Emerson Electric (EMR) Sells Assets for $5.2 Billion, Reports 3Q Earnings

Shares of Emerson Electric Company (EMR) were trading down -1.93 or -3.46 percent to $53.85 per share in Tuesday’s premarket. The stock sold off after news broke early this morning that the company would be selling two of its units for a total of $5.2 billion. In addition, the company reported lower than expected third quarter earnings results after news of the sales, which put pressure on the stock.  Emerson Electric Co. stock closed at $55.78 per share, down -0.12 or -0.21 percent in Monday’s regular trading session.


Stock Analysis

Fergusson, Missouri based Emerson Electric Company was founded by John W.
Emerson in 1890. The company is a multinational corporation focusing on multiple manufacturing and engineering services for industrial, commercial and consumer markets. The company develops power and climate technologies, industrial automation and storage systems, as well as manufacturing electric motors and professional tools. The company employs approximately 150,000 people and operates over 220 manufacturing locations all over the world.

Emerson announced this morning that it would be selling its network power unit for $4 billion to Platinum Equity, an investment firm, while the company’s motors and electric power division will be sold to Nidec Corp., a Japanese company for $1.2 billion.

Emerson said that it would retain a subordinated interest in the network power unit, which will continue to be headed by Emerson Executive Vice President and business leader for the unit, Scott Barbour. Emerson announced its intention to sell the power unit and explore “strategic alternatives” for its power generation and motors and drives units, as well as the company’s remaining storage units.

David Farr, Chairman and Chief Executive Officer of Emerson stated in the company’s earnings release that, “This morning we announced agreements for the sales of our Network Power, Leroy-Somer and Control Techniques businesses for a combined value of $5.2 billion. These agreements represent a significant step forward in the overall portfolio repositioning strategy we announced last year in June. Management and the Board will continue to focus on where best to allocate the proceeds to bolster our presence within our core Automation Solutions and Commercial & Residential Solutions business platforms in order to drive growth, profitability and shareholder value.”

In addition to the sale of assets, Emerson reported third quarter 2016 earnings this morning. The company reported net earnings of $479 million or $0.74 per share for the quarter ended on June 30th. This compares to net earnings of $564 million or $0.84 per share in the same period one year ago, a decline of -12 percent over last year.

Quarterly net sales came to $5.13 billion, a decline of -7 percent over 2015’s third quarter. The analyst consensus was for the company to report earnings of $0.84 per share on revenue of $5.32 billion. Due to tough market conditions, the company also lowered its guidance for the full 2016 year.

Underlying sales for the full year are now expected to be down -5 to -6 percent with the exclusion of negative currency translation and the impact of completed divestitures of about two percent each. Sales for the company are expected to be down -9 to -10 percent, with reported earnings per share expected to be $2.37 to $2.55, while adjusted earnings per share are now forecast to be $2.90 to $3.00. The revised earnings takes into account a previously announced increase to restructuring expenditure, which is now expected to be $90 million to $100 million in this fiscal year.

Other News About EMR

(EMR)

Investment management firm now holds 27,610 shares of Emerson.

Exclusive: Emerson Electric in bid for Pentair's valves business – sources

Unit for sale could be valued at approximately $2 billion.

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Published on Aug 2, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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