Business Context and Reporting Period
This Form 8-K filing by Emerson Electric Co. was submitted on December 17, 2018, pursuant to Regulation FD. The report provides an update on three-month trailing order trends for the period ending November 2018, comparing performance against the prior year.
Key Financial Metrics
The filing focuses on order growth rates rather than revenue, profit, or cash flow figures. Key metrics include:
- Total Emerson Orders: Increased 5% year-over-year for the trailing three months (September, October, November 2018).
- Automation Solutions Orders: Increased 10% year-over-year; underlying growth (excluding currency) was 12%.
- Commercial & Residential Solutions Orders: Declined 5% year-over-year.
- Currency Impact: Unfavorable currency translation affected both business segments, with a specific 2% negative impact noted in Automation Solutions.
Material Changes Versus Prior Period
Order trends diverged significantly between the two business platforms compared to the prior year:
- Automation Solutions: Demonstrated broad-based global demand with positive growth in all world areas. North America, Asia (specifically China), and Europe led the increase, driven by small and mid-sized expansion projects, optimization of existing assets, and maintenance and repair (MRO) spending.
- Commercial & Residential Solutions: Experienced a decline primarily due to slower demand in Asia, driven by the air conditioning and heating markets in China. This weakness was partially offset by steady growth in North America air conditioning markets, broad-based demand in Europe, and favorable trends in global professional tools markets.
Guidance, Outlook, and Risks
Outlook: Management expects steady demand for brownfield projects and MRO through fiscal 2019. For Commercial & Residential Solutions, order trends in Asia are expected to improve as comparisons become easier and spending recovers in the second half of fiscal 2019. The company noted favorable trends in capital formation for LNG midstream infrastructure and downstream capacity globally.
Risks and Contingencies: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, intellectual property protection, cybersecurity, tariffs, competitive factors, and the impact of the Tax Cuts and Jobs Act.
Investor Verification Checklist
- Verify the specific impact of currency translation on the 12% underlying growth in Automation Solutions versus the reported 10% total growth.
- Monitor the recovery timeline for the China air conditioning and heating markets affecting Commercial & Residential Solutions.
- Assess the sustainability of the "steady demand" for brownfield projects and MRO spending through fiscal 2019.
- Review the company's exposure to tariffs and the Tax Cuts and Jobs Act as referenced in the risk factors.