- Demand continued to be strong with December Trailing
Three-Month Underlying Orders up 17 percent
- Net Sales were $4.5 billion, up 8 percent from the year
prior; Underlying Sales were up 8 percent
- GAAP EPS was $1.50, up 103 percent from the year prior;
Adjusted EPS (as defined below) was $1.05, up 13
percent
- Updated 2022 Full Year Outlook to reflect continued
strong demand
- Declared quarterly cash dividend of $0.515 per share of
common stock payable March 10, 2022 to stockholders of record
February 11, 2022
Emerson (NYSE: EMR) today reported results for its first fiscal
quarter ended December 31, 2021 and updated its full year outlook
for fiscal 2022.
December Trailing Three-Month Underlying Orders were up
17 percent, as demand continued to be strong across all world areas
and major end markets. First quarter Net Sales and
Underlying Sales were up 8 percent. By geography, the
Americas grew 11 percent, Europe grew 3 percent, and Asia, Middle
East & Africa grew 6 percent. China grew 12 percent.
First quarter Pretax Margin of 26.3 percent was up 1280
basis points. Adjusted EBITA Margin, which excludes
restructuring, first year purchase accounting charges and
transaction fees, intangibles amortization expense and a gain from
our Vertiv subordinated interest, was 19.6 percent, up 140 basis
points.
Earnings Per Share, which includes a $0.60 gain from our
Vertiv subordinated interest, were $1.50 for the quarter, up 103
percent. Adjusted Earnings Per Share, which excludes
restructuring, first year purchase accounting charges and
transaction fees, intangibles amortization expense and a gain from
our Vertiv subordinated interest, were $1.05, up 13 percent.
Earnings in the quarter were ahead of management expectations and
benefited from better leverage, continued savings from effective
cost management and favorable mix despite the ongoing supply chain
headwinds.
Operating Cash Flow was $523 million for the quarter,
down 35 percent, and Free Cash Flow was $407 million, down
41 percent. Cash flow results reflected higher inventory due to
supply chain constraints but are on track to meet full year
guidance expectations shared in November.
"We are pleased with our first quarter results. Strong demand
continued in both the Automation Solutions and Commercial &
Residential Solutions platforms with ongoing growth in residential,
discrete and hybrid end markets, as well as strong recovery in our
commercial and process automation end markets. Much like the rest
of the industry, labor shortages, inflation and supply chain
challenges remain a hurdle, but a strong focus on operational
excellence and a steadfast commitment to our cost reset targets
have proven valuable in offsetting these headwinds,” said Emerson
President and Chief Executive Officer Lal Karsanbhai. “Given our
first quarter results and the strength in both platforms, we have
increased our 2022 full year outlook.
“We feel energized as our teams cultivate a world-class culture
and we continue our portfolio evolution while maintaining our
long-standing commitment to operational execution and financial
results,” Karsanbhai continued. “I speak for the worldwide Emerson
team when I say we’re ready to face the challenges of 2022 head
on.”
Business Platform
Results
Automation Solutions December trailing three-month
underlying orders were up 19 percent driven by strong demand in all
business groups and world areas. Backlog increased $500 million
compared to the prior quarter to $6.0 billion.
Net sales increased 4 percent in the quarter, with underlying
sales up 5 percent. The Americas were up 7 percent, Europe was
flat, and Asia, Middle East & Africa was up 7 percent. China
was up 17 percent.
Segment EBIT margin increased 530 basis points to 18.7 percent
and Adjusted Segment EBITA margin, which excludes restructuring and
intangibles amortization expense, increased 320 basis points to
21.5 percent. Favorable profitability was driven by increased
volume, leverage, cost management and mix.
Commercial & Residential Solutions December trailing
three-month underlying orders were up 13 percent driven by
continued strength in both the residential and commercial
businesses. Backlog increased $150 million compared to the prior
quarter to $1.3 billion.
Net and underlying sales increased 13 percent. The Americas were
up 17 percent, Europe was up 13 percent, and Asia, Middle East
& Africa was up 4 percent. China was flat.
Segment EBIT margin decreased 310 basis points to 17.9 percent
and Adjusted Segment EBITA margin (as defined above) decreased 320
basis points to 18.9 percent. Continued headwinds related to
price-cost impacted profitability in the quarter but are expected
to improve in the second half of the year.
2022 Updated Outlook
Despite ongoing supply chain constraints and challenges related
to the COVID-19 pandemic, we continue to see strong demand in both
of our platforms resulting in increased sales and updated earnings
expectations for the year. Net and Underlying Sales
guidance is increased by 1 percent to 6 to 8 percent and 7 to 9
percent, respectively. Earnings Per Share guidance of $4.71
to $4.86 have been updated to reflect the operational impact of
increased sales guidance and now includes the impact of estimated
AspenTech transaction fees and interest expense on $3 billion of
debt already issued to fund the transaction. Adjusted Earnings
Per Share have been increased to $4.90 to $5.05.
