Emerson Electric Company EMR reported third-quarter fiscal 2015 earnings per share of 84 cents per share, squeaking past the Zacks Consensus Estimate of 83 cents by a penny. However, it came 18% below the year-ago quarter figure of $1.03.
The year-over-year decline was attributable to strong spending reduction by global customers in oil & gas and energy-related markets, strengthening of U.S. dollar as well as sluggishness in emerging markets. Unimpressively, Emerson curtailed its fiscal 2015 earnings guidance, foreseeing no near-term respite.
Quarter in Details
Net sales decreased 13% year over year to $5,503 million and missed the Zacks Consensus Estimate of $5,686 million. Underlying sales in the quarter went down by 5%, with modest growth in Commercial & Residential Solutions.
As per the segments, Process Management segment net sales fell about 10%, with underlying sales slipping 4%, attributable to low order rates stemming from weak global spending in the oil and gas industry and strong U.S. dollar.
The Industrial Automation segment reported a 23% decline in year-over-year net sales, with an underlying sales decrease of 5% due to the persistent weakness in European demand and oil & gas and other related markets.
Net sales in the Network Power segment contracted 17%, with a decrease of 11% in underlying sales, owing to demand reduction for data center infrastructure and telecommunications investments globally.
Net sales in the Climate Technologies segment fell 6% in the quarter, with a 3% decrease in underlying sales, hurt by dismal U.S. air conditioning business.
Commercial & Residential Solutions net sales dipped 3%, with rise of 1% in underlying sales, driven by improving U.S. construction market.
Liquidity & Cash Flow
Exiting the quarter, the company had cash and cash equivalents of $3.4 billion with long-term debt of $4.3 billion. Meanwhile, for the nine months ended Jun 30, 2015, net cash provided by operating activities totaled $1,428 million.
Dismal 2015 Outlook
Citing an unfavorable operating environment, Emerson trimmed its reported earnings guidance and now expects it to be in the range of $3.97 to $4.07 from $4.17 to $4.32 guided earlier. Also, net sales are now expected to decrease about 9% (earlier range being decline of 7% to 5%).
Moreover, the company expects underlying sales to dip 2% in fiscal 2015 (prior range being decline of 0% and 2%). This excludes the negative currency translations and impact of divestiture.
To Conclude
Emerson came up with dismal earnings again, with old problems adding to the woes. For the remainder of fiscal 2015, the company anticipates the global market environment to remain challenging for its business, with strong U.S. dollar, low industrial spending and weakness in emerging and mature economies among the major concerns.
Further, Emerson foresees decrease in profitability in the near term owing to volume deleverage stemming from weakness in underlying sales and impact of restructuring initiatives.
Emerson currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include AZZ Inc. AZZ, A.O. Smith Corp. AOS and EnerSys ENS. While AZZ and A.O. Smith carry a Zacks Rank #1 (Strong Buy), EnerSys holds a Zacks Rank #2 (Buy).
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