Case Analysis: Emerson Electric
What a Long-term Investor Can Expect From Emerson?
Emerson Electric (EMR) is a well-known and famous stock amongst defensive investors, thanks to its long dividend growth history. Dividend and defensive investors like to invest in companies that have the potential to generate a steady growth in earnings and cash flows. Consequently, these companies usually offer increasing dividends and a steady share price appreciation. Emerson is a dividend aristocrat, as it has also paid increasing dividends since 1959.
Albeit a long fairy tale, Emerson Electric has almost lost its shine in the last five years, impacted by diminishing revenue generation potential. After posting revenue in the range of $20 to $23 billion from 2010 to 2015, the company posted …show more content…
The firm said “Investors would have to be rightly cautious of this pitched ‘strategic deal’ at the wrong time of the cycle. The perception is that Emerson has caught a falling knife in the same general end market where it struggled for the past two plus years.”
Besides from Pentair’s business unite acquisition, the fundamentals for its Automation and Commercial and Residential businesses are also unattractive. The company expects its sales to decline 1% this year, while earnings per share are also expected to remain flat compared to the previous year.
Its net sales from Automation Solutions, the largest revenue contributing segment, are expected to be down 3% to 4% this year, due to slower demand from energy and industrial markets. Although, the company expects its Commercial and Residential businesses to perform well in the following quarters, the latest interest rate hike in the U.S. could impact demand from housing and residential markets. In addition, political instability and falling economies in the Middle East could also have a strong impact on the demand for its Commercial and Residential …show more content…
Overall, the market environment and future fundamentals clearly suggest that that the company’s financial performance might remain under pressure in the coming days. Thus, we cannot expect a strong dividend growth from the company, compared to the average growth of 1.5% in the last three years.
On the other hand, its stock also offers a limited upside potential, amid several risk factors and substantial dependence on energy and industrial markets, which are likely to remain depressed in the coming days. Oil prices are currently trading around the lowest levels of this year and declined nearly 14% since OPEC producers agreed to expand output cuts for the next nine months. The market participants expect oil investments to remain sluggish in the coming days following the output cut agreement and lower oil prices.
In
Emerson Electric (EMR) is a well-known and famous stock amongst defensive investors, thanks to its long dividend growth history. Dividend and defensive investors like to invest in companies that have the potential to generate a steady growth in earnings and cash flows. Consequently, these companies usually offer increasing dividends and a steady share price appreciation. Emerson is a dividend aristocrat, as it has also paid increasing dividends since 1959.
Albeit a long fairy tale, Emerson Electric has almost lost its shine in the last five years, impacted by diminishing revenue generation potential. After posting revenue in the range of $20 to $23 billion from 2010 to 2015, the company posted …show more content…
The firm said “Investors would have to be rightly cautious of this pitched ‘strategic deal’ at the wrong time of the cycle. The perception is that Emerson has caught a falling knife in the same general end market where it struggled for the past two plus years.”
Besides from Pentair’s business unite acquisition, the fundamentals for its Automation and Commercial and Residential businesses are also unattractive. The company expects its sales to decline 1% this year, while earnings per share are also expected to remain flat compared to the previous year.
Its net sales from Automation Solutions, the largest revenue contributing segment, are expected to be down 3% to 4% this year, due to slower demand from energy and industrial markets. Although, the company expects its Commercial and Residential businesses to perform well in the following quarters, the latest interest rate hike in the U.S. could impact demand from housing and residential markets. In addition, political instability and falling economies in the Middle East could also have a strong impact on the demand for its Commercial and Residential …show more content…
Overall, the market environment and future fundamentals clearly suggest that that the company’s financial performance might remain under pressure in the coming days. Thus, we cannot expect a strong dividend growth from the company, compared to the average growth of 1.5% in the last three years.
On the other hand, its stock also offers a limited upside potential, amid several risk factors and substantial dependence on energy and industrial markets, which are likely to remain depressed in the coming days. Oil prices are currently trading around the lowest levels of this year and declined nearly 14% since OPEC producers agreed to expand output cuts for the next nine months. The market participants expect oil investments to remain sluggish in the coming days following the output cut agreement and lower oil prices.
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