The following tables summarize the updated fiscal year 2022 and
second quarter 2022 guidance framework. The tables below do not
include the operational impact of the impending transaction with
AspenTech, which is expected to close in the second calendar
quarter of 2022.
2022 Guidance
Net Sales Growth
6% - 8%
Operating Cash Flow
$3.8B
Automation Solutions
5% - 7%
Capital Spend
$650M
Commercial & Residential Solutions
8% - 10%
Free Cash Flow
$3.1B
Dividend
$1.2B
Underlying Sales Growth
7% - 9%
Share Repurchase
$250M - $500M
Automation Solutions
7% - 9%
Commercial & Residential Solutions
9% - 11%
Tax Rate
22%
Restructuring Actions
$150M
GAAP EPS
$4.71 - $4.86
Price-Cost
$175M
Adjusted EPS
$4.90 - $5.05
2022 Q2 Guidance
Net Sales Growth
4% - 6%
Automation Solutions
3% - 5%
Commercial & Residential Solutions
7% - 9%
Underlying Sales Growth
6% - 8%
Automation Solutions
5% - 7%
Commercial & Residential Solutions
9% - 11%
GAAP EPS
$0.98 - $1.03
Adjusted EPS
$1.15 - $1.20
Note 1: All figures are approximate
Upcoming Investor Events
Today, beginning at 8:00 a.m. Central Time / 9:00 a.m. Eastern
Time, Emerson management will discuss the first quarter results
during an investor conference call. Participants can access a live
webcast available at www.emerson.com/financial at the time of the
call. A replay of the call will be available for 90 days.
Conference call slides will be posted in advance of the call on the
company website.
Forward-Looking and Cautionary
Statements
Statements in this press release 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 the Company's ability to successfully
complete on the terms and conditions contemplated, and the
financial impact of, the proposed AspenTech transaction, the scope,
duration and ultimate impact of the COVID-19 pandemic as well as
economic and currency conditions, market demand, including related
to the pandemic and oil and gas price declines and volatility,
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. The outlook contained
herein represents the Company's expectation for its consolidated
results, excluding the expected AspenTech transaction other than as
noted herein.
Table
1
EMERSON AND SUBSIDIARIES
CONSOLIDATED OPERATING
RESULTS
(AMOUNTS IN MILLIONS EXCEPT PER
SHARE, UNAUDITED)
Quarter
Ended Dec 31
Percent
2020
2021
Change
Net sales
$4,161
$4,473
8%
Cost of sales
2,438
2,651
SG&A expenses
998
1,011
Gain on subordinated interest
—
(453
)
Other deductions, net
122
51
Interest expense, net
40
38
Earnings before income taxes
563
1,175
109%
Income taxes
111
280
Net earnings
452
895
Less: Noncontrolling interests in
subsidiaries
7
(1
)
Net earnings common
stockholders
$445
$896
101%
Diluted avg. shares outstanding
601.9
598.1
Diluted earnings per share common
share
$0.74
$1.50
103%
Quarter
Ended Dec 31
2020
2021
Other deductions, net
Amortization of intangibles
$78
$63
Restructuring costs
66
9
Other
(22
)
(21
)
Total
$122
$51
Table
2
EMERSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS,
UNAUDITED)
Quarter
Ended Dec 31
2020
2021
Assets
Cash and equivalents
$2,197
$4,726
Receivables, net
2,652
2,745
Inventories
2,013
2,335
Other current assets
819
1,054
Total current assets
7,681
10,860
Property, plant & equipment, net
3,693
3,685
Goodwill
7,832
7,695
Other intangible assets
3,196
2,791
Other
1,276
1,928
Total assets
$23,678
$26,959
Liabilities and equity
Short-term borrowings and current
maturities of long-term debt
$1,717
$37
Accounts payable
1,694
2,100
Accrued expenses
2,965
3,194
Total current liabilities
6,376
5,331
Long-term debt
5,892
8,722
Other liabilities
2,471
2,618
Total equity
8,939
10,288
Total liabilities and equity
$23,678
$26,959
Table
3
EMERSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(DOLLARS IN MILLIONS,
UNAUDITED)
Quarter
Ended Dec 31
2020
2021
Operating activities
Net earnings
$452
$895
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
244
231
Stock compensation
64
41
Pension expense
8
1
Changes in operating working capital
71
(185
)
Gain on subordinated interest
—
(453
)
Other, net
