Emerson Electric Co. Stock Buy Recommendation Reiterated (EMR)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Emerson Electric (NYSE: EMR) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • EMR's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.51, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $1,311.00 million or 4.46% when compared to the same quarter last year. In addition, EMERSON ELECTRIC CO has also modestly surpassed the industry average cash flow growth rate of 0.47%.
  • 43.20% is the gross profit margin for EMERSON ELECTRIC CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.20% trails the industry average.
  • EMERSON ELECTRIC CO has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, EMERSON ELECTRIC CO reported lower earnings of $2.67 versus $3.24 in the prior year. This year, the market expects an improvement in earnings ($3.60 versus $2.67).

Emerson Electric Co. operates as a diversified technology company worldwide. It engages in designing and supplying products and technology, and delivering engineering services and solutions to industrial, commercial, and consumer markets. Emerson Electric has a market cap of $35.01 billion and is part of the industrial goods sector and industrial industry. The company has a P/E ratio of 14.6, below the S&P 500 P/E ratio of 17.7. Shares are up 3.3% year to date as of the close of trading on Friday.

You can view the full Emerson Electric Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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