Emerson Electric Co.
Analysis
Emerson has finished its transformation and now grows from a narrow set of long-cycle projects: power, LNG, semiconductors and life sciences. Those orders keep building, while the reported numbers are held back by a software renewal quirk and a shrinking China.How much of the $12.4B project funnel converts within two years?
- Growth now rests on five capital-spending verticals.
Power, LNG, life sciences, semiconductors and aerospace and defense grew 27% last quarter and produced 80% of project wins, with power orders booked into fiscal 2028. Emerson now grows with a few big customers, not broad industry.
- Test & Measurement turned from the fix-up into the engine.
Orders there rose 19% last quarter, with semiconductor up 70%, and management has raised its full-year growth target twice, to about 14%. The division that was being repaired now carries the company while the rest crawls.How much of Test & Measurement's growth is share gain versus the chip cycle?
- Guidance swung on geopolitics, not on how Emerson executed.
In Q2 the Middle East conflict took a point off sales and the year was cut; by Q3 the region beat plan and the year was raised again. China went the other way, from flat to shrinking, so the near term hinges on a shipping lane.How quickly does the Middle East rebuild work turn into orders?
- Power and LNG project cycleThe bull case is that Emerson's controls and valves sit inside the largest power, LNG and life sciences projects being funded now, so orders keep refilling the funnel.
- Test and Measurement recoveryTest and Measurement has turned from a drag into the fastest-growing part of the portfolio, and management has raised its outlook for that business twice in two quarters.
- Recurring software revenueSoftware annual contract value keeps growing near a tenth a year, giving Emerson recurring revenue that does not depend on any single project award.
- China and Europe weaknessThe bear case is that much of Emerson's core business sits in Chinese chemicals and European factory automation, and both markets keep shrinking quarter after quarter.
- Middle East disruptionThe Middle East conflict closed a key shipping route and idled customer plants, so a healthy order book cannot be shipped or serviced at normal rates.
- Software renewal timingReported software sales depend on when multiyear contracts come up for renewal, so a year with fewer renewals cuts reported revenue and margin without changing cash.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$15K | Aug 26 | Oct 8 |
Donald Trump Republican · Executive | Purchase | ≥$15K | Jun 23 | Aug 22 |
Donald Trump Republican · Executive | Sale | ≥$15K | May 18 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Mar 17 | May 13 |
Kevin Hern Republican · House · OK-1 | Sale | ≥$15K | Sep 17 | Oct 13 |
Congressional trading data provided by QuiverQuant
How Emerson Electric Co. turned $18.0B of revenue into $3.5B of operating income.
| Revenue | ||
|---|---|---|
| Intelligent Devices | $12.4B | ▲ 1.97% YoY |
| Software and Control | $5.7B | ▲ 5.41% YoY |
| Total revenue | $18.0B | |
| Gross profit | $9.5B | 52.8% |
| Operating income | $3.5B | 19.6% |