September 25, 2016
NYSE: EMR
EMERSON ELECTRIC CO
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$1.90
B-
C+
C
Annual Dividend Yield
3.59%
SELL
C-
D
Beta
1.23
Sector: Industrials
EMR BUSINESS DESCRIPTION
Emerson Electric Co. designs and manufactures
products, and delivers services to industrial,
commercial, and consumer markets worldwide.
D+
D-
E+
E
E-
Market Capitalization
$34.0 Billion
F
BUY
52-Week Range
$41.25-$56.82
Sub-Industry: Electrical Components & Equipment
Weekly Price: (US$)
SMA (50)
RATING SINCE
TARGET PRICE
04/11/2016
$60.98
Price as of 9/22/2016
$52.80
Source: S&P
SMA (100)
1 Year
2 Years
68
65
63
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$60.98
$60.98
$60.98
TARGET
STOCK PERFORMANCE (%)
3 Mo.
Price Change
0.39
1 Yr.
18.25
60
58
3 Yr (Ann)
-6.66
55
53
GROWTH (%)
Last Qtr
-6.86
-15.08
-11.91
Revenues
Net Income
EPS
12 Mo.
-11.66
-25.37
-21.45
50
3 Yr CAGR
-5.72
7.36
11.22
48
45
43
Rating History
RETURN ON EQUITY (%)
EMR
Q3 2016
23.35
Q3 2015
28.25
Q3 2014
23.40
BUY
Ind Avg
19.13
20.40
17.61
S&P 500
11.83
13.71
14.43
HOLD
BUY HOLD
Volume in Millions
60
40
20
2015
P/E COMPARISON
BUY
0
2016
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
18.72
23.68
25.19
EMR
Ind Avg
S&P 500
EPS ANALYSIS¹ ($)
RECOMMENDATION
We rate EMERSON ELECTRIC CO (EMR) a BUY. This is driven by some important positives, which we believe
should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
expanding profit margins, good cash flow from operations, solid stock price performance, largely solid
financial position with reasonable debt levels by most measures and notable return on equity. We feel its
strengths outweigh the fact that the company has had sub par growth in net income.
HIGHLIGHTS
43.70% is the gross profit margin for EMERSON ELECTRIC CO which we consider to be strong. It has
increased from the same quarter the previous year. Along with this, the net profit margin of 9.34% is above
that of the industry average.
2014
2015
Q3 0.74
Q2 0.57
Q1 0.53
Q4 0.98
Q3 0.84
Q2 1.42
Q1 0.75
Q4 0.58
Q3 1.03
Q2 0.77
Q1 0.65
Net operating cash flow has increased to $718.00 million or 43.88% when compared to the same quarter last
year. The firm also exceeded the industry average cash flow growth rate of 28.62%.
2016
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also
clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings
results. Turning our attention to the future direction of the stock, it goes without saying that even the best
stocks can fall in an overall down market. However, in any other environment, this stock still has good upside
potential despite the fact that it has already risen in the past year.
Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.9%.
Since the same quarter one year prior, revenues slightly dropped by 6.8%. The declining revenue appears to
have seeped down to the company's bottom line, decreasing earnings per share.
EMR's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry
average, implying that the management of the debt levels should be evaluated further. Regardless of the
somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.90 is weak.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 1
September 25, 2016
NYSE: EMR
EMERSON ELECTRIC CO
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$1.90
Annual Dividend Yield
3.59%
PEER GROUP ANALYSIS
20%
AYI
FA
RA
VO
BL
E
ST
UN
FA
HUBB
ROK
EMR
LE
-15%
Price as of 9/22/2016
$52.80
The US electrical equipment industry is divided into two segments, electrical components & equipment and
heavy electrical equipment. The electrical components & equipment segment includes manufacturers of
small-scale electrical equipment, such as motors, electric heating, and cooling systems, small generators,
storage batteries, and related equipment. The heavy electrical equipment segment includes manufacturers of
power-generating equipment and other equipment, such as power turbines, machinery for fixed-use, and
large electrical systems.
AME
ETN
B
RA
VO
Revenue Growth (TTM)
52-Week Range
$41.25-$56.82
There are more than 2000 electrical equipment companies operating in the industry. The industry is cyclical
and manufacturers distribute their products to other manufacturing industries, wholesalers, and the
construction industry. Major players are ABB (ABB), Eaton Corp (ETN), Rockwell Automation (ROK), Emerson
Electric (EMR), Plug Power (PLUG), and Ametek (AME).
ENS
RBC
ABB
Market Capitalization
$34.0 Billion
INDUSTRY ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
GNRC
Beta
1.23
10%
27.5%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $2.3 Billion and $50.5 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
Establishing an efficient and flexible supply chain drives manufacturing excellence. With increasing
competition from global players, minimizing inventory and lead times while maximizing top-line with
quick-to-market products is crucial. Electric power equipment, including metal-clad switchgear, switchgear
relays, and ducts, has growth potential in the electric utilities market due to the increasing investment in
automated systems, which results in greater efficiency and lower operating costs. Latin America and Asia,
with their increasing population, rapid industrialization, and strong infrastructure investments, represent a
substantial portion of the export market.
