EMERSON ELECTRIC CO

Previous wording

For the first quarter of fiscal 2024, net sales were $4.1 billion, up 22 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 10 percent. Foreign currency translation had a 1 percent favorable impact, the Test & Measurement acquisition added 12 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent.

Current wording

For the second quarter of fiscal 2024, net sales were $4.4 billion, up 17 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 8 percent. Foreign currency translation had a 1 percent unfavorable impact and the Test & Measurement acquisition added 10 percent.

Previous wording

Earnings from continuing operations attributable to common stockholders were $142, down 57 percent, and diluted earnings per share from continuing operations were $0.25, down 55 percent compared with $0.56 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.22, up 56 percent compared with $0.78 in the prior year, reflecting the strong sales growth and operating performance, as well as a $0.13 contribution from Test & Measurement.

Current wording

Earnings from continuing operations attributable to common stockholders were $501, down 6 percent, and diluted earnings per share from continuing operations were $0.87, down 5 percent compared with $0.92 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.36, up 25 percent compared with $1.09 in the prior year, reflecting the strong sales growth and operating performance, as well as an $0.11 contribution from Test & Measurement.

Previous wording

Following is an analysis of the Company’s operating results for the first quarter ended December 31, 2022, compared with the first quarter ended December 31, 2023.

Current wording

Following is an analysis of the Company’s operating results for the second quarter ended March 31, 2023, compared with the second quarter ended March 31, 2024.

Previous wording

Net sales for the first quarter of fiscal 2024 were $4.1 billion, up 22 percent compared with 2023. Intelligent Devices sales were up 11 percent, while Software and Control sales were up 55 percent, which included the impact of the Test & Measurement acquisition. Underlying sales were up 10 percent on 8 percent higher volume and 2 percent higher price. Foreign currency translation had a 1 percent favorable impact, the Test & Measurement acquisition added 12 percent and the divestiture of Metran, Emerson's Russia-based manufacturing subsidiary, deducted 1 percent. Underlying sales were up 9 percent in the U.S. and up 11 percent internationally. The Americas was up 8 percent, Europe was up 10 percent, and Asia, Middle East & Africa was up 15 percent (China up 9 percent).

Current wording

Net sales for the second quarter of fiscal 2024 were $4.4 billion, up 17 percent compared with 2023. Intelligent Devices sales were up 5 percent, while Software and Control sales were up 56 percent, which included the impact of the Test & Measurement acquisition. Underlying sales were up 8 percent on 5 percent higher volume and 3 percent higher price. Foreign currency translation had a 1 percent unfavorable impact and the Test & Measurement acquisition added 10 percent. Underlying sales were up 2 percent in the U.S. and up 12 percent internationally. The Americas was up 4 percent, Europe was up 12 percent, and Asia, Middle East & Africa was up 11 percent (China down 3 percent).

Previous wording

Selling, general and administrative (SG&A) expenses of $1,277 increased $247 and SG&A as apercent of sales increased 0.5 percentage points to 31.0 percent compared with the prior year, reflecting the impact of the Test & Measurement acquisition, partially offset by lower stock compensation expense and strong operating leverage on higher sales.

Current wording

Selling, general and administrative (SG&A) expenses of $1,296 increased $296 and SG&A as apercent of sales increased 2.9 percentage points to 29.6 percent compared with the prior year, reflecting the impact of the Test & Measurement acquisition and higher stock compensation expense, partially offset by strong operating leverage on higher sales.

Previous wording

Other deductions, net were $487 for the first quarter of fiscal 2024, an increase of $367 compared with the prior year. The current year included intangibles amortization related to the Test & Measurement acquisition of$139, restructuring costs of $83, acquisition/divestiture costs of $80 and a loss of $36 on the Company's equity method investment in Copeland. The prior year included a charge of $47 related to the Company exiting its business in Russia and a mark-to-market gain of $35 related toforeign currency forward contracts that were terminated in June 2023. See Note 7 and Note 10.

Current wording

Other deductions, net were $389 for the second quarter of fiscal 2024, an increase of $280 compared with the prior year. The current year included intangibles amortization related to the Test & Measurement acquisition of$141, restructuring costs of $30, a loss of $59 on the Company's equity method investment in Copeland and a divestiture loss of $39. The prior year included amark-to-market gain of $35 related to its equity investment in National Instruments Corporation and a mark-to-market loss of $14 related to foreign currency forward contracts that were terminated in June 2023. See Note 7 and Note 10.

Previous wording

Earnings from continuing operations attributable to common stockholders were $142, down 57 percent, and diluted earnings per share from continuing operations were $0.25, down 55 percent compared with $0.56 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.22 compared with $0.78 in the prior year, reflecting strong operating results. See the analysis above ofadjusted earnings per share for further details.

