The annual results for Emerson Electric Co. (NYSE:EMR) were released last week, making it a good time to revisit its performance. It looks like a credible result overall - although revenues of US$17b were in line with what the analysts predicted, Emerson Electric surprised by delivering a statutory profit of US$3.24 per share, a notable 11% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Emerson Electric after the latest results.
Following last week's earnings report, Emerson Electric's 21 analysts are forecasting 2021 revenues to be US$17.1b, approximately in line with the last 12 months. Statutory per share are forecast to be US$3.22, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of US$17.1b and earnings per share (EPS) of US$3.22 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$76.33, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Emerson Electric at US$88.00 per share, while the most bearish prices it at US$65.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Emerson Electric's revenue growth will slow down substantially, with revenues next year expected to grow 1.9%, compared to a historical growth rate of 6.8% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.6% next year. Factoring in the forecast slowdown in growth, it seems obvious that Emerson Electric is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Emerson Electric's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$76.33, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Emerson Electric analysts - going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Emerson Electric you should be aware of.
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