Emerson Electric Gets An Upgrade From This Analyst As Fundamentals Are Accelerating

Morgan Stanley analyst Joshua Pokrzywinski upgraded the shares of Emerson Electric Co EMR from Equal-Weight to Overweight and raised the price target from $95 to $96.
Since the National Instruments Corporation NATI bid, shares are down 16% versus EE/MI and S&P 500, down 3% and 1%, respectively.
In the analyst's view, the NATI resolution potentially looks like a win-win for shares.
The analyst believes that EMR is unlikely to bid above $55/share versus its current $53/share offer or, more likely, will not win the bid.
Related: Emerson Discloses $7.6B Offer For National Instruments - Reveals Several Private Attempts Made Over Last Eight Months
The analyst expects orders to accelerate, possibly as peers decelerate or decline.
Fundamentally, the analyst sees process capex accelerating as other industrial verticals start to moderate based on a comparatively low starting point.
Project FID announcements and EMR orders potentially soon after should come with IRA clarification in the coming months, added the analyst.
According to the analyst, LNG and Hydrogen together drive a more than 2% uplift to EMR's revenue CAGR through 2030.
Derated valuation, multiple fundamental tailwinds, and an advantaged M&A position vs. other acquirers with a higher cost of capital should substantially limit the downside, the analyst added.
The analyst's bull case assumes greater growth and margin expansion, and has EMR trading at a 21x multiple, a 3% premium to peers.
The analyst notes that most names above EMR on risk-adjusted risk/reward have substantial U.S. non-resi exposure with rising concerns of a lending freeze, suggesting more downside risk or a higher probability of the bear case than a month ago.
Price Action: EMR shares are trading higher by 1.77% at $83.73 on the last check Tuesday.

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