Current wording

Earnings from continuing operations attributable to common stockholders were $501, down 6 percent, and diluted earnings per share from continuing operations were $0.87, down 5 percent compared with $0.92 in the prior year. Adjusted diluted earnings per share from continuing operations were $1.36 compared with $1.09 in the prior year, reflecting strong operating results. See the analysis above ofadjusted earnings per share for further details.

Previous wording

Net earnings common stockholders in the first quarter of fiscal 2024 were $142 compared with $2,331 in the prior year, and earnings per share were $0.25 compared with $3.97 in the prior year.

Current wording

Net earnings common stockholders in the second quarter of fiscal 2024 were $501 compared with $792 in the prior year, and earnings per share were $0.87 compared with $1.38 in the prior year.

Previous wording

Following is an analysis of operating results for the Company’s business segments for the first quarter ended December 31, 2022, compared with the first quarter ended December 31, 2023. The Company defines segment earnings as earnings before interest and taxes. See Note 14 for a discussion of the Company's business segments.

Current wording

Following is an analysis of operating results for the Company’s business segments for the second quarter ended March 31, 2023, compared with the second quarter ended March 31, 2024. The Company defines segment earnings as earnings before interest and taxes. See Note 14 for a discussion of the Company's business segments.

Previous wording

Software and Control sales were $1,314 in the first quarter of 2024, an increase of $465, or 55 percent compared to the prior year, reflecting the impact of the Test & Measurement acquisition and strong growth in Control Systems & Software. Underlying sales were up 9 percent on 7 percent higher volume and 2 percent higher price. Underlying sales increased 14 percent in the Americas, 2 percent in Europe and 9 percent in Asia, Middle East & Africa (China up 4 percent). Control Systems & Software sales increased $69, or 11 percent, reflecting robust global demand in process end markets and strong demand in power end markets in the Americas and Asia, Middle East & Africa. Test & Measurement sales were $382 in the first quarter, reflecting the impact of the acquisition. AspenTech sales increased $14, or 6 percent, primarily due to higher maintenance and services revenue. Earnings for Software and Control decreased $38, down 51 percent, and margin decreased 5.9 percentage points due to the Test & Measurement loss which reflected significant intangibles amortization and restructuring. Adjusted EBITA margin increased 2.3 percentage points, reflecting leverage on higher sales, higher price and favorable mix.

Current wording

Software and Control sales were $1,332 in the second quarter of 2024, an increase of $479, or 56 percent compared to the prior year, reflecting the impact of the Test & Measurement acquisition and strong growth in Control Systems & Software. Underlying sales were up 14 percent on 11 percent higher volume and 3 percent higher price. Underlying sales increased 4 percent in the Americas, 31 percent in Europe and 20 percent in Asia, Middle East & Africa (China up 9 percent). Control Systems & Software sales increased $64, or 11 percent, reflecting strong international demand in process end markets and strong demand in power end markets in the Americas. Test & Measurement sales were $367 in the second quarter, reflecting the acquisition. AspenTech sales increased $48, or 21 percent, primarily due to higher license and maintenance revenue. Earnings for Software and Control decreased $9, down 14 percent, and margin decreased 3.9 percentage points due to the Test & Measurement loss which reflected significant intangibles amortization and restructuring. Adjusted EBITA margin increased 2.6 percentage points, reflecting leverage on higher sales and higher price.

Previous wording

Cost of sales for the first quarter of fiscal 2024 were $2,201, an increase of $448 compared with 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross margin of 46.5% decreased 1.5 percentage points, reflecting the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by 5.6 percentage points. Excluding this impact, gross margin improved due to the Test & Measurement acquisition and higher price.

Current wording

Cost of sales for 2024 were $4,293, an increase of $585 versus $3,708 in 2023, reflecting the impact of higher volume and the Test & Measurement acquisition. Gross margin of 49.5 percent increased 1.5 percentage points, reflecting the Test & Measurement acquisition, higher price and leverage on higher sales, partially offset by the impact from acquisition-related inventory step-up amortization of $231, which negatively impacted margins by approximately 2.7 percentage points.

Previous wording

Pretax earnings from continuing operations of $139 decreased $283, down 67 percent compared with the prior year. Earnings increased$77 in Intelligent Devices and decreased $38 in Software and Control, see the Business Segments discussion that follows and Note 14.

Current wording

Pretax earnings from continuing operations of $791 decreased $270 compared with prior year. Earnings increased $149 in Intelligent Devices and decreased $47 in Software and Control, see the Business Segments discussion that follows and Note 14.

Previous wording

Income taxes were $7 in the first quarter of fiscal 2024 and $98 in 2023, resulting in effective tax rates of 5 percent and 23 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items and the impact of inventory step-up amortization, which in total had a 16 percentage point impact on the rate. The prior year rate includeda 2 percentage point unfavorable impact related to the Russia charge, which had no related tax benefit.

