Business Context and Reporting Period
This Form 8-K filing by Emerson Electric Co. is dated November 23, 2011. The report provides Regulation FD disclosure regarding trailing three-month underlying order trends for the period ending October 2011, comparing performance against the prior year.
Key Financial Metrics and Order Trends
The filing focuses on underlying order growth percentages rather than revenue or profit figures. Key metrics for the trailing three-month average versus the prior year include:
- Total Emerson: +5% to +10% growth.
- Process Management: +10% to +15% growth.
- Industrial Automation: 0% to +5% growth.
- Network Power: 0% growth (flat).
- Climate Technologies: -5% to 0% decline.
- Tools and Storage: +10% to +15% growth.
Excluding the unfavorable impact of currency exchange rates, which deducted more than 3 percentage points from the total growth rate, underlying orders grew 8 percent.
Material Changes and Segment Commentary
Order trends reflected moderate growth overall, influenced by prior year comparisons and currency headwinds.
- Process Management: Remained the primary growth driver, fueled by global oil and gas investment. However, comparisons were negatively affected by a 5% impact from the Petrobras Comperj project booked in September 2010. Currency rates had a significant 13 percentage point unfavorable impact on this segment.
- Industrial Automation: Growth slowed due to softening capital goods end markets. Strength in electrical distribution and fluid automation was offset by weakness in electrical drives. Reduced government subsidies negatively impacted wind and solar energy businesses.
- Network Power: Orders were flat due to weak global end markets for embedded computing and power. The segment is undergoing a repositioning to fewer, more strategic customers to improve profitability. Currency rates deducted 1 percentage point.
- Climate Technologies: Continued weakness in U.S. and European residential and commercial markets. The global refrigeration business was flat due to strong prior-year bookings, though the Asia business showed moderate improvement. Currency rates added 1 percentage point.
- Tools and Storage: Trends accelerated with growth across all businesses, driven by professional tools, wet/dry vacuums, and commercial storage, benefiting from improved U.S. commercial construction.
Guidance, Outlook, and Risks
The filing does not provide specific financial guidance or forecasts for future periods. Management noted an upcoming annual investor conference scheduled for February 14, 2012, in New York City.
Forward-looking statements are subject to risks and uncertainties, 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 specific impact of the Petrobras Comperj project on Process Management order comparisons.
- Monitor the progress of the Network Power segment's repositioning strategy and its effect on profitability.
- Assess the sustainability of growth in Tools and Storage relative to U.S. commercial construction trends.
- Review the most recent Form 10-K for detailed risk factors regarding currency exchange rates and market demand.
- Confirm details of the February 14, 2012, investor conference for updated management commentary.