(31
)
(7
)
Cash provided by operating activities
808
523
Investing activities
Capital expenditures
(122
)
(116
)
Purchases of businesses, net of cash and
equivalents acquired
(1,611
)
(39
)
Proceeds from subordinated interest
—
438
Other, net
13
2
Cash provided by (used in) investing
activities
(1,720
)
285
Financing activities
Net increase in short-term borrowings
340
(335
)
Proceeds from long-term debt
—
2,975
Payments of long-term debt
(301
)
(501
)
Dividends paid
(303
)
(307
)
Purchases of common stock
(13
)
(253
)
Other, net
42
22
Cash provided by (used in) financing
activities
(235
)
1,601
Effect of exchange rate changes on cash
and equivalents
29
(37
)
Increase (Decrease) in cash and
equivalents
(1,118
)
2,372
Beginning cash and equivalents
3,315
2,354
Ending cash and equivalents
$2,197
$4,726
Table
4
EMERSON AND SUBSIDIARIES
SEGMENT SALES AND EARNINGS
(DOLLARS IN MILLIONS,
UNAUDITED)
Quarter
Ended Dec 31
2020
2021
Sales
Measurement & Analytical
Instrumentation
$698
$735
Valves, Actuators & Regulators
806
816
Industrial Solutions
508
566
Systems & Software
680
688
Automation Solutions
2,692
2,805
Climate Technologies
1,031
1,163
Tools & Home Products
445
508
Commercial & Residential
Solutions
1,476
1,671
Eliminations
(7
)
(3
)
Net sales
$4,161
$4,473
Earnings
Automation Solutions
$361
$526
Climate Technologies
212
192
Tools & Home Products
98
107
Commercial & Residential
Solutions
310
299
Stock compensation
(64
)
(41
)
Unallocated pension and postretirement
costs
24
26
Corporate and other
(28
)
(50
)
Gain on subordinated interest
—
453
Interest expense, net
(40
)
(38
)
Earnings before income taxes
$563
$1,175
Restructuring costs
Automation Solutions
$64
$5
Climate Technologies
1
2
Tools & Home Products
1
1
Commercial & Residential
Solutions
2
3
Corporate
—
1
Total
$66
$9
The table above does not include $3 and $9
of costs related to restructuring actions that were reported in
cost of sales and selling, general and administrative expenses for
the three months ended December 31, 2020 and 2021,
respectively.
Depreciation and Amortization
Automation Solutions
$156
$155
Climate Technologies
49
47
Tools & Home Products
19
20
Commercial & Residential
Solutions
68
67
Corporate and other
20
9
Total
$244
$231
Table
5
EMERSON AND SUBSIDIARIES
ADJUSTED EBITA & EPS
SUPPLEMENTAL
(AMOUNTS IN MILLIONS EXCEPT PER
SHARE, UNAUDITED)
The following tables, which show results
on an adjusted EBITA basis and diluted earnings per share on an
adjusted basis, are intended to supplement the Company's discussion
of its results of operations herein. The Company defines adjusted
EBITA as earnings excluding interest expense, net, income taxes,
intangibles amortization expense, restructuring expense, first year
purchase accounting related items and transaction fees, and certain
gains, losses or impairments. Adjusted earnings per share excludes
intangibles amortization expense, restructuring expense, first year
purchase accounting related items and transaction fees, and certain
gains, losses or impairments. Adjusted EBITA, adjusted EBITA
margin, and adjusted earnings per share are measures used by
management and may be useful for investors to evaluate the
Company's operational performance.
Quarter
Ended Dec 31
2020
2021
Pretax earnings
$563
$1,175
Percent of sales
13.5%
26.3%
Interest expense, net
40
38
Restructuring and related costs
69
18
Amortization of intangibles
81
77
Gain on subordinated interest
—
(453)
AspenTech transaction costs
—
23
Gain on acquisition of full ownership of
equity investment
(17)
—
OSI first year acquisition accounting
charges and fees
21
—
Adjusted EBITA
$757
$878
Percent of sales
18.2%
19.6%
Quarter
Ended Dec 31
2020
2021
GAAP earnings per share
$0.74
$1.50
Restructuring and related costs
0.09
0.02
Amortization of intangibles
0.10
0.10
Gain on subordinated interest
—
(0.60)
AspenTech transaction costs
—
0.03
Gain on acquisition of full ownership of
equity investment
(0.03)
—
OSI first year acquisition accounting
charges and fees
0.03
—
Adjusted earnings per share
$0.93