Current wording

Income taxes were $156 in the first six of months of fiscal 2024 and $232 in 2023, resulting in effective tax rates of 20 percent and 22 percent, respectively. The current year rate included a $57 ($0.10 per share) benefit related to discrete tax items, partially offset by unfavorable impacts from inventory step-up amortization and the loss on divestiture noted above. In total, the net impact of these items benefited the rate by approximately 1 percentage point.

Previous wording

Earnings from discontinued operations were $2,002 ($3.41 per share) in the prior year, reflecting the $2.1 billion after-tax gain on the InSinkErator divestiture. See Note 5.

Current wording

Earnings from discontinued operations were$2,264 ($3.90 pershare) in the prior year, reflecting the $2.1 billion after-tax gain on the InSinkErator divestiture. See Note 5.

Previous wording

Intelligent Devices sales were $2.8 billion in the first quarterof 2024, an increase of $283, or 11 percent. Underlying sales increased 11 percent on 9 percent higher volume and 2 percent higher price. Unde rlying sales increased 6 percent in the Americas, Europe increased 14 percent and Asia, Middle East & Africa was up 18 percent (China up 10 percent). Final Control sales increased$78, or 9 percent, reflecting strength in energy and power end markets. Sales for Measurement & Analytical increased$198, or 26 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $5, or 1 percent, reflecting softness in the Americas and Asia, Middle East & Africa. Safety & Productivity sales increased $12, or 4 percent, reflecting solid demand in the Americas and Europe. Earnings for Intelligent Devices were$594, an increase of$77, or 15 percent, and margin increased 0.6 percentage points to 21.0 percent. Adjusted EBITA margin was 23.8 percent, an increase of 1.6 percentage points, reflecting leverage on higher sales and favorable price less net material inflation, partially offset by higher headcount and other costs.

Current wording

Intelligent Devices sales were $5.9 billion in the first six months of 2024, an increase of $420, or 8 percent. Underlying sales increased 8 percent on 6 percent higher volume and 2 percent higher price. Underlying sales increased 5 percent in the Americas, Europe increased 10 percent, and Asia, Middle East & Africa was up 13 percent (China up 2 percent). Final Control sales increased $137, or 7 percent, reflecting strength in energy and power end markets. Sales for Measurement & Analytical increased $323, or 20 percent, reflecting robust growth in all geographies and strong backlog conversion. Discrete Automation sales decreased $56, or 4 percent, reflecting softness in all geographies. Safety & Productivity sales increased $16, or 2 percent, reflecting slight growth in the Americas, moderate growth in Europe and strength in Asia, Middle East & Africa. Earnings for Intelligent Devices were $1,326, an increase of $149, or 13 percent, and margin increased 1.0 percentage points to 22.5 percent. Adjusted EBITA margin was 24.7 percent, an increase of 1.2 percentage points, reflecting leverage on higher sales, favorable mix and favorable price less net material inflation, partially offset by increases in other costs.

Previous wording

Key elements of the Company's financial condition for the three months ended December 31, 2023 as compared to the year ended September 30, 2023 and the three months ended December 31, 2022 follow.

Current wording

Key elements of the Company's financial condition as of and forthe six months ended March 31, 2024 as compared to the year ended September 30, 2023 and the six months ended March 31, 2023 follow.

Previous wording

Operating working capital increased due to the acquisition of NI, changes in accrued expenses and higher inventory levels to support sales growth. As of December 31, 2023, Emerson's cash and equivalents totaled $2,076, which included approximately $180 attributable to AspenTech. The cash held by AspenTech is intended to be used for its own purposes and is not available to return to Emerson shareholders.

Current wording

Operating working capital increased due to the acquisition of NI and changes in accrued expenses. As of March 31, 2024, Emerson's cash and equivalents totaled $2,318, which included approximately $180 attributable to AspenTech. The cash held by AspenTech is intended to be used for its own purposes and is not available to return to Emerson shareholders.

Previous wording

The current ratio decreased compared to September 30, 2023, reflecting the decrease in cash and increase in short-term borrowings used to support the NI acquisition. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 2.6X for the first three months of fiscal 2024 compares to 7.3X for the three months ended December 31, 2022, reflecting lower GAAP pretax earnings largely due to the NI acquisition. Excluding the impact from acquisition-related inventory step-up amortization of $231, higher intangibles amortization of $156, acquisition/divestiture fees and related costs of $134, higher restructuring and related costs of $72, and the loss of $36 on the Copeland equity method investment, the interest coverage ratio was 10.1X.

