Emerson Electric (EMR) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 11% year-over-year to $4.4B, with underlying sales up 3%, led by Process and Hybrid businesses, while Discrete Automation and Test & Measurement remained soft.

• Adjusted EPS increased 11% to $1.43, exceeding guidance, while GAAP EPS fell due to a $279M pretax loss on Copeland note receivable.

• Operating and free cash flow both grew 27% year-over-year, with free cash flow at $975M and margin of 22.3%.

• Portfolio simplification advanced with the Copeland exit, generating $2.9B after-tax proceeds for debt reduction.

• Employee engagement improved, with a participation rate of 89% and engagement score of 79%.

Financial highlights

• Q3 net sales reached $4.4B, up 11% year-over-year; price contributed 2 percentage points to growth.

• Gross margin in Q3 was 52.8%, up 230 basis points year-over-year; year-to-date gross margin at 50.6%.

• Adjusted segment EBITA/EBITDA margin hit a record 27.1%, up 20 basis points from last year.

• Free cash flow was $975M in Q3, with a year-to-date margin of 22.3% and YTD free cash flow up 31% versus prior year.

• Backlog at quarter-end was $7.4B, with base business backlog flat and reduction mainly in Test & Measurement.

Outlook and guidance

• FY2024 net sales growth expected at ~15%, with underlying sales growth of ~6% and 9.5% from NI acquisition.

• Adjusted EPS guidance raised to $5.45–$5.50; free cash flow guidance increased to ~$2.8B.

• Operating cash flow forecasted at ~$3.2B for FY2024.

• Share repurchases expected to total ~$300M and dividends ~$1.2B for the year.

• Test & Measurement full-year sales expected at $1.45–$1.5B, with adjusted segment EBITDA margin of ~23%.