Engineering and automation solutions company Emerson (NYSE:EMR) reported Q1 CY2025 results topping the market’s revenue expectations , with sales up 1.3% year on year to $4.43 billion. Guidance for next quarter’s revenue was better than expected at $4.60 billion at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $1.48 per share was 4.6% above analysts’ consensus estimates.
Revenue: $4.43 billion vs analyst estimates of $4.38 billion (1.3% year-on-year growth, 1.1% beat)
Adjusted EPS: $1.48 vs analyst estimates of $1.41 (4.6% beat)
Adjusted EBITDA: $1.24 billion vs analyst estimates of $1.21 billion (28% margin, 2.9% beat)
Revenue Guidance for Q2 CY2025 is $4.60 billion at the midpoint, above analyst estimates of $4.54 billion
Management slightly raised its full-year Adjusted EPS guidance to $5.98 at the midpoint
Operating Margin: 24.5%, up from 22.6% in the same quarter last year
Free Cash Flow was -$87 million, down from $661 million in the same quarter last year
Market Capitalization: $60.49 billion
"Emerson delivered strong underlying orders in the second quarter with margin expansion and adjusted earnings exceeding our expectations," said Emerson President and Chief Executive Officer Lal Karsanbhai.
Company Overview
Founded in 1890, Emerson Electric (NYSE:EMR) is a multinational technology and engineering company providing solutions in the industrial, commercial, and residential markets.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Emerson Electric struggled to consistently increase demand as its $17.61 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of lacking business quality.
Emerson Electric Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Emerson Electric’s annualized revenue growth of 10.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Emerson Electric recent performance stands out, especially when considering many similar Internet of Things businesses faced declining sales because of cyclical headwinds.
Emerson Electric Year-On-Year Revenue Growth
This quarter, Emerson Electric reported modest year-on-year revenue growth of 1.3% but beat Wall Street’s estimates by 1.1%. Company management is currently guiding for a 5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Operating Margin
Emerson Electric has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Emerson Electric’s operating margin rose by 3 percentage points over the last five years, showing its efficiency has improved.
Emerson Electric Trailing 12-Month Operating Margin (GAAP)
This quarter, Emerson Electric generated an operating profit margin of 24.5%, up 2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Emerson Electric’s EPS grew at a solid 10.1% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.
Emerson Electric Trailing 12-Month EPS (Non-GAAP)
We can take a deeper look into Emerson Electric’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Emerson Electric’s operating margin expanded by 3 percentage points over the last five years. On top of that, its share count shrank by 7.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Emerson Electric Diluted Shares Outstanding
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Emerson Electric, its two-year annual EPS growth of 9.9% is similar to its five-year trend, implying stable earnings power.
In Q1, Emerson Electric reported EPS at $1.48, up from $1.36 in the same quarter last year. This print beat analysts’ estimates by 4.6%. Over the next 12 months, Wall Street expects Emerson Electric’s full-year EPS of $5.77 to grow 7.1%.
Key Takeaways from Emerson Electric’s Q1 Results
It was good to see Emerson Electric provide full-year EPS guidance that slightly beat analysts’ expectations. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed. Overall, this print had some key positives. The stock traded up 2.5% to $110 immediately following the results.
