Emerson Stock Gains From Business Strength, Headwinds Persist

Emerson Electric Co. EMR is benefiting from solid momentum across the Intelligent Devices and Software and Control segments. Within the Intelligent Devices segment, strength in the Final Control business, driven by solid momentum in power end markets, is driving the company’s performance. Sales from this business increased 4% year over year in the first quarter of fiscal 2025 (ended December 2024).

Robust growth in all geographies and strong backlog conversion levels are aiding the Measurement & Analytical business (sales rose 3% year over year in the fiscal first quarter). Within the Software and Control segment, strength in the power and process end markets is supporting the Control Systems & Software business. Revenues from the business increased 2% year over year in the fiscal first quarter. 

Given the strength across its end markets, Emerson has provided a bullish forecast for fiscal 2025 (ending September 2025).  The company expects net sales to increase approximately 1.5-3.5% year over year. Underlying sales are anticipated to increase 3-5% in the same period.

Emerson believes in expanding its market presence, solidifying its customer base and enhancing product offerings through acquisitions. In March 2025, it acquired all outstanding shares of Aspen Technology, Inc.’s common stock that it did not own. It is worth noting that EMR acquired a 55% majority stake in AspenTech in 2022, later increasing its ownership to around 57%.

Also, in the fourth quarter of fiscal 2023, the company completed the acquisitions of Afag and Flexim. The buyout of Afag boosted Emerson’s capabilities in factory automation, helping it expand into lucrative end markets, battery manufacturing, automotive, packaging, medical, life sciences and electronics. The acquisition of Flexim expanded its automation portfolio and measurement capabilities. Acquisitions had a positive impact of 9% on underlying sales growth in fiscal 2024.

EMR’s shareholder-friendly policies also add to its appeal. In the first three months of fiscal 2025, it paid out dividends of $301 million and repurchased shares worth $899 million. Also, in November 2024, the company hiked its dividend by 0.5%. Emerson plans to repurchase shares worth $2 billion and pay out dividends of $1.2 billion in fiscal 2025.

EMR’s Price Performance

In the past six months, shares of the Zacks Rank #3 (Hold) company have lost 9% compared with the industry’s 20.1% decline.

Despite the positives, EMR has been witnessing weakness in the Safety & Productivity, Discrete Automation and Test & Measurement businesses of late. The Safety & Productivity business is witnessing weakness owing to tepid demand for its product in the Americas and Europe regions. Sales from the business declined 3% in the first quarter of fiscal 2025.

The Discrete Automation business’ sales declined 5% in the fiscal first quarter due to softness across all geographies. Weakness in the Europe region is adversely affecting the Test & Measurement business’ sales, which declined 6% in the fiscal first quarter.

Emerson is undertaking restructuring measures to improve operational efficiency and increase the asset base worldwide. However, the same poses a threat to its bottom line in the near term. In the fiscal first quarter, restructuring and related costs was $12.9 million.

Stocks to Consider

Some better-ranked companies from the same space are discussed below.

DNOW Inc. DNOW currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DNOW delivered a trailing four-quarter average earnings surprise of 30.4%. In the past 60 days, the Zacks Consensus Estimate for DNOW’s 2025 earnings has increased 10.3%.

Dover Corporation DOV presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 5.3%.

In the past 60 days, the consensus estimate for DOV’s 2025 earnings has increased 0.3%.

Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 5.3%.

The Zacks Consensus Estimate for AIT’s fiscal 2025 (ending June 2025) earnings has improved 0.3% in the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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