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Emerson Electric Co EMR

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Emerson’s Stock Sell-Off Is Puzzling; We Raise Intrinsic Value Following Our Revisit of Assumptions

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Nothing in wide-moat-rated Emerson’s fiscal fourth-quarter and full-year 2021 results materially alters our long-term view of the firm. While we brought down our long-term revenue assumptions, this was more than offset by higher earnings assumptions. Therefore, we lift our fair value estimate to $107 from $102, just shy of a 5% raise. The raise was primarily driven by a slightly higher GAAP operating margin of 19.4%, including charges (some of which are noncash purchase amortization charges, while others are cash charges, like restructuring). That’s 90 basis-points higher than our prior expectations as we incorporate an additional year of assumptions. Time value of money was also a slight tailwind.

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Company Profile

Business Description

Emerson Electric is a multi-industrial conglomerate that operates under two business platforms: automation solutions and commercial and residential solutions. The latter is further subdivided into two operating segments: climate technologies, which sells HVAC and refrigeration products and services, as well as tools and home products, which sells tools and compressors, among other products and services. Commercial and residential solutions boasts several household brands, including Copeland, InSinkErator, and RIDGID. Automation solutions is most known for its process manufacturing solutions, which consists of measurement instrumentation, as well as valves and actuators, among other products and services. About half of the firm’s geographic sales take place in the United States.

8000 West Florissant Avenue, P.O. Box 4100
St. Louis, MO, 63136
T +1 314 553-2000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Sep 30, 2021
Stock Type Cyclical
Employees 86,700