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Emerson raises 2018 outlook on strong performance, favorable tax impact

Emerson Electric Co.'s net earnings rose 26.9% in its first quarter of fiscal year 2018 from a year earlier, benefiting from broad-based growth in the company's automation solutions segment.

The manufacturer reported net earnings of $392 million, or 61 cents per common share, for its first quarter of fiscal 2018, up from $309 million, or 48 cents per share, in the year-ago quarter. Emerson said its first-quarter EPS includes a benefit of 3 cents due to the lower U.S. corporate tax rate and a provisional tax benefit of 7 cents because of the enactment of the new tax law.

Net sales rose 18.7% year over year to $3.82 billion from $3.22 billion as both of the company's platforms reported strong underlying sales growth, benefiting from continued favorable global economic conditions.

The company's automation solutions segment posted earnings of $386 million in the quarter, up from $326 million in the prior-year quarter, as sales increased 30.8% year over year to $2.57 billion from $1.97 billion. The segment's broad-based growth during the quarter reflected favorable trends in energy-related, hybrid and general industrial markets and was led by North America and Asia, which posted increases of 14% and 13% in underlying sales, respectively, Emerson said.

Earnings for the commercial and residential solutions business increased slightly to $252 million from $249 million, as sales remained flat at $1.25 billion and underlying sales increased 5%. Strong demand in the Asian air-conditioning and refrigeration markets and continued growth of professional tools in oil and gas and construction-related markets drove the growth.

Emerson raised its EPS and sales guidance for fiscal year 2018 due to stronger operational performance and the favorable impact of the new U.S. tax law.

It expects GAAP EPS to be in the range of $3.05 to $3.15, up from the previous guidance range of $2.66 to $2.86, because of improved operational performance and increased share repurchases and the estimated impact of the lower corporate tax rate. Sales are projected to rise in the range of 11% to 13% in the year, compared with the previous guidance of an increase of 8% to 10%.