Business Context and Reporting Period
This Form 8-K filing by Emerson Electric Co. is dated January 26, 2011. The report provides Regulation FD disclosure regarding the company's underlying order trends for the trailing three-month period ending December 2010. The filing also announces upcoming investor events for the first quarter of 2011.
Key Financial Metrics
The filing focuses on order growth rates rather than revenue, profit, or cash flow figures. Key metrics include:
- Total Emerson Order Growth: Ranged from +10% to +20% on a trailing three-month basis for October, November, and December 2010.
- Consecutive Growth: December 2010 marked the 10th consecutive month of double-digit order growth on a trailing three-month basis.
- Currency Impact: Currency exchange rates negatively impacted total orders by approximately one percentage point.
- Fixed Rate Orders: Total fixed rate orders remained at approximately 15%.
Material Changes and Segment Performance
Order trends varied by segment compared to the prior year:
- Process Management: Strong growth (>+20%) driven by large global projects and early-stage global recovery. Currency negatively impacted this segment by approximately two percentage points.
- Industrial Automation: Strong growth (>+20%) led by power generating alternator and electrical drives businesses, reflecting improving capital goods end markets.
- Network Power: Growth moderated from +10% to +15% in October to 0% to +5% in December. Weakness in embedded computing and power businesses, along with a tough comparison in Asia due to prior year stimulus, offset strength in UPS and precision cooling.
- Climate Technologies: Orders strengthened, moving from -5% to 0% in October to +5% to +10% in December. Improvements in Asia and North American residential markets offset a weaker European market.
- Tools and Storage: Growth ranged from +5% to +10% in October to 0% to +5% in December. Strength in tools was offset by weakness in residential businesses, indicating no strong recovery in U.S. consumer discretionary spending.
Guidance, Outlook, and Risks
Outlook: Management expects moderate growth for Climate Technologies over the next couple of quarters. Monthly comparisons are expected to become tougher moving forward as trailing three-month orders turned positive in January 2010.
Upcoming Events:
- First quarter 2011 results will be issued on February 1, 2011, followed by an investor conference call.
- An Annual Investment Community Update will be held on February 3, 2011, in St. Louis, MO, presented by Chairman and CEO David N. Farr.
Risks: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, and competitive and technological factors.
Investor Verification Checklist
- Verify the specific Q1 2011 revenue and earnings figures when released on February 1, 2011.
- Monitor the impact of currency exchange rates on future order growth, given the noted negative impact in Q4 2010.
- Assess the sustainability of the 10-month double-digit order growth streak given the tougher year-over-year comparisons expected.
- Review the performance of the Network Power segment, which showed moderating growth trends.
- Confirm the status of U.S. consumer discretionary spending recovery as it relates to the Tools and Storage segment.