Emerson Electric's (EMR) Potential C&RS Divestiture Seen Buoying Sentiment

October 5, 2022 12:15 PM EDT
Get Alerts EMR Hot Sheet
Price: $95.15 -1.78%

Rating Summary:
    16 Buy, 19 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 13 | New: 70
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Shares of Emerson Electric (NYSE: EMR) are up 1.3% in mid-day trading Wednesday following reports overnight from Bloomberg News that the company is in talks with private equity firm Blackstone (NYSE: BX) to sell at least a part of its commercial and residential solutions business for between $5-$10 billion.

If a deal happens, it would be just the latest in a string of reshuffling moves by Emerson. In August, Emerson announced it would sell its garbage-disposal unit, InSinkErator, to Whirlpool (NYSE: WHR) for $3.0 billion. In the fall of 2021, Emerson announced it would merge its software units with Aspen Technology (NASDAQ: AZPN) in a deal valued at about $11 billion.

Stephens analyst Tommy Moll views the latest possible deal news as positive and expects the stock to perform well through earnings and into November's Investor Conference as sentiment improves.

"We reiterate OW and expect EMR to perform well today, through earnings and into November's Investor Conference, where sentiment should be buoyed with each step toward shaping a better-connected portfolio of higher-technology, higher-growth businesses," Moll commented.

Given the various potential outcomes from a commercial and residential solutions business, the analyst is reserving judgment on implications for earnings and valuation. That said, he reiterated his views that most of the assets in the segment "would fetch a multiple well above EMR's current average."

Moll added that thematically he would be supportive of Emerson divesting the remainder of the Tools & Home platform, which with the pending InSinkErator deal, would leave the company with "leading, cohesive Automation and Climate segments and attractive sum-of-the-parts optionality." The analyst maintained a $120 price target on the stock.

By Staff

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