Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on September 24, 2009, pursuant to Regulation FD. The report provides a summary of trailing three-month order trends for the period ending August 2009, comparing them to the prior year.
Key Financial Metrics
The filing focuses on order rates rather than GAAP financial results (revenue, profit, cash flow). The trailing three-month order rate for Total Emerson was down 20% to 25% compared to the prior year. Currency exchange rates negatively impacted orders by approximately 1 percentage point.
| Segment | August 2009 Order Trend (vs. Prior Year) |
|---|---|
| Process Management | -25% to -20% |
| Industrial Automation | > -30% |
| Network Power | -20% to -15% |
| Climate Technologies | -15% to -10% |
| Appliance and Tools | -25% |
| Total Emerson | -25% to -20% |
The filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Segment Performance
- Stabilization: The trailing three-month order rate showed signs of stabilization, with August trends slightly better than June and July.
- Process Management: Negatively impacted by reduced capital spending and MRO demand; power and water markets held up better than refining and chemical.
- Industrial Automation: Continued broad weakness, with significant declines in power generation demand.
- Network Power: Stabilization observed in data-center computing and telecommunications markets.
- Climate Technologies: Order rates turned slightly positive in August, driven by strength in Asia and Chinese stimulus programs.
- Appliance and Tools: Consumer-related businesses stabilized, while residential and non-residential businesses remained weak.
Guidance, Outlook, and Risks
Management stated that recent order trends support the sales forecast presented during the third-quarter conference call on August 4, 2009. The outlook remains cautious due to overall weakness in global gross fixed investment and capital goods end markets.
Upcoming Events:
- Fourth quarter and fiscal year 2009 results to be issued on November 3, 2009.
- Investor conference call scheduled for November 3, 2009, at 3:00 p.m. EST.
- Baird 2009 Industrial Conference presentation on November 11, 2009.
Risks: Forward-looking statements are subject to risks including economic and currency conditions, market demand, pricing, and competitive factors.
Investor Verification Checklist
- Verify the specific sales forecast details from the August 4, 2009, third-quarter conference call.
- Monitor the November 3, 2009, earnings release for actual revenue and profit figures to compare against the order trends.
- Assess the impact of currency exchange rates on future quarters given the noted 1 percentage point negative impact.
- Track the performance of the Climate Technologies segment in Asia to confirm if stimulus-driven growth is sustainable.
- Review the most recent Form 10-K for detailed risk factors regarding capital goods end markets.