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Emerson (EMR) to Report Q4 Earnings: Is a Beat in the Cards?

Emerson Electric Co. EMR is scheduled to report fourth-quarter 2017 results before the opening bell on Nov 7. In the quarter to be reported, the company is expected to report strong revenues in Industrial Automation business, which constitutes nearly two-third of its total revenues.

Last quarter, the company’s adjusted earnings came in line with the Zacks Consensus Estimate of 68 cents. Ithas a decent earnings surprise history, with an average positive surprise of 5.5% in the trailing four quarters.

We expect Emerson to score an earnings beat in the to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model shows that Emerson has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: Emerson has an Earnings ESP of +0.14%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Driving the Better-than-Expected Results

Emerson is now poised to grow on the back of global infrastructure growth, as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending.  Moreover, environmental regulations are driving the need for new products, adding to itsstrength. Going forward, Emerson believes telecommunications infrastructure demand will continue to be one of the strongest growth drivers.

The companyremains bullish on its Automation Solutions segment backed byfavorable trends in power and life sciences as well asimproving MRO spending by oil and gas customers. The company’s focus on domains like human comfort, connected home, food quality, advancing energy efficiency at home and work and sustainability augur well for its Commercial and Residential Solutions segment. Furthermore, its restructuring efforts, undertaken over the past few quarters, are likely to prove conductive to its upcoming results.

Moreover, the Zacks Consensus Estimate for revenues from the Automation Solutions segment in the to-be-reported quarter currently remains high at $2,874 million compared with third-quarter revenues of $2,440 million. This apart, the company’s ardent eye for acquisitions is anticipated to be conducive to its core business, going forward. The company is likely to see growth on the recent GeoFields buyout. Other acquisitions including Pentair Valves & Controls, Locus Traxx and PakSense are expected to drive fourth-quarter fiscal sales as well.

However, the fact remains that prolonged softness in the oil and gas markets is anticipated to affect both capital spending and operational expenditure of clients, which in turn may hurt Emerson’s operations. Furthermore, a strong U.S. dollar, volatile industrial spending, along withuncertainties in emerging and mature economies remain concerns.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Columbus McKinnon Corporation CMCO has an Earnings ESP of +4.76% and a Zacks Rank #1.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company DE has an Earnings ESP of +0.71% and a Zacks Rank #2.

Rockwell Automation, Inc. ROK has an Earnings ESP of +1.36% and a Zacks Rank #2.

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Rockwell Automation, Inc. (ROK): Free Stock Analysis Report
 
Emerson Electric Company (EMR): Free Stock Analysis Report
 
Deere & Company (DE): Free Stock Analysis Report
 
Columbus McKinnon Corporation (CMCO): Free Stock Analysis Report
 
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