Emerson Electric Co. (EMR) reported fourth-quarter earnings per share from continuing operations of 67 cents per share, higher than the Zacks Consensus Estimate of 60 cents.
 
Sales for the fourth quarter ended September 30, 2009 of $5.3 billion, a decrease of 21% from the $6.7 billion for the same period last year. Underlying sales in the quarter declined 20%, which excludes a 2% unfavorable impact from currency exchange rates and a 1% positive impact from acquisitions. Sequentially, fourth quarter sales improved 4.6% versus the third quarter, showing revenue stabilization for the second consecutive quarter.
 
Process Management sales decreased 13% in the fourth quarter versus the prior year quarter.  This included a 13% underlying sales decline, a 3% unfavorable impact from currency translation and a 3% favorable impact from acquisitions.
 
Industrial Automation sales were down 36% in the fourth quarter, compared to the fourth quarter of 2008.  Underlying sales decreased by 37%, the System Plast and Trident Power acquisitions added 3% and currency subtracted 2%.
 
In the fourth quarter, Network Power reported a sales decline of 22%, with underlying sales down 20% and currency and acquisitions subtracting 1% each.
 
Climate Technologies sales decreased 10% in the quarter, moderating from higher percentage declines in the previous two quarters.  Underlying sales declined 10%, currency subtracted 2% and acquisitions added 2%.
 
Sales in the Appliance and Tools segment decreased 22% in the quarter, with consumer related product demand continuing to show signs of stabilization.
 
Gross profit margin improved 110 basis points compared to the prior year quarter, and 200 basis points over the third quarter of 2009. Pretax earnings margin for the fourth quarter was 12.3% versus 14.9% in the fourth quarter of 2008 and 10.7% in the third quarter of 2009.
 
In fiscal 2009, operating cash flow was $3.1 billion and capital expenditures were $531 million, resulting in strong free cash flow (operating cash flow less capital expenditures) of $2.6 billion. Cash and equivalents were $1.8 billion with long-term debt at $3.3 billion and shareowners’ equity at $9.1 billion.
 
Underlying sales for fiscal 2010 are expected to be down 5% to 7%.  First quarter underlying sales are expected to be down 17% to 20%.  Operating profit margin for fiscal year 2010 is expected to be flat to slightly down.
 
Emerson Electric Co., a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to various industrial and commercial, and consumer markets worldwide. The company operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. The company was founded in 1890 and is based in St. Louis, Missouri. Major competitors include ABB Ltd. (ABB), General Electric Co. (GE) and Hitachi Ltd. (HIT).
 
We currently have a Neutral recommendation on EMR.
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