we expected while at the same time trailing three-month underlying order rates improved sequentially throughout the quarter.

“Conditions in our oil and gas and industrial served markets will remain challenging, but order trends in our other markets are expected to strengthen in the second half of the fiscal year. As a result, the Company continues to expect better second half performance in terms of both profitability and underlying sales as our restructuring actions take hold.”


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