Emerson Reports 1Q 2018 Results

Emerson announced net sales in the first quarter ended Dec. 31, 2017 were $3.8 billion, up 19%, with underlying sales up 7% excluding favorable currency of 3% and an impact from acquisitions and divestitures of 9%. The first quarter results reflected continued favorable global economic conditions as both platforms delivered solid underlying sales growth.
 
December trailing three month underlying orders were up 7% and the company expects orders to trend in a range of 5% to 10% for the remainder of the year.
 
Pretax margin of 13.2% and EBIT margin of 14.2% decreased 120 and 160 basis points, respectively, reflecting dilution from the Valves & Controls acquisition. Excluding Valves & Controls, EBIT margin of 16.5% increased 70 basis points driven primarily by leverage on higher sales and benefit of prior year restructuring actions.
 
“We continued to execute our strategic repositioning plans across both business platforms and delivered a stronger first quarter than we had expected a few months ago,” said David N. Farr, chairman and CEO. “Our growth in the quarter reflects broad-based momentum across our key end markets and regions, providing solid footing for our teams to deliver earnings and cash flow growth in 2018. We now see a stronger year operationally for Emerson, and combined with the benefit of US tax reform, we are raising our full-year GAAP EPS guidance to $3.05 to $3.15 and net sales growth to 11% to 13%, or 5% to 7% on an underlying basis.
 
“The positive impact of tax reform in the U.S. cannot be overstated,” Farr added. “The legislation levels the global playing field for US companies and will drive our economy by encouraging capital investment and ultimately leading to growth of jobs and wages. We expect increased capital formation to have a favorable impact on Emerson’s growth over the next few years as US companies bring home cash and invest in US manufacturing.”
 
Automation Solutions net sales increased 31% in the quarter, with underlying sales up 9% excluding favorable currency of 3% and an impact from acquisitions of 19%.
 
Commercial & Residential Solutions first quarter net sales were flat and underlying sales increased 5% excluding favorable currency of 2% and an impact from divestitures of 7%.
 
Total Emerson net sales are now expected to be up 11% to 13% with underlying sales up 5% to 7% excluding a 6% impact from acquisitions, divestitures and currency translation.