Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on June 25, 2010, pursuant to Regulation FD. The report provides a summary of trailing three-month underlying order growth rates for the period ending May 2010, comparing performance against the prior year.
Key Financial Metrics
The filing focuses on order growth rates rather than revenue, profit, or cash flow figures. Specific financial metrics for revenue, margins, debt, or liquidity are not provided in this document.
| Segment | May 2010 Order Growth (vs. Prior Year) |
|---|---|
| Process Management | -5% |
| Industrial Automation | >+20% |
| Network Power | +5% to +10% |
| Climate Technologies | >+20% |
| Appliance and Tools | +5% to +10% |
| Total Emerson | +10% to +15% |
Material Changes and Commentary
- Currency Impact: Recent strengthening of the U.S. dollar negatively impacted trailing three-month order rates, reducing overall growth by over 4 percentage points. Specifically, the weakening of the euro reduced the Process Management GAAP order rate by over 12 percentage points.
- Underlying Growth: Excluding currency effects, the trailing three-month underlying order growth rate improved to its highest level since February. Process Management underlying orders reached their highest level since November 2008.
- Segment Drivers:
- Process Management: Strengthened by MRO demand in valve and measurement businesses.
- Industrial Automation: Very high growth driven by power generating alternators, electrical drives, power transmission, and fluid automation.
- Network Power: Growth in embedded power and computing offset by declines in Asian network power and UPS/cooling businesses.
- Climate Technologies: Strong growth in Europe (refrigeration), Asia (stimulus programs and efficiency standards), and the U.S. (residential replacement).
- Appliance and Tools: Strength in tools, motors, and appliances offset by weakness in storage businesses.
Guidance and Outlook
The filing does not provide specific financial guidance or forecasts for future periods. Management indicated that third-quarter 2010 results will be issued on August 3, 2010, followed by an investor conference call at 2:00 p.m. Eastern Daylight Time.
Investor Verification Checklist
- Verify the specific magnitude of currency headwinds in the upcoming Q3 earnings release to assess the true underlying demand.
- Confirm the sustainability of the "very high" order growth in Industrial Automation and Climate Technologies.
- Monitor the impact of China's new efficiency standards implemented June 1, 2010, on future Climate Technologies orders.
- Review the Q3 earnings call for updates on the weakness in the storage businesses within the Appliance and Tools segment.