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Sep 30, 2020
Emerson Q4 2020 Earnings Report
Emerson's Q4 2020 earnings declined due to the impact of the COVID-19 pandemic, but the company exceeded its second quarter reset financial forecast in sales, EBITDA, and cash flow.
Key Takeaways
Emerson reported a decrease in net sales by 8% to $4.6 billion, with underlying sales down by 9%. GAAP EPS increased by 3% to $1.20, while adjusted EPS decreased by 4% to $1.10. The company delivered strong operating cash flow of $1.23 billion, up 2%, and free cash flow of $1.02 billion, up 2%.
Fourth quarter GAAP net sales were $4.6 billion, down 8 percent; underlying sales were down 9 percent, in-line with management guidance.
Fourth quarter GAAP EPS was $1.20, up 3 percent from the year prior; adjusted EPS was $1.10, down 4 percent.
Operating cash flow was $1.23 billion, up 2 percent for the quarter.
Free cash flow was $1.02 billion, up 2 percent for the quarter, resulting in exceptional free cash flow conversion of 140 percent.
Emerson
Emerson
Forward Guidance
Emerson expects overall revenue to return to growth in the third quarter of 2021. Commercial & Residential Solutions is expected to return to growth earlier than originally expected, while Automation Solutions is expected to return to growth later in the year.
Positive Outlook
- Net Sales Growth 1% - 4%
- Automation Solutions (1%) - 2%
- Commercial & Residential Solutions 5% - 8%
- Underlying Sales Growth (1%) - 2%
- Automation Solutions (4%) - (1%)
Challenges Ahead
- Management believes it is appropriate to assume a conservative forecast for the 2021 macroeconomic environment given the current uncertainty
- Due to the delayed recovery in many automation markets, we are increasing restructuring spend within Automation Solutions, resulting in a total company restructuring spend of over $200 million in 2021.
- The guidance assumes no major operational or supply chain disruptions
- The guidance assumes oil prices in the $35 to $50 range during this period.
- Tax Rate ~22.5%