Key Metrics
- AspenTech Revenue: $1.1 billion
- Test & Measurement Revenue: $1.46 billion (down 12% yoy)
- Free Cash Flow: $2.9 billion (up 23% yoy)
Forward guidance
- 2025 Revenue Growth: Underlying sales expected to grow 3% to 5% in 2025, with process and hybrid businesses growing mid-single digits and discrete markets recovering in the second half.
- Adjusted EPS Guidance: Expected adjusted earnings per share for 2025 is between $5.85 and $6.05.
- Free Cash Flow Projection: Full year free cash flow is expected to be $3.2 billion to $3.3 billion.
- Share Repurchase Plan: Emerson plans to repurchase approximately $2 billion of common stock in fiscal 2025, with $1 billion expected to be completed in the first quarter.
- Tax Rate Estimate: Expected tax rate for 2025 is approximately 22%.
- AspenTech Contribution: AspenTech's contribution to adjusted EPS is expected to be between $0.44 and $0.46 for 2025.
- Test & Measurement Synergies: Targeting $200 million in synergies from Test & Measurement by year three, up from a previous target of $185 million.
Key takeaways
- Positives:
- Lal Karsanbhai emphasized the strategic acquisition of AspenTech, stating, "This is an exciting opportunity to bring two exceptional companies fully together and unlock significant value creation potential for shareholders." This indicates a strong belief in the synergy and growth potential of the combined entities.
- Emerson's commitment to returning capital to shareholders is evident, with plans to repurchase $2 billion in stock and return approximately 100% of free cash flow in 2025, as stated by Karsanbhai: "We believe the current multiple does not accurately reflect Emerson's strong outlook."
- The company reported a robust backlog of $7.2 billion, with Karsanbhai noting, "We believe the $7.2 billion is a very healthy level and supportive of the guide for next year," indicating confidence in future revenue generation.
- Baughman highlighted a strong project funnel of $11.2 billion, driven by investments in LNG, life sciences, and sustainability, suggesting a favorable market environment.
- Negatives:
- The discrete automation segment remains a concern, with orders down mid-single digits for the year, although Karsanbhai noted, "Orders turning positive for our Discrete Automation business in Q4 is certainly a positive for us," indicating cautious optimism.
- Ram Krishnan acknowledged challenges in the Chinese market, stating, "We expect investments in self-reliance programs and sustainability to continue," but noted that recovery is anticipated in the second half of 2025, reflecting uncertainty in that region.
- The Safety & Productivity business is under review for strategic alternatives, with Karsanbhai stating, "Everything's on the table at this point," which may indicate potential instability or lack of focus in that segment.
- The Test & Measurement segment saw a decline of 12% in 2024, with Baughman mentioning, "We remain optimistic about a recovery in this business in 2025," highlighting ongoing operational challenges.
Peer Summary
- Automation Sector Insights: Rockwell Automation projected a slight sales decline of -1%, with Blake Moret stating, "Orders continued to be soft in Q4," indicating ongoing demand challenges that may affect the broader automation market.
- Electrical Equipment Trends: Eaton Corp raised its guidance for Electrical Americas growth to 13% to 14%, with Craig Arnold noting, "Our markets continue to be strong," suggesting robust demand in this segment, contrasting with Emerson's concerns in discrete automation.
- Instrumentation Market Sentiment: AMETEK reported a 2% decline in organic sales, with Dave Zapico highlighting project delays due to "economic, geopolitical and election uncertainties," reflecting potential headwinds in the instrumentation sector that could impact Emerson's performance.
- Macroeconomic Challenges: Rockwell's comments on "lingering channel destocking effects" and AMETEK's acknowledgment of customer tentativeness suggest a cautious outlook across sectors, which may influence investor sentiment and operational strategies in the industry.
