Emerson Electric Co.'s (NYSE: EMR) process management business segment could get hurt buy a sustained period of low oil prices, an analyst said Friday.
Deutsche Bank's John G. Inch downgraded Emerson to Hold, from Buy, citing a weakening outlook for the segment. Inch cut his target nearly 7 percent to $68.
Emerson, down 15 percent year-to-date, traded recently at $59.40, down 3.1 percent.
The company's process segment, which provides measurement and control systems for industrial processes, accounted for 44 percent of Emerson's fiscal 2014 profits and 36 percent of its $24.54 billion in sales.
A prime customer for the segment is the oil and gas industry, although it also sells to drug makers, food processors and power utilities.
During the last recession, Emerson process' results "declined double-digits organically," Inch said, adding that a similar scenario could unfold "if the business were to erode due to the collapse in oil prices."
The company's industrial automation segment, accounting for 20 percent of 2014 sales, gets 34 percent of its business in European markets, where economic conditions remain "challenged," Inch said.
Network power, also 20 percent of revenue, could be put up for sale in 2015 according to Inch, although he said its relatively weak profits along with turmoil in the telecommunications industry suggest a disappointing price.
Latest Ratings for EMR
| Dec 2014 | Deutsche Bank | Downgrades | Buy | Hold |
| Dec 2014 | Bank of America | Maintains | Neutral | |
| Nov 2014 | RBC Capital | Initiates Coverage on | Sector Perform |
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