The industry may incur significant expenditures going forward because of the need to produce manufacturing
equipment with lower carbon dioxide emissions. The United Nations Framework Convention on Climate
Change expects to reduce total electricity consumption 40% by 2056. The industry is dependent on electrical
distributors and industry wholesalers, who form the main distribution channel. These distributors control
visibility and availability of products to the end market. These distribution companies, which typically work on
low margins, make it challenging for smaller players to compete. The largest distributors acquire smaller
independent distributors in order to gain market share.
20%
REVENUE GROWTH AND EARNINGS YIELD
AYI
FA
RA
VO
BL
E
ST
Electronics and electrical equipment manufacturers are trying to streamline operations and eliminate waste.
Many companies are pursuing reduced operating costs and increased manufacturing flexibility by
implementing improvement methodologies such as lean manufacturing and Six Sigma. In order to be cost and
price competitive, manufacturers are moving component and final assembly production to facilities outside of
the US.
HUBB
ENS
UN
B
RA
VO
ABB
LE
-15%
FA
Revenue Growth (TTM)
GNRC
2%
Low interest rates may boost capital expenditure and mergers and acquisitions in the domestic market.
Demand for electrical transmission and distribution equipment is expected to grow 3.6% per annum due to
anticipated increases in non-utility generation and regulatory activities, which will spur investment in the
electric grid.
AMERBC
ROK
PEER GROUP: Electrical Equipment
ETN
EMR
6.5%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -11.7% and
19.5%. Companies with NA or NM values do not
appear.
Ticker
EMR
ST
HUBB
ABB
ENS
ETN
RBC
GNRC
ROK
AYI
AME
Recent
Company Name
Price ($)
EMERSON ELECTRIC CO
52.80
SENSATA TECHNOLOGIES HLDG N 38.92
HUBBELL INC
107.22
ABB LTD
22.81
ENERSYS INC
69.44
EATON CORP PLC
64.09
REGAL BELOIT CORP
59.40
GENERAC HOLDINGS INC
34.96
ROCKWELL AUTOMATION
118.58
ACUITY BRANDS INC
260.95
AMETEK INC
48.11
Market
Cap ($M)
33,979
6,649
5,933
50,518
3,016
29,142
2,658
2,303
15,344
11,452
11,182
Price/
Earnings
18.72
16.85
22.06
29.62
23.46
15.79
18.74
32.07
21.02
42.64
20.21
Net Sales
TTM ($M)
20,581.00
3,077.93
3,450.30
34,341.00
2,354.78
20,153.00
3,312.60
1,371.03
5,948.40
3,125.40
3,908.61
Net Income
TTM ($M)
1,845.00
397.56
276.70
1,687.00
132.34
1,873.00
142.30
74.31
745.80
268.00
565.60
The peer group comparison is based on Major Electrical Components & Equipment companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 2
September 25, 2016
NYSE: EMR
EMERSON ELECTRIC CO
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$1.90
Annual Dividend Yield
3.59%
Beta
1.23
Market Capitalization
$34.0 Billion
52-Week Range
$41.25-$56.82
Price as of 9/22/2016
$52.80
COMPANY DESCRIPTION
Emerson Electric Co. designs and manufactures products,
and delivers services to industrial, commercial, and
consumer markets worldwide. Its Process Management
segment offers systems and software; measurement and
analytical instrumentation; valves, actuators, and
regulators; industry services and solutions; and digital
plant architecture solutions. This segment also provides
consulting services for precision measurement, control,
monitoring, asset optimization, and safety and reliability
of oil and gas reservoirs and plants. It serves oil and gas,
refining, chemicals, power generation, pharmaceuticals,
food and beverages, pulp and paper, metal and mining,
and municipal water supplies markets. The company's
Industrial Automation segment provides alternators and
other power generation equipment; commercial and
industrial motors and drives; fluid power and control
products; electrical distribution equipment; and materials
joining and precision cleaning products. Its Network
Power segment designs, manufactures, installs, and
maintains critical and uninterruptible power systems,
thermal management equipment, integrated data center
control devices, software, monitoring, and data center
infrastructure management solutions for
telecommunications networks, data centers, and other
critical applications. The company's Climate
Technologies segment supplies compressors,
temperature sensors and controls, thermostats, flow
controls, and remote monitoring technology and services
residential heating and cooling, commercial air
conditioning, commercial and industrial refrigeration, and
marine control areas. Its Commercial & Residential
Solutions segment provides tools for professionals and
homeowners; home storage systems; and appliance
solutions. The company was formerly known as The
Emerson Electric Manufacturing Company and changed
its name to Emerson Electric Co. in 2000. Emerson
Electric Co. was founded in 1890 and is headquartered in
St. Louis, Missouri.