$1.05
Table
6
EMERSON AND SUBSIDIARIES
SEGMENT EBITA
(DOLLARS IN MILLIONS,
UNAUDITED)
Quarter
Ended Dec 31
2020
2021
Automation
Solutions
Automation Solutions EBIT
$361
$526
Percent of sales
13.4%
18.7%
Restructuring and related costs
64
12
Amortization of intangibles
68
65
Automation Solutions EBITA
$493
$603
Percent of sales
18.3%
21.5%
Commercial &
Residential Solutions
Commercial & Residential Solutions
EBIT
$310
$299
Percent of sales
21.0%
17.9%
Restructuring and related costs
3
4
Amortization of intangibles
13
12
Commercial & Residential Solutions
EBITA
$326
$315
Percent of sales
22.1%
18.9%
Table
7
Reconciliations of Non-GAAP Financial Measures & Other
Reconciliations of Non-GAAP measures (denoted by *) with the most
directly comparable GAAP measure (dollars in millions, except per
share amounts):
Q1 2022 Underlying Sales Change
Auto Solns
Comm & Res Solns
Emerson
Reported (GAAP)
4 %
13 %
8 %
(Favorable) / Unfavorable FX
1 %
— %
— %
Acquisitions / Divestitures
— %
— %
— %
Underlying*
5 %
13 %
8 %
Q2 2022E Underlying Sales
Change
Auto Solns
Comm & Res Solns
Emerson
Reported (GAAP)
3% - 5%
7% - 9%
4% - 6%
(Favorable) / Unfavorable FX
2 %
2 %
2 %
Acquisitions / Divestitures
— %
— %
— %
Underlying*
5% - 7%
9% - 11%
6% - 8%
FY 2022E Underlying Sales
Change
Auto Solns
Comm & Res Solns
Emerson
Reported (GAAP)
5% - 7%
8% - 10%
6% - 8%
(Favorable) / Unfavorable FX
2 %
1 %
1 %
Acquisitions / Divestitures
— %
— %
— %
Underlying*
7% - 9%
9% - 11%
7% - 9%
Q1 Earnings Per Share
Q1 FY21
Q1 FY22
Change
Earnings per share (GAAP)
$
0.74
$
1.50
103 %
Restructuring and related costs
0.09
0.02
(10)%
Amortization of intangibles
0.10
0.10
— %
Gain on subordinated interest
—
(0.60)
(84)%
AspenTech transaction costs
—
0.03
4 %
Gain on acquisition of full ownership of
equity investment
(0.03)
—
4 %
OSI purchase accounting and fees
0.03
—
(4)%
Adjusted earnings per share*
$
0.93
$
1.05
13 %
Earnings Per Share
Q2 FY22E
FY22E
Earnings per share (GAAP)
$0.98 - $1.03
$4.71 - $4.86
Restructuring and related costs
0.04
0.20
Amortization of intangibles
0.10
0.39
Gain on subordinated interest
—
(0.60)
AspenTech transaction costs and interest
expense
0.03
0.20
Adjusted earnings per share*
$1.15 - $1.20
$4.90 - $5.05
EBIT and EBITA Margin
Q1 FY21
Q1 FY22
Change
Pretax margin (GAAP)
13.5 %
26.3 %
1280 bps
Interest expense, net
1.0 %
0.8 %
(20) bps
Restructuring and related costs
1.7 %
0.4 %
(130) bps
Amortization of intangibles
1.9 %
1.7 %
(20) bps
Gain on subordinated interest
— %
(10.1)%
(1010) bps
AspenTech transaction costs
— %
0.5 %
50 bps
Gain on acquisition of full ownership of
equity investment
(0.4)%
— %
40 bps
OSI purchase accounting items
0.5 %
— %
(50) bps
Adjusted EBITA margin*
18.2 %
19.6 %
140 bps
Automation Solutions Segment EBIT
Margin
Q1 FY21
Q1 FY22
Change
Automation Solutions Segment EBIT margin
(GAAP)
13.4 %
18.7 %
530 bps
Restructuring and related costs
2.4 %
0.5 %
(190) bps
Amortization of intangibles impact
2.5 %
2.3 %
(20) bps
Automation Solutions Adjusted Segment
EBITA margin*
18.3 %
21.5 %
320 bps
Commercial & Residential EBIT
Margin
Q1 FY21
Q1 FY22
Change
Commercial & Residential EBIT margin
(GAAP)
21.0 %
17.9 %
(310) bps
Restructuring and related costs
0.2 %
0.3 %
10 bps
Amortization of intangibles impact
0.9 %
0.7 %
(20) bps
Commercial & Residential Adjusted
EBITA margin*
22.1 %
18.9 %
(320) bps
Q1 Cash Flow
Q1 FY21
Q1 FY22
Change
Operating cash flow (GAAP)
$
808
$
523
(35) %
Capital expenditures
(122)
(116)
(6) %
Free cash flow*
$
686
$
407
(41) %
FY 2022E Cash Flow
FY 2022E
Operating cash flow (GAAP)
~ $ 3.8B
Capital expenditures
650M
Free cash flow*
~ $ 3.1B
Note 1: Underlying sales and orders
exclude the impact of acquisitions, divestitures and currency
translation.
Note 2: All fiscal year 2022E figures are
approximate, except where range is given.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220201006217/en/
Emerson Investor Contact: Colleen Mettler (314) 553-2197 Media
Contact: Charlotte Boyd (952) 994-8607
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