By Nick Zieminski
NEW YORK (Reuters) - Steamy summer weather helped
Emerson Electric Copost higher-than-expected quarterly
profit Tuesday as sales growth resumed in the United States
and Europe, and the conglomerate raised its 2010 profit
"The guys were steaming from the hot weather," said Sterne
Agee analyst Nick Heymann, who called Emerson's climate
technologies segment the big standout in the quarter. "Margins
The hottest summer globally since 1880 clearly aided the
company, he said. Climate technologies sales jumped 29 percent
in the quarter, with Asia sales up 49 percent, helped by China
Emerson, one of the last global U.S. industrials to report
results this earnings season, helped show that fears about the
world economy were exaggerated, Heymann said.
"This quarter demonstrated that Europe was not the almighty
negative that would sap the recovery potential for the global
economy," he said. "The places that are really screwed up in
southern Europe don't really count for much for most of
Net earnings at Emerson, a maker of industrial automation
systems and technology for energy and chemical plants, jumped
51 percent to $585 million, or 77 cents per share, in the
fiscal third quarter ended June 30, up from $387 million, or 51
cents per share, a year earlier.
The latest results included a loss of 1 cent per share from
discontinued operations. Analysts on average expected a profit
of 68 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 11 percent to $5.64 billion, topping Wall
Street forecasts for $5.57 billion.
Each of Emerson's five segments posted higher sales and
operating profit, with the biggest sales gain in its climate
technology and industrial automation units. Its biggest
segment, process management, showed slightly higher sales but
much higher profit, helped by cost cuts.
Emerson shares were up 14 cents to $50.99 in afternoon
SLOW, STEADY RECOVERY
Emerson, which also makes uninterruptible power systems,
electric motors and tools, said global markets were recovering
at a slower pace than in past economic cycles, and slow, steady
recovery would likely continue for several years.
"As I look at the industrial world, the trends are
continuing to be positive. They will be moderate," Chief
Executive David Farr said on a conference call.
Farr said U.S. industrial customers have resumed spending,
and he expects modest growth in Europe. Middle East and Eastern
European markets are likely to struggle in 2011, he said.
Emerson is set to make "major investments" in China, Farr
added. "The (China) market is still in good growth," he said.
"It is slowing down. The government is clearly modulating what
they are going to invest in, (but) I think the economic growth
will still be very positive next year."
The St. Louis-based company said it expects 2010 profit of
$2.60 to $2.70 per share, up from its May forecast of $2.40 to
$2.55. The average Wall Street forecast is $2.53.
The 10-cent range, with only one quarter left in the fiscal
year, was "a pretty wide door," Heymann said. Sterne Agee rates
"It underscores that there's more inherent volatility in
the earnings than we are realizing," the analyst said.
Companies whose earnings are unpredictable typically have
lower stock market valuations, he added, giving the example of
Last month, Emerson won the bidding for British power
supply systems maker Chloride, paying $1.5 billion to
expand in the critical power market. Some analysts have
questioned whether Emerson overpaid. On
Tuesday, Emerson did not comment on expected cost savings from
Separately, Emerson said trailing three-month orders were
up 10 percent to 15 percent in June, matching May's pace, but
order rates were hurt by the strong U.S. dollar. Orders were
flat in the process management segment but would have been up
11 percent excluding the effects of currency conversion,
Emerson said in a regulatory filing.
(Reporting by Nick Zieminski; Editing by Lisa Von Ahn, Dave
Zimmerman and John Wallace)