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of EMR shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
EMERSON ELECTRIC CO
8000 West Florissant Avenue, PO Box 4100
St. Louis, MO 63136
USA
Phone: 314-553-2000
http://www.emerson.com
THESTREET RATINGS RESEARCH METHODOLOGY
FACTOR
SCORE
3.5
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, EMR has a growth score better than 60% of
the stocks we rate.
strong
2.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 40% of the companies we
cover.
strong
5.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 90% of the companies we review.
strong
1.5
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 20% of the stocks we monitor.
strong
4.5
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 80% of the companies we analyze.
strong
4.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 80% of the companies we track.
strong
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 3
September 25, 2016
NYSE: EMR
EMERSON ELECTRIC CO
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$1.90
Annual Dividend Yield
3.59%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.90
2.93 E
3.04 E
Q4 FY16
2016(E)
2017(E)
Beta
1.23
Market Capitalization
$34.0 Billion
52-Week Range
$41.25-$56.82
Price as of 9/22/2016
$52.80
FINANCIAL ANALYSIS
EMERSON ELECTRIC CO's gross profit margin for the third quarter of its fiscal year 2016 is essentially
unchanged when compared to the same period a year ago. Sales and net income have dropped, however the
growth has outpaced the average competitor within the industry. EMERSON ELECTRIC CO has weak liquidity.
Currently, the Quick Ratio is 0.90 which shows a lack of ability to cover short-term cash needs. The company's
liquidity has decreased from the same period last year.
During the same period, stockholders' equity ("net worth") has decreased by 9.69% from the same quarter last
year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q3 FY16
5,126.00
1,037.00
845.00
479.00
Q3 FY15
5,503.00
1,107.00
906.00
564.00
Q3 FY16
3,516.00
22,082.00
7,282.00
7,901.00
Q3 FY15
3,393.00
23,464.00
7,469.00
8,749.00
Q3 FY16
43.70%
20.23%
16.48%
0.93
8.35%
23.35%
Q3 FY15
43.30%
20.11%
16.46%
0.99
10.53%
28.25%
Q3 FY16
1.23
0.48
53.00
15.94
Q3 FY15
1.28
0.46
49.00
18.49
Q3 FY16
643
0.48
0.74
12.28
NA
3,658,976
Q3 FY15
663
0.47
0.84
13.19
NA
3,523,679
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 4
September 25, 2016
NYSE: EMR
EMERSON ELECTRIC CO
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$1.90
Annual Dividend Yield
3.59%
RATINGS HISTORY
Our rating for EMERSON ELECTRIC CO has not
changed since 4/11/2016. As of 9/22/2016, the stock
was trading at a price of $52.80 which is 7.1% below
its 52-week high of $56.82 and 28.0% above its
52-week low of $41.25.
BUY: $53.78
BUY: $49.62
HOLD: $44.10
HOLD: $46.43
BUY: $64.25
2 Year Chart
Market Capitalization
$34.0 Billion
Price/Earnings
1
2
3
premium
$60
52-Week Range
$41.25-$56.82
4
5
EMR 18.72
Peers 23.68
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• EMR is trading at a discount to its peers.
Price/Projected Earnings
1
2
3
premium
From
Hold
Buy
Hold
Buy
Buy
To
Buy
Hold
Buy
Hold
Buy
Price reflects the closing price as of the date listed, if available
(as of 9/22/2016)
41.49% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
1
2
3
27.32% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
4
5
Price/Sales
1
2
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
EMR NM
Peers 3.27
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• EMR's negative PEG ratio makes this valuation
measure meaningless.
Earnings Growth
1
2
3
4
lower
5
higher
EMR -21.45
Peers -16.98
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, EMR is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
EMR 1.65
Peers 2.09
• Discount. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• EMR is trading at a discount to its industry on this
measurement.
3
EMR 11.23
Peers 13.13
• Discount. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• EMR is trading at a discount to its peers.
discount
EMR 4.30
Peers 4.10
• Average. A lower price-to-book ratio makes a stock
more attractive to investors seeking stocks with
lower market values per dollar of equity on the
balance sheet.
• EMR is trading at a valuation on par with its peers.
premium
31.19% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
5
2
premium
discount
premium
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
4
EMR 17.38
Peers 19.64
• Average. An average price-to-projected earnings
ratio can signify an industry neutral stock price and
average future growth expectations.
• EMR is trading at a valuation on par with its peers.
Price/Book
1
Price/CashFlow
discount
2015
MOST RECENT RATINGS CHANGES
Date
Price
Action
4/11/16
$53.78
Upgrade
1/8/16
$44.10 Downgrade
12/1/15
$49.62
Upgrade
9/3/15
$46.43 Downgrade
9/22/14
$64.25 No Change
Price as of 9/22/2016
$52.80
VALUATION
BUY. This stock's P/E ratio indicates a discount compared to an average of 23.68 for the Electrical Equipment
industry and a discount compared to the S&P 500 average of 25.19. For additional comparison, its
price-to-book ratio of 4.30 indicates a premium versus the S&P 500 average of 2.82 and a premium versus the
industry average of 4.10. The price-to-sales ratio is below both the S&P 500 average and the industry average,
indicating a discount. The valuation analysis reveals that, EMERSON ELECTRIC CO seems to be trading at a
discount to investment alternatives within the industry.
$70
$50
2014
Beta
1.23
1
2
3
lower
4
5
higher
EMR -11.66
Peers -0.93
• Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
• EMR significantly trails its peers on the basis of
sales growth
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 5