Emerson Electric Gains On Q4 Earnings Beat And FY25 Growth Forecast: Eyes AspenTech Buyout

Emerson Electric Company EMR shares traded higher on Tuesday after the company reported fourth-quarter FY24 results.

Net sales growth of 13% year over year to $4.62 billion, beating the consensus of $4.57 billion. Underlying sales were up 4%, and underlying orders increased by 2% in the quarter. Adjusted EPS improved 15% to $1.48, beating the consensus of $1.47.

Sales by Segments: Final Control $1.17 billion (+8%), Measurement & Analytical $1.12 billion (+7%), Discrete Automation $643 million (-3%); Safety & Productivity $352 million (-1%), Control Systems & Software $780 million (+9%), AspenTech $215 million (-13%), and Test & Measurement $360 million.

Adjusted Total Segment EBITA was $1.21 billion compared to $1.05 billion in the prior year quarter, and the margin improved by 70 bps to 26.2%.

Emerson’s operating cash flow for the quarter totaled $1.07 billion, compared to $991 million in the prior year, and free cash flow was $905 million (+10% Y/Y). Emerson held cash and equivalents of $8.05 billion as of September-end.

Dividend: Emerson declared a quarterly cash dividend per share of $0.5275 (vs. $0.525 prior quarter), payable on December 10, to stockholders of record on November 15, 2024.

Emerson President and Chief Executive Officer Lal Karsanbhai said, “We have done an exceptional job integrating Test & Measurement with $100 million of synergies realized in the first year, and we remain resolute in our focus on executing at a world-class level, guided by our Emerson Management System. Emerson’s leading technology, alignment with secular trends and customer focus provide confidence for continued momentum in fiscal 2025.”

Outlook: For FY25, Emerson Electric expects its net sales growth outlook of 3.5% – 5.5%, with underlying sales growth of 3% – 5% and adjusted EPS of $5.85 – $6.05 vs. consensus $5.48.

Emerson expects an operating cash flow of $3.6 billion – $3.7 billion and an FCF of $3.2 billion – $3.3 billion for FY25.

For the first quarter, the company projects net sales growth of 2.5% – 3.5% and adjusted EPS of $1.25 – $1.30 vs. consensus of $1.28.

Emerson disclosed plans to boost capital returns to shareholders with a share repurchase program totaling around $2 billion for FY25, including $1 billion expected in the fiscal first quarter.

Acquisition: In a separate release, Emerson proposed acquiring all remaining shares of Aspen Technology, Inc. AZPN for an enterprise value of $15.1 billion.

Emerson’s proposal of $240 per share offers a 35% premium over AspenTech’s undisturbed share price of $177.84 on August 6, and an 8% premium above its 52-week high of $221.94 through August 6.

Emerson currently owns approximately 57% of AspenTech’s outstanding shares of common stock. Upon completing the transaction, AspenTech would become Emerson’s wholly-owned subsidiary.

Emerson anticipates that the proposed transaction, including synergies, will have a neutral effect on its Adjusted EPS in fiscal 2025.

Emerson has also initiated a strategic review of its Safety & Productivity segment, considering options like a cash sale. This segment includes the remaining non-automation businesses in Emerson’s portfolio.

Investors can gain exposure to the stock via ProShares S&P Kensho Smart Factories ETF MAKX and Gabelli Automation ETF GAST.

Price Action: EMR shares are up 8.6% at $119.25 at the last check Tuesday.

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