Business Context and Reporting Period
This Form 8-K filing by Emerson Electric Co. was submitted on March 17, 2011. The report provides Regulation FD disclosure regarding the company's trailing three-month order trends ending in February 2011, comparing performance against the prior year.
Key Financial Metrics and Order Trends
The filing focuses on order growth rates rather than GAAP financial results (revenue, profit, cash flow). The following trailing three-month order growth percentages (versus prior year) were reported:
- Total Emerson: +10% to +15% (December 2010), +15% (January 2011), +10% to +15% (February 2011).
- Process Management: >+20% across all three months.
- Industrial Automation: >+20% across all three months.
- Climate Technologies: +5% to +10% (Dec), +15% (Jan), +5% to +10% (Feb).
- Tools and Storage: 0% to +5% (Dec), +5% (Jan), +5% to +10% (Feb).
- Network Power: 0% to +5% (Dec), -5% to 0% (Jan), -5% to 0% (Feb).
Currency Impact: Currency exchange rates positively impacted total orders by two percentage points and Process Management orders by eight percentage points.
Note: The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Segment Commentary
Order trends remained solid in the trailing three-month period, driven by strength in capital goods end markets, though rates have moderated from peak levels. Excluding currency, trailing three-month orders dropped three points from the previous month.
- Process Management: Remained strong due to increased capital spending; trends excluding currency remained above 20%.
- Industrial Automation: Showed broad strength led by electrical drives and power generating alternators.
- Network Power: Trends were negative due to tough comparisons in Asia (following strong stimulus programs in China) and weakness in embedded computing and power businesses. Growth in Network Power Systems (excluding Asia) remained solid.
- Climate Technologies: Growth moderated due to difficult prior-year comparisons. Strength in North America and Asia was offset by weakness in Europe.
- Tools and Storage: Orders improved slightly; non-residential construction strength offset softness in consumer and residential businesses.
Outlook, Risks, and Upcoming Events
Outlook: Management expects orders to continue moderating to normal levels as comparisons become tougher moving forward. Climate Technologies comparisons are expected to remain difficult for several months.
Risks: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, and competitive factors.
Upcoming Events:
- May 3, 2011: Second quarter 2011 results investor conference call (2:00 p.m. EDT).
- May 18, 2011: 2011 Electrical Products Group Conference in Longboat Key, Florida, featuring a presentation by CEO David N. Farr.
Investor Verification Checklist
- Verify the specific impact of currency fluctuations on the reported order growth percentages.
- Monitor the upcoming Q2 2011 earnings call on May 3, 2011, for actual revenue and profit figures.
- Assess the sustainability of order growth in Process Management and Industrial Automation given the noted moderation in rates.
- Review the performance of Network Power in Asia to determine if the negative trend is stabilizing.
- Confirm the timeline for the recovery of Climate Technologies given the difficult comparison periods.