UPDATE 4-Emerson profit beats, but shares down on outlook

* Q4 EPS ex-items 81 cents vs Street view 78 cents

* Q4 rev $5.84 bln vs Street view $5.89 bln

* Sees FY 2011 sales rising 12 pct to 15 pct

* Shares down 2.4 percent
(Adds CEO and analyst comment, updates shares)

NEW YORK, Nov 2 (BestGrowthStock) – Industrial conglomerate Emerson
Electric Co (EMR.N: ) reported a higher-than-expected quarterly
profit and said the global economy was strengthening, but its
shares fell 2.4 percent on its initial 2011 forecast.

The company, whose 2011 fiscal year began Oct. 1, did not
provide an earnings-per-share outlook but said sales would rise
12 percent to 15 percent and operating profit margins would
also climb.

Analysts estimated that translates to 2011 earnings of $3
to $3.20 per share, which is below the average Wall Street
forecast of $3.23.

“There’s no reason today to chase the stock,” said analyst
Matt Collins of Edward Jones, adding that Emerson tipped its
hand to strong numbers when it reported 18 percent order growth
last week, sparking a rally in its shares.

“Macro data has been disappointing, but when you look at
the results for most (industrial) companies, they’re still
showing solid growth and near-record profitability,” said
Collins, who rates Emerson “buy.”

Emerson Chief Executive David Farr said global economic
growth was unlikely to accelerate quickly in the coming year
as developed countries like the United States are forced to
restructure their finances, much like corporations did during
the downturn.

Farr, who joked on the company’s conference call that he
had voted twice in U.S. midterm elections on Tuesday, said, “I
believe we’re going to have a change in direction relative to
what makes this country great and stop wasting money and
spending money in the wrong places.”

He also said Emerson was positioned for record profits and
cash flow this year and was stepping up investments in emerging
markets and in developing its technology. The company will
generate 65 percent of its total sales from international
markets within five years, he said.


Emerson’s net earnings rose 48 percent to $749 million, or
98 cents per share, in the fiscal fourth quarter, up from $506
million, or 67 cents per share, a year earlier.

Excluding one-time items, Thomson Reuters I/B/E/S
calculated that Emerson earned 81 cents per share from
continuing operations, 3 cents more than the average analyst

Revenue rose 14 percent to $5.84 billion, slightly below
the average Wall Street forecast of $5.89 billion. Underlying
sales — which exclude factors such as currency fluctuation and
acquisitions — rose 15 percent in Europe and were growing at a
faster pace than sales in Asia and the United States.

Emerson shares were down $1.36 at $54.61 in afternoon
trading on the New York Stock Exchange. They had rallied 20
percent since the start of September, outperforming both the
broader market (.SPX: ) and other industrial stocks (.GSPIC: ) by a
wide margin.

The stock rallied ahead of results, and investors have
rewarded only big profit beats this earnings season, industrial
analyst Brian Langenberg of Langenberg & Co said. He said a
slight decline in the stock was not surprising.

“This was a very positive quarter,” he said, noting that
underlying sales grew sequentially and Europe was surprisingly

Emerson’s report was another sign that capital spending by
governments and companies was driving an industrial recovery,
while consumer-led markets were unlikely to participate in the
recovery until late 2011, he said.

Companies tied to global capital spending will continue to
outperform those exposed to U.S. construction and consumer
markets, Langenberg said. He listed ABB (ABBN.VX: ), Rockwell
Automation (ROK.N: ) and Siemens (SIEGn.DE: ) as among companies
that would benefit.

St. Louis-based Emerson said its industrial automation unit
posted a 26 percent sales increase in the quarter, helped by a
large contract for a California solar power facility. Operating
profit in the segment almost doubled.

Emerson said last week that fourth-quarter orders, an
indicator of future sales, rose more than 20 percent in the
process management and industrial automation segments.

The company raised its quarterly dividend by 3 percent,
continuing a 54-year streak of rising dividend payments.

Emerson said operating profit margins should rise to at
least 17.2 percent in fiscal 2011 from 16.7 percent in 2010.

At the midpoint of its sales rise forecast for 2011, sales
would be $23.8 billion, in line with analysts’ estimates.

“Something has to go wrong for them not to beat those
numbers,” Langenberg said.
(Reporting by Nick Zieminski; Editing by Maureen Bavdek and
John Wallace)

UPDATE 4-Emerson profit beats, but shares down on outlook