Emerson Exhibits Strong Prospects Despite Persisting Headwinds

Emerson Electric Co. EMR is poised to gain from healthy demand across the majority of its end markets. Solid demand in the process and hybrid industries is boosting underlying sales. EMR’s underlying sales increased 2% year over year in the first six months of fiscal 2025 (ended March 2025). The company expects sales in the process and hybrid industry to grow in mid-single digits in the second half of fiscal 2025, driven by strength in the life sciences, energy, liquefied natural gas (LNG) and power end markets.

Strong momentum in the Intelligent Devices and Software and Control segments is driving Emerson’s performance. The Intelligent Devices segment is seeing strength in the Final Control business, fueled by robust demand in power end markets. The Measurement & Analytical business is benefiting from robust growth across the Asia, the Middle East and Africa regions. In the Software & Control segment, solid growth at AspenTech and strength in the power and process end markets are boosting the Control Systems & Software business’ performance. 

Given the strength across EMR’s end markets, it has updated its outlook for fiscal 2025 (ending September 2025). Emerson now expects net sales to increase approximately 4% year over year compared with 1.5-3.5% anticipated earlier. Underlying sales are also anticipated to increase approximately 4% year over year in the same period.

Emerson’s expansion initiatives are expected to drive growth. In March 2025, the company completed the acquisition of all outstanding shares of AspenTech’s common stock that it did not previously own. EMR acquired a 55% majority stake in AspenTech in 2022, later increasing its ownership to approximately 57%. AspenTech now operates as a wholly owned subsidiary of Emerson. This acquisition augmented EMR’s automation portfolio and extended its presence into new markets, allowing it to strengthen its capabilities in software-defined control within the industrial automation market.

The company believes in rewarding its shareholders handsomely through dividend payments and share buybacks. In the first six months of 2025, Emerson paid out dividends of $598 million and repurchased common stocks worth $1.12 billion. In November 2024, the company hiked its dividend by 0.5%. Emerson plans to repurchase shares worth $2.3 billion and pay out dividends of $1.2 billion in fiscal 2025.

EMR’s Price Performance

In the past year, the stock has gained 13.5% against the industry’s 12.3% decline.

Headwinds Plaguing EMR

Softness across the Safety & Productivity, Discrete Automation and Test & Measurement businesses is a concern for Emerson. The Safety & Productivity business is witnessing weakness owing to tepid demand for its products across all geographies. The Discrete Automation business continues to struggle due to softness in Asia, the Middle East & Africa, and Europe regions. Weakness in the Europe region is adversely affecting the Test & Measurement business’ sales.

Emerson has considerable exposure to regions outside the United States. Its significant international presence exposes it to political and economic disruptions, all of which can directly affect its profits. Also, the company is exposed to headwinds arising from unfavorable movements in foreign currencies. Adverse foreign currency translation lowered its sales by 1% year over year in the second quarter of fiscal 2025.

Zacks Rank & Stocks to Consider

EMR currently carries a Zacks Rank #3 (Hold). Some better-ranked companies are discussed below:

Crown Holdings, Inc. CCK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CCK delivered a trailing four-quarter average earnings surprise of 16.3%. In the past 60 days, the Zacks Consensus Estimate for Crown Holdings’ 2025 earnings has increased 3.8%.

Broadwind, Inc. BWEN presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 61.1%.

In the past 60 days, the consensus estimate for BWEN’s 2025 earnings has increased 14.3%.

The Gorman-Rupp Company GRC presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 2.4%.

The Zacks Consensus Estimate for GRC’s 2025 earnings has increased by a penny in the past 60 days.

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

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