Business Context and Reporting Period
This Form 8-K filing by Emerson Electric Co. was submitted on September 20, 2011, pursuant to Regulation FD. The report provides a summary of trailing three-month order trends for the period ending August 2011, comparing performance against the prior year.
Key Financial Metrics
The filing focuses on order growth rather than revenue, profit, or cash flow figures.
- Total Emerson Order Growth: Trailing three-month average increased by 10% to 15% versus the prior year.
- Organic Growth: Excluding currency effects, trailing underlying three-month order growth was 8%.
- Currency Impact: Currency exchange rates contributed approximately 3 percentage points to total growth.
- Backlog: Management notes strong backlog levels expected to ensure solid revenue growth in subsequent quarters.
Material Changes by Segment
Order performance varied significantly across business segments during the trailing three-month period (June, July, August 2011):
- Process Management: Strong growth (>20%) driven by project activity and MRO business in oil, gas, and refining markets. Currency contributed ~2 percentage points.
- Industrial Automation: Growth slowed (+5% to +15%) due to difficult prior-year comparisons. Strength in fluid automation and ultrasonic welding was offset by weakness in electrical drives and power transmission. Currency contributed ~7 percentage points.
- Network Power: Modest growth (+5% to +10%) driven by Asia and North American UPS/cooling businesses, offset by weakness in embedded computing and energy systems. Currency contributed ~3 percentage points.
- Climate Technologies: Slightly negative growth (-5% to 0%) due to weakness in U.S. residential/commercial markets and temperature controls, partially offset by global refrigeration growth.
- Tools and Storage: Positive growth (+5% to +10%) aided by weather-related demand for vacuums and professional tools, offset by softness in food waste disposers.
Outlook, Risks, and Unusual Items
Outlook: Management anticipates solid revenue growth over the next several quarters supported by strong backlog. End markets for Process Management and Network Power Systems remain robust despite soft economic indicators in the U.S. and Europe.
Risks: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, and competitive factors.
Upcoming Events: Fourth quarter and fiscal year 2011 results are scheduled for release on November 1, 2011, followed by an investor conference call.
Investor Verification Checklist
- Verify the specific revenue and earnings impact of the reported 8% underlying order growth in the upcoming Q4 2011 earnings release.
- Monitor the volatility of currency exchange rates, which contributed significantly (up to 7 percentage points in Industrial Automation) to reported order growth.
- Assess the sustainability of the "strong backlog" cited by management against the noted softness in U.S. residential and commercial end markets.
- Review the performance of the electrical drives and power transmission businesses, which showed weakness offsetting gains in other Industrial Automation areas.