Business Context and Reporting Period
Emerson Electric Co. filed a Form 8-K on June 18, 2009, pursuant to Regulation FD. The report provides a summary of GAAP underlying orders for the trailing three-month period ending May 2009, comparing performance against the prior year.
Key Financial Metrics and Order Trends
The filing focuses on order rates rather than revenue or profit figures for the period. Key metrics include:
- Total Emerson Orders: Down 25% for the trailing three months ended May 2009.
- Currency Impact: Exchange rates negatively impacted total orders by approximately 3 percentage points.
- Segment Performance (Trailing 3-Month % Change):
- Process Management: Down 15% to 20%.
- Industrial Automation: Down greater than 30%.
- Network Power: Down 20% to 25%.
- Climate Technologies: Down 20% to 25%.
- Appliance and Tools: Down 20% to 25%.
- Restructuring Costs: Management expects to incur $275 million to $300 million in restructuring expense for the fiscal year.
Material Changes and Segment Commentary
Order trends in May were slightly better than April but continued to reflect significant weakness in global end-market demand.
- Process Management: Orders remained mixed; power and water markets were strong, while chemical and refining were weak. Currency impact was smaller than in previous months due to a weakening U.S. dollar.
- Industrial Automation: Trends remained extremely weak due to depressed nonresidential gross fixed investment and deteriorating power generation demand. Currency negatively impacted orders by approximately 5 percentage points.
- Network Power: Strength in China was offset by weakness in North America and Europe.
- Climate Technologies: Trends improved sequentially due to U.S. air-conditioning replacement needs and lower preseason inventory buildup. The segment appears to be stabilizing.
- Appliance and Tools: Consumer-related businesses appear to be stabilizing at low demand levels despite nonresidential slowdowns.
Guidance, Outlook, and Risks
Emerson has increased global best cost actions to position the company for a global economic recovery expected in late 2010. The company anticipates issuing third-quarter 2009 results on August 4, 2009.
Risks and Uncertainties: Forward-looking statements are subject to risks 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 $275-$300 million restructuring expense on future earnings per share.
- Monitor the stabilization of the Climate Technologies and Appliance and Tools segments in upcoming quarterly reports.
- Track the recovery of nonresidential gross fixed investment affecting the Industrial Automation segment.
- Review the August 4, 2009, third-quarter earnings release for updated revenue and profit figures.