Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on February 2, 2010, to announce its first-quarter 2010 results of operations and financial condition. The filing includes a press release (Exhibit 99.1) containing both GAAP and non-GAAP financial measures. The report covers trailing three-month order trends ending in December 2009.
Key Financial Metrics and Order Trends
The filing does not provide specific GAAP revenue, profit, cash flow, or debt figures; these are contained in the attached press release (Exhibit 99.1). However, the filing details trailing three-month order trends (percent change versus prior year) for the period ending December 2009:
- Total Emerson: Trailing three-month order rate was flat to down 5 percent.
- Currency Impact: Currency positively impacted total orders by approximately 6 percentage points.
- Underlying Orders: Excluding currency, underlying orders turned slightly positive for December 2009, with improvement noted across all five business segments.
Segment Order Performance (Trailing 3-Month Average)
| Segment | October 2009 | November 2009 | December 2009 |
|---|---|---|---|
| Process Management | -10% to -5% | -5% to 0% | -15% to -10% |
| Industrial Automation | -30% to -25% | -20% | -15% to -10% |
| Network Power | -15% to -10% | -5% to 0% | 0% to +5% |
| Climate Technologies | +5% | +5% to +10% | +15% to +20% |
| Appliance and Tools | -20% | -10% | -5% to 0% |
Material Changes and Segment Commentary
Order trends showed sequential improvement in most segments during the trailing three-month period:
- Process Management: Orders were down 10% to 15% in the trailing three-month period. Currency provided a 7 percentage point positive impact, which was smaller than in previous months. Underlying trends showed modest improvement since October.
- Industrial Automation: Continued sequential improvement. Electronic drives saw positive growth, while the power generating alternator business remained weak. Currency added approximately 7 percentage points.
- Network Power: Trends improved, driven by growth in Asia and embedded power/computing businesses.
- Climate Technologies: Orders trended positive, driven by strength in Asia and improvements in air-conditioning and refrigeration end-markets.
- Appliance and Tools: Trends improved, led by growth in consumer-related businesses.
Guidance, Outlook, and Risks
The filing does not contain specific numerical guidance for future periods. Management indicated that senior leadership would discuss Q1 2010 results on an investor conference call held on February 2, 2010. An Annual Investment Community Update was scheduled for February 5, 2010, in New York City.
Risks and Uncertainties: The filing includes standard forward-looking statements cautioning that results may differ due to economic and currency conditions, market demand, pricing, and competitive/technological factors.
Investor Verification Checklist
- Verify specific Q1 2010 GAAP revenue, net income, and earnings per share figures in the attached press release (Exhibit 99.1).
- Confirm the reconciliation of non-GAAP financial measures to GAAP results as required by Regulation G.
- Review the detailed segment breakdown of revenue and operating margins in the full press release.
- Assess the impact of currency fluctuations on future guidance, given the significant positive impact noted in the trailing three-month period.
- Monitor the performance of the "power generating alternator" business within Industrial Automation, which was explicitly noted as weak.