Shares of Emerson Electric Co. (EMR) hit a 52-week high of $69.55 during Friday’s trading session. However, the stock closed lower at $69.34, reflecting a solid year-over-year increase of 27.0%. The average trading volume for the last three months aggregated 2,416,699 shares.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough potential to move upward. Its long-term EPS growth expectation of 9.2% and a market cap of $48.8 billion are some of the catalysts driving the stock.
Growth Drivers
Emerson Electric has been witnessing rising earnings estimates on the back of recent strategic acquisitions, strong fourth-quarter 2013 earnings and divestiture of its non-performing assets.
On Nov 5, the company reported strong fourth-quarter 2013 results with earnings increasing 4% year over year, primarily driven by the performance of its Process Management segment, which grew 5% year over year. The company’s top-line also rose 1% year over year. Its cash and cash equivalents at the end of fiscal stood at $3,275 million, a healthy rise of 38.7% year over year.
In addition, the company completed the strategic acquisitions of Enardo LLC and a minority stake in SPX Corporation. The strategic acquisition of Enardo perfectly complements the existing business of Emerson’s Process Management division. Apart from these, the company has also announced its plan to buy an India-based private company Virgo Valves to strengthen the division’s presence in the oil & gas industry.
Emerson Electric had also divested its 51% stake in embedded computing and power business to private equity investment firm Platinum Equity, retaining the remaining 49% non-controlling ownership stake in the business. The business was deemed to be a strategic misfit for Emerson Electric’s portfolio. Post-divestiture, Emerson Electric plans to focus more on its core businesses.
Estimate Revisions
Over the last 7 days, the earnings estimates did not show any upward or downward revision for 2013. Although there is a lacuna of estimate revisions, we envision an uptrend for the stock backed by its strong growth potential.
Other Stocks to Consider
Other stocks in the industry that look promising at the moment include EnerSys (ENS), Pioneer Power Solutions, Inc. (PPSI) and AO Smith Corp. (AOS). All three stocks carry a Zacks Rank #1 (Strong Buy).
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