Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on August 24, 2011, providing Regulation FD disclosure regarding trailing three-month order trends ending July 2011. The report covers performance across five business segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Tools and Storage.
Key Financial Metrics
This filing focuses on order growth percentages rather than GAAP financial results such as revenue, profit, or cash flow. Key order metrics for the trailing three-month period (May–July 2011) versus the prior year include:
- Total Emerson Order Growth: +10% to +15% (GAAP); +6% excluding currency impact.
- Currency Impact: Positively impacted total orders by approximately 6 percentage points.
- Segment Order Growth (GAAP):
- Process Management: >+20%
- Industrial Automation: +10% to +15%
- Network Power: +5% to +10%
- Climate Technologies: -5% to 0%
- Tools and Storage: +5%
The filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Segment Commentary
Order growth remained solid, led by industrial-related businesses, despite weakness in U.S. and European economies.
- Process Management: Strong growth driven by oil and gas project and MRO orders. Currency added ~9 percentage points. Future comparisons may be difficult.
- Industrial Automation: Growth slowed due to difficult prior-year comparisons (up ~40% previously). Strength in alternators and fluid automation was offset by weakness in electrical drives and power transmission. Currency added ~8 percentage points.
- Network Power: Modest growth driven by Asia and Latin America systems and cooling businesses. Weakness in embedded computing and energy systems, plus price increases, offset gains. Currency added ~4 percentage points.
- Climate Technologies: Orders remained slightly negative due to U.S. residential softness and temperature controls weakness, partially offset by global refrigeration growth.
- Tools and Storage: Growth in professional tools and storage offset by weakness in wet/dry vacuums.
Outlook, Risks, and Unusual Items
Management expects solid revenue growth in the next several quarters supported by a strong backlog position. However, the outlook notes considerable weakness in U.S. and European economies with no near-term catalysts for better growth. Forward-looking statements are subject to risks including economic conditions, currency fluctuations, market demand, pricing, and competitive factors.
Investor Verification Checklist
- Verify the specific impact of currency exchange rates on future quarters given the 6 percentage point boost in the current period.
- Monitor the sustainability of Process Management growth as project comparisons become more difficult.
- Assess the duration of weakness in the U.S. residential market affecting Climate Technologies.
- Confirm the timeline for the upcoming Citi Global Industrials Conference presentation on September 21, 2011.
- Review the most recent Form 10-K for detailed risk factors referenced in the forward-looking statements.