Business Context and Reporting Period
This Form 8-K is a current report filed by Emerson Electric Co. on November 23, 2010. The filing serves as a Regulation FD disclosure providing an update on trailing three-month order trends for the period ending October 2010.
Key Financial Metrics: Order Growth
The filing focuses on GAAP underlying orders, reporting percent changes in the trailing three-month average versus the prior year. Specific revenue, profit, or cash flow figures are not provided in this document.
| Segment | August 2010 | September 2010 | October 2010 |
|---|---|---|---|
| Process Management | +15% | >+20% | >+20% |
| Industrial Automation | >+20% | >+20% | >+20% |
| Network Power | +10% to +15% | +10% to +15% | +10% to +15% |
| Climate Technologies | 0% to +5% | 0% to +5% | -5% to 0% |
| Tools and Storage | +5% | +5% | +5% to +10% |
| Total Emerson | +10% to +15% | +15% to +20% | +15% to +20% |
Material Changes and Segment Commentary
- Overall Trend: Trailing three-month orders accelerated slightly, reaching the highest level since orders turned positive in January 2010. Currency exchange rates had a negligible impact on the total order growth rate.
- Process Management: Orders strengthened further with solid growth in systems, valves, and measurement. Growth was driven by oil and gas, chemical, power, and refining markets. Currency negatively impacted this segment by approximately one percentage point.
- Industrial Automation: Growth remained high but moderated from peak levels due to less favorable comparisons. Capital goods end markets continued to improve.
- Network Power: Order rates remained strong, led by embedded power, inbound power, UPS, and precision cooling. Growth resumed in Asia, and Latin America orders were strong.
- Climate Technologies: Orders declined modestly due to weakness in the North American residential business (impacted by prior-year build-ahead for R-410A conversion) and slight declines in Asia. Stationary and transport refrigeration markets remained strong.
- Tools and Storage: Order growth improved, with strength in tools and disposers partially offset by weakness in residential storage.
Guidance, Outlook, and Risks
Outlook: Current order levels support the growth expectations communicated during the November 2, 2010 earnings conference call.
Upcoming Events: Senior management will host the annual investor conference on February 3 and 4, 2011, in St. Louis.
Risks: The filing includes standard forward-looking statement disclaimers. Risks include economic and currency conditions, market demand, pricing, and competitive and technological factors.
Investor Verification Checklist
- Verify the specific revenue and earnings impact of the reported order growth in the subsequent quarterly earnings release.
- Monitor the "less favorable comparisons" mentioned in Industrial Automation to assess if order growth moderates further in future quarters.
- Review the specific performance of the North American residential business within Climate Technologies to determine if the weakness is temporary or structural.
- Confirm the details of the February 2011 investor conference for updated management commentary.