Emerson Electric (EMR) Reports In-Line Q1 EPS; Revenues Beat; Raises FY20 EPS Guidance

Emerson Electric (NYSE: EMR) reported Q1 EPS of $0.67, in-line with the analyst estimate of $0.67. Revenue for the quarter came in at $4.2 billion versus the consensus estimate of $4.15 billion.

• Net sales of $4.2 billion were flat; underlying sales were flat
• GAAP EPS was $0.53; adjusted EPS of $0.67 was in-line with management’s guidance
• Initiated $97 million of restructuring actions in the quarter, a strong start on the previously announced Board of Directors’ comprehensive operational review
• Delivered operating cash flow of $424 million, up $101 million, and free cash flow of $310, up $142 million
• Returned $434 million to shareholders, including $129 million of share repurchases
• Reiterated full-year 2020 sales guidance; updated full-year EPS guidance for planned restructuring actions and associated benefits

“Our first quarter results provide a solid start to the year,” said Emerson Chairman and CEO David N. Farr. “Even with slightly lower-than-expected sales, we delivered in-line adjusted earnings per share as our teams executed well and we realized benefits from the 2019 restructuring actions. Throughout the year, we plan to prioritize driving higher margins in a no-growth environment.

“Sales and underlying orders were slightly below our expectations in the first quarter as North American upstream operators further slowed investment spending and demand from distributors serving discrete manufacturing was weak in December,” Farr continued. “However, we booked the first phases of key LNG projects that had been delayed from the second half of fiscal 2019, an encouraging early indication. We will continue to closely monitor the health of the capital spending cycle.

“As a foundational step in the previously announced Board of Directors’ operational review, our teams all over the world initiated $97 million of restructuring actions in the quarter - well above the $70 million target discussed on the fourth quarter earnings call. We look forward to laying out details of our long-term plan at our February Investor Conference.”

GUIDANCE:

Emerson Electric sees FY2020 EPS of $3.55-$3.80, versus the consensus of $3.63.

Management has updated the fiscal year 2020 outlook to reflect the expected costs and benefits of full year restructuring plans. GAAP earnings per share guidance is $3.27 to $ 3.52. Adjusted earnings per share, which excludes approximately $215 million of planned restructuring actions and $13 million of related costs for the year, is $3.55 to $3.80 compared to prior guidance of $3.48 to $3.72. This increase reflects the favorable impact of expected savings from the restructuring actions. Our expectation for full year cash flow remains largely unchanged.

“We continue to plan for a challenging economic environment for the remainder of fiscal 2020,” Farr said. “Although we’ve seen some progress with trade resolution, we still expect broad-based corporate focus on cost cutting, the U.S. presidential election, and tensions in the Middle East to pressure industrial markets in the near term.

“Our Board of Directors has largely completed its review of operational, capital allocation and portfolio initiatives, and our teams have worked hard to initiate nearly $100 million of restructuring in the quarter. As a result, we are raising the fiscal year 2020 guidance, and expect to fully outline our plans and reset our long-term outlook at our upcoming Investor Conference on February 13th.

“I want to personally thank our Board of Directors, shareholders, company leadership, employees, and customers for their dedication and efforts as we continue to navigate macroeconomic uncertainty and position the company for long-term value creation and success.”

We expect to present additional detail surrounding the outcomes of the Board of Directors’ review of operational, capital allocation and portfolio initiatives during our Investor Conference on February 13th.

For earnings history and earnings-related data on Emerson Electric (EMR) click here.

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