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Emerson Electric (EMR) 4Q EPS Tops Consensus, Margins Expand

 November 06, 2012 07:02 AM

(By Balachander) Emerson Electric Co. (NYSE: EMR) posted stronger-than-expected quarterly earnings as the manufacturing and technology company benefited from sales growth and expansion of margins.

The company said its businesses performed very well during the fourth quarter even while underlying economic demand reached its lowest level in the year.

"Orders have slowed as near-term business investment has become more cautious and market visibility has deteriorated due to economic uncertainty in the U.S., China and Europe," the St. Louis, Missouri-based said. "This has resulted in a challenging and tenuous planning environment."

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The Board voted to increase the first-quarter cash dividend to $0.41 per share of common stock from $0.40, representing an annual rate of $1.64 per share. The new dividend is payable on December 10, 2012, to shareholders of record on November 16, 2012.

On a normalized basis, the company earned $1.11 a share for the fourth quarter, up 7 percent from the same period last year. Bottom-line also beat market expectations of $1.05 a share.

Net earnings dropped 63 percent to $761 million, hit by goodwill impairment charge of $592 million.

Net sales rose 2 percent to $6.70 billion, while consensus estimated a growth of 2.20 percent. Underlying sales increased 5 percent, as the U.S. grew 2 percent, Asia advanced 8 percent, and Europe was flat.

The company has five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Commercial & Residential Solutions businesses.

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Process Management led the sales growth (reported up 18 percent, underlying up 21 percent), boosted by strong energy-related end markets and continued conversion of backlog related to the Thailand flooding, EMR noted.

Gross profit margin improved 140 basis points to 41.0 percent.

For 2013, EMR forecasts earnings per share growth in the mid-to-high single digits from $3.39 in 2012, while analysts' expect $3.63. It sees underlying sales increasing at a rate in a low-single-digit range of 0 to 5 percent.

EMR shares ended Monday's regular trading session at $50.50. The stock has been trading in the 52-week range between $43.58 and $53.78.



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