Item 7.01 Regulation FD Disclosure
The following information is furnished pursuant to Regulation FD.
Emerson Three-Month Orders, Including Foreign Currency Translation
(Percentage change versus prior year; trailing three-month averages, excluding acquisitions and divestitures, including currency translation)
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Apr '19
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May '19
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Jun '19
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Automation Solutions
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0 to 5
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0 to 5
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0 to 5
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Commercial & Residential Solutions
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-5 to 0
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-5 to 0
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-5 to 0
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Total Emerson
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0 to 5
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0 to 5
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0
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June 2019 Orders Comments
Total Emerson
trailing three-month orders were flat with underlying orders up 2 percent, excluding a 2 percent unfavorable currency impact. June underlying orders growth was below the 5 to 7 percent expected range management communicated on the May 7th second quarter earnings call and at the Electrical Products Group conference on May 21st.
Third quarter 2019 earnings per share slightly exceeded management's May 7th guidance of $0.94 due to a discrete tax benefit. Earnings from operations were lower than expected on slower sales growth, offset by lower corporate costs. Strong operating execution mitigated the profit impact of slower sales growth.
We continue to reposition the business to deliver strong profitability on lower second half growth, as communicated on the May 7th earnings conference call, and have further increased planned restructuring activities for the remainder of 2019. These investments will help position the company for improving profitability in early 2020. We expect to increase full year restructuring spend and other actions to approximately $100 million, which is up approximately $30 million since short-cycle end markets began to soften in the second fiscal quarter.
Further details on the third quarter results and an outlook update will be provided prior to the market open on Tuesday, August 6, 2019.
Automation Solutions
orders increased 2 percent and were up 4 percent on an underlying basis excluding unfavorable currency of 2 percent. Underlying orders growth slipped below the 5 percent level for the first time in two years and was below management's expectations primarily due to slower global discrete end markets and persistent high channel inventories. Upstream oil and gas investment activity in North America remained soft and did not improve in June as management had expected.
Apart from these trends, global demand remained stable, with continued broad-based strength across process and hybrid end markets driven by strong maintenance and repair (MRO) demand and brownfield investment activity focused on expansion and optimization of existing facilities. Strength continued in long-cycle bookings, with underlying orders growth up 7 percent in the Systems and Final Control businesses, driven by greenfield investment and modernization activity.
In the Americas, underlying orders growth was slightly negative, with North America down low single digits driven primarily by slower short-cycle demand in discrete manufacturing and upstream oil and gas end markets. Recovery in these end markets has not progressed in line with expectations management communicated in May, and, as a result, the company is accelerating restructuring actions. Growth was stable across other process and hybrid industries, including midstream and downstream oil and gas markets.
Underlying orders growth in Europe remained stable, up high-single digits, reflecting increased MRO spending and investment activity in oil and gas, power, chemical and life sciences end markets.
Underlying orders growth in Asia, Middle East & Africa remained strong, up high-single digits, supported by continued infrastructure investment across the region.
Commercial & Residential Solutions
orders were down 2 percent with underlying down 1 percent, excluding unfavorable currency of 1 percent, and were below management's expectations primarily due to unfavorable weather conditions in North America and continued channel inventory re-balancing that unfavorably impacted some markets.
North America air conditioning underlying orders were down low-single digits. Orders were stable in the first two months of the quarter and down sharply in June due to cooler weather and higher levels of precipitation in key regions. The cold chain business was up low-single digits.
Asia Climate Technologies underlying orders were down low- to mid-single digits and continued a trend of improvement since December 2018 when orders bottomed, down more than 20 percent.
Europe orders were down low single digits due to slower cold chain and commercial air conditioning demand in Eastern Europe and Russia. Western Europe remained positive, and Europe orders are expected to trend favorably in July.
The global professional tools business was flat, reflecting continued headwinds from channel inventory re-balancing.
Upcoming Investor Events
On Tuesday, August 6, 2019, Emerson will report its third quarter 2019 results prior to market open and host an investor conference call that same day, beginning at 2:00 p.m. Eastern Time, 1:00 p.m. Central Time. Participants can access a live webcast available at www.emerson.com/financial at the time of the call. A replay of the call will remain available for 90 days.
Forward-Looking and Cautionary Statements
Statements in this Current Report on Form 8-K that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include economic and currency conditions, market demand, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, among others, as set forth in the Company's most recent Annual Report on Form 10-K and subsequent reports filed with the SEC. Underlying orders discussed herein exclude the impact of currency translation.