Emerson Reports Full Year, 4Q 2017 Results

Emerson reported results for the fourth quarter and fiscal year ended Sept. 30, 2017.
 
Fiscal year net sales of $15.3 billion increased 5%, with underlying sales up 1% excluding slightly unfavorable currency and an impact from acquisitions of 4%.The Company exited the fiscal year with September trailing three month underlying orders up 11%, which were in line with expectations communicated by management in May 2017.
 
Pretax margin of 15.3% and EBIT margin of 16.4% decreased 70 and 80 basis points, respectively, due to dilution from the Valves & Controls acquisition.Excluding Valves & Controls, EBIT margin of 17.9% increased 70 basis points.Earnings per share from continuing operations increased 4% to $2.54.
 
Operating cash flow from continuing operations was $2.7 billion and free cash flow from continuing operations exceeded $2.2 billion, reflecting 135% conversion of net earnings from continuing operations, or 130% excluding Valves & Controls first year acquisition accounting charges.As a percentage of net sales, free cash flow from continuing operations was a record-high 14.5%.
 
“Fiscal 2017 was an important year for Emerson as we successfully completed the strategic portfolio repositioning announced over two years ago, and our global management teams executed extremely well to deliver strong earnings and cash flow against difficult market conditions,” said David N. Farr, chairman and CEO.“We are invigorated as we enter fiscal 2018.Emerson is now wholly aligned around our two business platforms, which gives our teams clear direction and an unwavering focus on serving our customers and profitably building these world class businesses through organic and inorganic opportunities.”
 
Net sales in the fourth quarter were up 13%, with underlying sales up 3% excluding favorable currency of 1% and an impact from acquisitions of 9%.The hurricanes that hit Texas and Florida moderately reduced the fourth quarter sales of both business platforms, and the company expects to recover these sales over the next 12 months as damaged areas rebuild.
 
Pretax margin of 15.5% and EBIT margin of 16.3% decreased 170 and 210 basis points, respectively.Excluding Valves & Controls, EBIT margin of 19.7% increased 130 basis points driven primarily by flow through of restructuring savings and lower restructuring spend.Earnings per share from continuing operations were $0.77, up 4% compared with the prior year, and were $0.83, up 12% excluding a ($0.06) impact from Valves & Controls first year acquisition accounting charges related to inventory and backlog amortization.
 
“Market conditions began trending favorably for Emerson in the second half of 2017, and we expect 2018 to continue that trajectory,” said Farr.“With a strong foundation for growth and increasing momentum in global markets, I look forward to seeing our teams deliver results for our shareholders – strong cash flow and adjusted net earnings per share of $2.75 to $2.95.”