Industrial technology company Emerson Electric ‘s (EMR) disappointing quarterly results Wednesday highlighted management’s inability to execute on a consistent basis, forcing us to downgrade our rating on the stock and lower our price target. Revenue for the three months ended Sept. 30 increased 5% year-over-year, to $4.09 billion, but missed analysts’ forecasts of $4.19 billion, according to LSEG. Adjusted earnings-per-share (EPS) jumped 21% on an annual basis, to $1.29, while falling short of expectations of $1.31 per share. Emerson stock tumbled 7.7% Tuesday, to trade around $84.60 a share. Bottom line This was not the fiscal fourth quarter we were looking for. We had wanted to see consistency following two strong quarters that came after a rocky start to the year, but Emerson Electric didn’t deliver. Adjusted earnings before interest, taxes and amortization (EBITA) and cash flow were bright spots, while the company’s backlog – a leading indicator of sales – did increase 12% year-over-year. But that was all over shadowed by misses on sales, weak underlying growth, and a suboptimal outlook for the current quarter and fiscal year 2024. For the current quarter, the sales forecast was solid, even as the earnings guidance came up short. On a full-year basis, sales and earnings forecasts fell short of expectations, as did cash-flow-generation targets. For fiscal 2024, the company said its “process and hybrid end markets remain strong, driven by secular trends like energy security, sustainability and decarbonization, nearshoring and digital transformation.” But management also said Tuesday that discrete markets are at a different stage in the business cycle, noting that orders remain under pressure and aren’t expected to rebound until the back half of fiscal 2024. Given the lack of consistency from management and disappointing outlook we are cutting our price target to $100 a share, down from $110, representing 19-times the company’s five-year historical…
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