Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on September 24, 2010, pursuant to Regulation FD. The report provides a summary of underlying orders for the trailing three-month period ending August 2010, comparing performance against the prior year.
Key Financial Metrics
The filing focuses on order growth percentages rather than revenue, profit, or cash flow figures.
- Total Emerson Underlying Orders: Up 10% to 15% (trailing three-month average vs. prior year).
- August 2010 Specifics: Underlying orders were approximately 15%, excluding a negative 2 percentage point currency impact. Overall orders were up 13%.
- Segment Performance (August 2010):
- Process Management: +15%
- Industrial Automation: >+20%
- Network Power: +10% to +15%
- Climate Technologies: 0% to +5%
- Appliance and Tools: +5%
The filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Segment Drivers
Order growth was led by strength in Industrial Automation, Process Management, and Network Power segments. Notable changes include:
- Process Management: Solid growth in the U.S., Asia, Latin America, and Europe driven by MRO activity and small projects. Currency exchange rates negatively impacted orders by approximately 2 percentage points.
- Industrial Automation: Strength in electrical drives, power generating alternators, power transmission, materials joining, and precision cleaning.
- Network Power: Growth in embedded power, uninterruptible power supply, precision cooling, and inbound power, partially offset by a decline in the network power business in Asia.
- Climate Technologies: Growth moderated from very high levels. Strong growth in Asia and global refrigeration was offset by declines in North American residential air-conditioning due to tougher prior year comparisons and channel inventory liquidation.
- Appliance and Tools: Strength in disposers, tools, and non-residential storage offset by weakness in residential storage.
Discontinued Operations: The motors and appliance controls businesses have been reclassified to discontinued operations as a decision has been made to sell these businesses. Trailing three-month orders for Emerson and the Appliance and Tools segment exclude these businesses.
Guidance, Outlook, and Risks
Upcoming Events: Emerson will issue fourth quarter and fiscal year 2010 results on November 2, 2010, followed by an investor conference call at 2:00 p.m. Eastern Daylight Time.
Risks and Uncertainties: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, and competitive and technological factors. The company undertakes no obligation to update these statements.
Investor Verification Checklist
- Verify the final fiscal year 2010 results and Q4 performance when released on November 2, 2010.
- Confirm the status and timeline of the sale of the motors and appliance controls businesses (discontinued operations).
- Monitor the impact of currency exchange rates on future order growth, given the noted 2 percentage point negative impact in August.
- Assess the sustainability of order growth in the Industrial Automation and Process Management segments.