Current wording

The current ratio decreased compared to September 30, 2023, reflecting the decrease in cash and increase in short-term borrowings used to support the NI acquisition. The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 5.5X for the first six months of fiscal 2024 compares to 8.6X for the six months ended March 31, 2023, reflecting lower GAAP pretax earnings largely due to the NI acquisition. Excluding the impact from acquisition-related inventory step-up amortization of $231, higher intangibles amortization of $310, acquisition/divestiture fees and related costs of $154, higher restructuring and related costs of $79, the loss of $95 on the Copeland equity method investment and the gain on subordinated interest of $79, the interest coverage ratio was 10.1X.

Previous wording

Operating cash flow from continuing operations for the first three months of fiscal 2024 was $444, an increase of $142 compared with $302 in the prior year, reflecting higher earnings (excluding the impact of items related to the NI acquisition). Acquisition-related costs and integration activities negatively impacted operating cash flow in the current year by approximately $100. AspenTech generated approximately $30 compared to $50 in the prior year. Free cash flow from continuing operations of $367 in the first three months of fiscal 2024 (operating cash flow of $444 less capital expenditures of $77) increased $124 compared to free cash flow of $243 in 2023 (operating cash flow of $302 less capital expenditures of $59), reflecting the increase in operating cash flow. Cash used in investing activities from continuing operations was $8,453, reflecting the acquisition of NI. Cash provided by financing activities from continuing operations was $2,055, reflecting an increase in short-term borrowings of $2,647, partially offset by share repurchases and dividends.

Current wording

Operating cash flow from continuing operations for the first six months of fiscal 2024 was $1,201, an increase of $324 compared with $877 in the prior year, reflecting higher earnings (excluding the impact of items related to the NI acquisition). Acquisition-related costs and integration activities negatively impacted operating cash flow in the current year by approximately $170. AspenTech generated operating cash flow of approximately $170 compared to approximately $180 in the prior year. Free cash flow from continuing operations of $1,042 in the first six months of fiscal 2024 (operating cash flow of $1,201 less capital expenditures of $159) increased $286 compared to free cash flow of $756 in 2023 (operating cash flow of $877 less capital expenditures of $121), reflecting the increase in operating cash flow, partially offset by higher capital expenditures. Cash used in investing activities from continuing operations was $8,490, reflecting the acquisition of NI. Cash provided by financing activities from continuing operations was $1,613, reflecting an increase in short-term borrowings of$2,464, partially offset by share repurchases and dividends.

Previous wording

Total cash provided by operating activities was $415 including the impact of discontinued operations, and decreased $3 compared with $418 in the prior year.

Current wording

Total cash provided by operating activities was $1,158 including the impact of discontinued operations, and increased $672 compared with $486 in the prior year.

Previous wording

Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. Emerson is in a strong financial position, with total assets of $47 billion and common stockholders' equity of $21 billion, and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis.

Current wording

Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. Emerson is in a strong financial position, with total assets of $46 billion and common stockholders' equity of $21 billion, and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis.

Previous wording

For the full year, consolidated net sales from continuing operations are expected to be up 14.5 percent to 17 percent, with underlying sales up 4.5 percent to 6.5 percent excluding a 10 to 10.5 percent impact from the NI acquisition. Earnings per share from continuing operations are expected to be $2.80 to $2.95, while adjusted earnings per share from continuing operations are expected to be $5.30 to $5.45 (see the following reconciliation).

Current wording

For the full year, consolidated net sales from continuing operations are expected to be up 15 percent to 16 percent, with underlying sales up 5.5 percent to 6.5 percent excluding a 10 percent impact from the NI acquisition and a 0.5 percent unfavorable impact from foreign currency. Earnings per share from continuing operations are expected to be $2.98 to $3.08, while adjusted earnings per share from continuing operations are expected to be $5.40 to $5.50 (see the following reconciliation).

Previous wording

Operating cash flow from continuing operations is expected to be $3.0 to $3.1 billion and free cash flow from continuing operations, which excludes projected capital spending of approximately $0.4 billion, is expected to be $2.6 to $2.7 billion. The fiscal 2024 outlook assumes approximately $500 million returned to shareholders through share repurchases and approximately $1.2 billion of dividend payments.

Current wording

Operating cash flow from continuing operations is expected to be approximately $3.1 billion and free cash flow from continuing operations, which excludes projected capital spending of approximately $0.4 billion, is expected to be approximately $2.7 billion. The fiscal 2024 outlook assumes approximately $500 million returned to shareholders through share repurchases and approximately $1.2 billion of dividend payments.

Previous wording

Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the scope, duration and ultimate impacts of the Russia-Ukraine and other global conflicts, as well as economic and currency conditions, market demand, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2023 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.

Current wording

Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the scope, duration and ultimate impacts of the Russia-Ukraine and other global conflicts, as well as economic and currency conditions, market demand, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, and inflation, among others, which are set forth in the “Risk Factors” of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year ended September 30, 2023 and in subsequent reports filed with the SEC, which are hereby incorporated by reference.