Emerson Electric (NYSE: EMR) reported Q4 EPS of $1.10, $0.16 better than the analyst estimate of $0.94. Revenue for the quarter came in at $4.6 billion versus the consensus estimate of $4.46 billion.

• Fourth quarter GAAP net sales of $4.6 billion were down 8 percent; underlying sales were down 9 percent, in-line with management guidance. Full year GAAP net sales of $16.8 billion were down 9 percent; underlying sales were down 8 percent, also in-line with management guidance.
• Fourth quarter GAAP EPS was $1.20, up 3 percent from the year prior; adjusted EPS, which excludes restructuring and certain tax benefits, was $1.10, down 4 percent. Full year GAAP EPS was $3.24, down 13 percent from the year prior, and ahead of guidance of $2.80 to $2.95; adjusted EPS was $3.46, down 6 percent, and ahead of guidance of $3.20 to $3.35.
• Delivered strong operating cash flow of $1.23 billion in the quarter, up 2 percent, and $3.08 billion for the year, up 3 percent.
• Delivered strong free cash flow of $1.02 billion in the quarter, up 2 percent, and $2.55 billion for the year, up 6 percent.
• Initiated $73 million of restructuring and related actions in the quarter, totaling $304 million for the year, continuing aggressive execution of the comprehensive cost reset program to return to record adjusted EBIT margins.
• Completed 64 consecutive years of increased dividends per share and plan to announce a 2 cent increase for 2021, after today's Board of Directors meeting.

“The year took a dramatic turn in March, as the virus rapidly spread and impacted all of our major markets,” said Emerson Chairman and CEO David N. Farr. “Despite unforeseen once-in-a-career challenges and circumstances, Emerson was relatively well prepared and positioned. We had already begun our focus on cost containment actions and planning for a low-growth year, as was laid out during our February 2020 Investor Day. And our well-established regionalization strategy - maximizing sourcing, manufacturing, and distribution of products and solutions within regional end markets - was instrumental to maintaining our supply chain integrity as uncertainty intensified and economies halted. Amidst all the challenges, we exceeded our second quarter reset financial forecast in sales, EBITDA, and cash flow.

“As the situation rapidly evolved, Emerson's leadership team and global operations maintained focus on our key priority: to safely serve our customers and ensure business continuity in essential industries like power, life sciences, food & beverage, home comfort and safety, water, and energy. I am exceptionally proud of the way our employees rose to the challenge, going above and beyond to help our customers navigate the turbulence. Although there is clearly more work to be done as we enter a new fiscal year, I want to thank our employees, customers, shareholders, and Board of Directors for their unwavering commitment and partnership as we all manage this dynamic period in history.

"Although the COVID-19 virus has not yet subsided, the Emerson global team has learned to operate safely and effectively, in person, in this environment. Emerson's offices and facilities are open with employees safely working on site."

“Despite the uncertainties and challenges from COVID-19, we ended the year with orders and sales squarely in-line with second quarter guidance,” Farr said. “Most importantly, we were able to deliver strong profitability, earnings, and cash flow, driven by our ongoing robust cost containment and restructuring actions. I’m proud of the team for executing on this challenging but vital work. As the broader macroeconomic outlook begins to stabilize, we are well-positioned with a more agile and lean cost structure to sustain and build upon our strong profitability, particularly as late cycle end markets begin their recovery.

“In conclusion, the fiscal year wasn’t just about reacting to the pandemic. We also continued to invest and took bold action to build on our innovation and technology footprint of the future, with three strategic acquisitions: American Governor, Open Systems International Inc. and Progea. These core technologies and capabilities will strengthen our position in attractive and growing marketplaces including software, renewable energy, and transmission & distribution. Digital transformation initiatives continue to gain momentum among many of our industrial customers, and these portfolio enhancements will enable us to help more customers adapt and excel within new operating paradigms.”

GUIDANCE:

Emerson Electric sees FY2021 EPS of $3.40-$3.50, versus the consensus of $3.30.

2021 Capital Allocation and Outlook

There is no change to the capital allocation framework set forth during the Investor Conference in February including the return of 50 to 60 percent of cash flow to shareholders in the form of dividends and share repurchases over the long term. Share repurchases were suspended in fiscal year 2020, with approximately $950 million repurchased, due to the changing demand environment associated with COVID-19. Emerson intends to resume share repurchases in fiscal year 2021 in the amount of $500 million to $1 billion, while concurrently maintaining optionality for further acquisitions should the opportunity arise. This allocation excludes the funding of the previously announced acquisition of Open Systems International Inc. which closed on Oct 1, 2020.

Management believes it is appropriate to assume a conservative forecast for the 2021 macroeconomic environment given the current uncertainty, and expects a slow-but-steady improvement in demand over the course of 2021 as economies, companies, and communities continue to gradually reopen and learn to safely operate with the virus. We also expect to see continued progress with regard to vaccine development, manufacturing, and distribution over the course of the fiscal year.

Within this framework, as management forecasted in April 2020, we expect overall revenue to return to growth in the third quarter of 2021. Commercial & Residential Solutions is expected to return to growth earlier than originally expected, while Automation Solutions is expected to return to growth later in the year. Due to the delayed recovery in many automation markets, we are increasing restructuring spend within Automation Solutions, resulting in a total company restructuring spend of over $200 million in 2021. Lastly, the guidance assumes no major operational or supply chain disruptions and oil prices in the $35 to $50 range during this period.

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