(EMR) Emerson Electric Company Exceeds Earnings Estimates

February 2nd, 2010

Emerson Electric Company (EMR) reported earnings from continuing operations of 56 cents for the first quarter of 2010, exceeding the Zacks Consensus Estimate of 42 cents.

Net sales for the first quarter ended Dec 31, 2009 were $5.0 billion, a decline of 7% from $5.4 billion reported in the prior year quarter. Underlying sales in the quarter declined 13%, which excludes a 3% favorable impact each from currency exchange rates and acquisitions.

Business Segment Information

Process Management sales declined 9% in the quarter, versus their highest first quarter sales in fiscal 2009. Underlying sales decreased 17% against tough comparisons to the prior year period, and exclude a positive 5% impact from acquisitions and a favorable currency impact of 3%. The EIM acquisition in Oct 2009 provided significant entry into the electric valve actuation market segment, with products targeted for energy-related and water and waste industries.

Industrial Automation sales decreased 21% in the quarter against a tough comparison to the prior year quarter in which underlying sales were still growing. Underlying sales decreased 28%, currency added 4% and acquisitions added 3%. In Oct 2009, Emerson completed the acquisition of SSB Wind Systems, a leading global supplier of electrical pitch control systems for the wind turbine market.

Sales in the Network Power segment declined 5% in the first quarter Incorporatedluding an underlying sales decline of 10%, a 3% percent favorable impact from currency and a 2% favorable impact from the Avocent acquisition. Strength continued in Asia, which was up 7% in the quarter, and positive growth resumed in the embedded power business.

Climate Technologies sales growth turned positive Incorporatedreasing 13% in the quarter. Underlying sales were up 7%, acquisitions added 3% and currency added 3%. Asia and the U.S. led with growth of 52% and 7% respectively.

Appliance and Tools sales decreased 5% in the quarter, which included an underlying sales decrease of 7% and a 1% favorable impact each from currency translation and acquisitions. Sales growth resumed in some of the consumer related businesses.

Balance Sheet and Cash Flow

Strong operating cash flow of $687 million in the first quarter represented a 115% increase from the same quarter last year, driven primarily by improved asset management and stable margins. Free cash flow (operating cash flow less capital expenditures) was $598 million, up 219% compared to the prior year quarter, and was 141% of net earnings.

Cash and cash equivalents were $1.8 billion with long-term debt at $3.2 billion and shareowners’ equity at $8.6 billion.

Guidance

Emerson expects full year earnings per share in the range of $2.20 to $2.40, which includes the impact of the Avocent acquisition. The current Zacks Consensus Estimate is $2.11. Emerson is estimating a 2% favorable impact from currency translation and a 4% favorable impact from acquisitions resulting in reported sales which are flat to up 3%, or $20.9 to $21.5 billion.

We currently have a Neutral recommendation on EMR.

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(EMR) Emerson Electric Company Exceeds Earnings Estimates

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(EMR) Emerson Electric Company Exceeds Earnings Estimates

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