Emerson's (EMR) Q4 Earnings & Sales Top, Guidance Upbeat
Zacks Investment Research | Nov 06, 2017 09:58PM ET
Emerson Electric Co. (NYSE:EMR) reported fourth-quarter fiscal 2017 adjusted earnings of 83 cents per share, which trumped the Zacks Consensus Estimate of 80 cents by 3.8%, and grew 12% year over year.
Favorable global market conditions and strong top-line growth boosted the bottom line, which was offset by high cost of sales and administrative expenses.
Fiscal 2017 adjusted earnings came in at $2.64, reflecting growth of 8% over fiscal 2016.
Inside the Headlines
The fiscal fourth quarter witnessed the company sustain its growth track, as the Automation Solutions and Commercial & Residential Solutions platforms delivered net and underlying sales growth as well as enjoyed strong order rates in the reported quarter. Net sales grew 13% year over year to $4,435 million and surpassed the Zacks Consensus Estimate of $4,424 million. Underlying sales growth for the quarter was 3% and acquisitions contributed 9% to growth, while currency translation affected the top line favorably by 1%. Consistently improving conditions in the energy related, hybrid and general industrial markets drove sales.
For fiscal 2017, net sales came in at $15.3 billion, up 5% year over year, indicating strengthening global economic conditions, stabilizing oil prices, and improving industrial and emerging market demand.
Coming to the segments’ performance in the fiscal fourth quarter, the company’s Automation Solutions platform reported an impressive 18% year-over-year growth in net sales to $2,894 million. Underlying sales also grew 3% as favorable trends in key served markets supported operations. Robust, broad-based demand in power, life sciences and chemical markets was driven by higher optimization projects and MRO activity. Underlying sales in North America rose 10%, led by energy, life sciences and chemical markets. Asia was up 2%, while China grew 8% on robust demand in the process automation and discrete markets. Europe was up 2%, while Latin America and Middle East/Africa were down 18% and 11% respectively.
Margins contracted 30 basis points (bps) year over year to 16.9%. However, excluding the dilutive impact of the Valves & Controls acquisition, margins actually expanded 300 bps to 20.2%, driven by restructuring benefits, lower restructuring outlay, favorable material costs and leverage on higher sales.
MRO activity levels in energy-related markets are gathering momentum, driven by shale and downstream customers. Power and life sciences markets also remained favorable. Continued improvement in order trends and an expanding project line indicate favorable momentum for the segment in the fiscal 2018.
The Commercial & Residential Solutions platform witnessed a 4% increase in net sales and 3% growth in underlying sales, with net sales coming in at $1,543 million. The top line was supported by robust demand in the global HVAC and refrigeration markets, and encouraging conditions in the construction related markets. Asia witnessed particularly strong growth once again, as it rose 14% year over year, driven by robust growth in China, which is enjoying major demand acceleration in the refrigeration and air conditioning markets. Europe was up 4%, while North America contracted 1%, as both HVAC and refrigeration markets took a hit due to comparatively cooler weather and the disruption from Texas and Florida hurricanes. Latin America went down 5%, while the Middle East/Africa grew 20%.
Under the platform, the Climate Technologies business grew 4.1% year over year to $1,108 million, while the Tools & Home Products unit grew 2.4% year over year to $435 million.
Margins contracted 110 bps to 23.5% as the declining ClosetMaid business drove 50 bps of margin dilution in the quarter.
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