How Will Emerson Electric (EMR) Stock React To Sale Of Its Power Unit?

NEW YORK (TheStreet) -- Shares of Emerson Electric Co. (EMR) are slightly lower after it was reported that the technology company hired Goldman Sachs Group (GS) to sell its power transmission solutions business in a deal that could be worth over $1 billion, sources told Reuters.

The company is preparing for an auction in the fall and is in the early stages of contacting potential buyers, including other industrial companies and buyout firms, sources said.

 

TheStreet Ratings team rates EMERSON ELECTRIC CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate EMERSON ELECTRIC CO (EMR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • EMERSON ELECTRIC CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, EMERSON ELECTRIC CO increased its bottom line by earning $2.76 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $2.76).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electrical Equipment industry. The net income increased by 275.3% when compared to the same quarter one year prior, rising from $194.00 million to $728.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electrical Equipment industry and the overall market, EMERSON ELECTRIC CO's return on equity exceeds that of both the industry average and the S&P 500.
  • 44.15% 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. Along with this, the net profit margin of 11.53% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,018.00 million or 2.31% 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 2.28%.
  • You can view the full analysis from the report here: EMR Ratings Report

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