Emerson Electric Q4 Earnings Call Highlights

Key Points

• Q4 results exceeded expectations: Underlying orders rose 14%, sales increased 7%, and adjusted EPS climbed 15% to $1.86; full-year free cash flow grew 9% to $3.5 billion.
• Emerson forecast further growth in fiscal 2027: It expects sales to rise about 5% and adjusted EPS to reach $7.25, with power and LNG among key growth drivers. Weakness in Europe and China and longer-dated orders temper the outlook.
• Shareholder returns and project demand remain strong: Emerson plans to return about $3.8 billion to shareholders in 2027, while its project funnel grew 17% to $13 billion and backlog reached $8.2 billion.

Emerson Electric NYSE: EMR reported fourth-quarter sales and earnings growth above its expectations and forecast continued gains in fiscal 2027, citing strong demand for automation in power, liquefied natural gas and other growth markets.

The company’s underlying orders rose 14% in the quarter, while underlying sales increased 7%. Adjusted earnings per share climbed 15% to $1.86, and adjusted segment EBITA margin expanded 160 basis points to 29.1%.

For the full fiscal year, underlying sales grew 4% and adjusted earnings per share rose 10% to $6.59. Free cash flow increased 9% to $3.5 billion.

President and CEO Lal Karsanbhai said Emerson entered the new year with momentum from its growth markets, though persistent weakness in Europe and China factored into its outlook.

2027 outlook and shareholder returns

Emerson forecast approximately 5% underlying and GAAP sales growth for fiscal 2027, along with adjusted earnings per share of $7.25, up 10%. The company projected an adjusted segment EBITA margin of 29% and free cash flow of $3.8 billion to $3.9 billion.

For the first quarter, Emerson expects approximately 5% underlying and GAAP sales growth, a 28% adjusted segment EBITA margin and adjusted earnings per share of $1.58 to $1.62.

The company plans to return approximately $3.8 billion to shareholders in 2027, including $2.5 billion in share repurchases and $1.3 billion in dividends. The plan includes a 7% increase in the dividend per share and approximately $1.5 billion of buybacks in the first quarter.

CFO Mike Baughman said front-loading repurchases would provide a lower share count while preserving flexibility for potential bolt-on acquisitions. Karsanbhai said Emerson would continue evaluating acquisitions of about $1 billion or less, but large-scale deals were not part of the current plan.

Orders and project activity

Fourth-quarter underlying orders grew 18% in software and systems and 13% in intelligent devices. North American orders rose 15%, while Middle East orders increased 42%. Test & Measurement orders grew 14%, including a 59% increase in semiconductor orders.

Emerson ended the quarter with $8.2 billion in backlog, up 11% from a year earlier. Baughman said the proportion of backlog expected to be delivered over the next 12 months fell to 70% from a longstanding level of about 75%, reflecting more long-cycle orders.

The company’s project funnel increased 17% year over year to $13 billion. Karsanbhai said Emerson won approximately $575 million from the funnel during the fourth quarter, with 75% of those wins coming from its growth verticals.

Those wins included a petrochemical project in Qatar, where Emerson will provide control and safety systems and instrumentation, and LNG Canada’s phase II expansion in British Columbia, where it will supply valve and sensor technology. Emerson also signed a 10-year DeltaV manufacturing software subscription agreement with a global life sciences contract manufacturer.

Growth markets offset regional weakness

Emerson’s growth verticals increased 21% in fiscal 2026 and accounted for 27% of sales. The company expects those markets to grow at a low-double-digit rate in 2027, supported by electrification, energy security and nearshoring investments.

Chief Operating Officer Ram Krishnan said power and LNG are expected to be at the higher end of the forecast. Emerson modeled semiconductor growth in the mid-single digits, including a strong first half followed by a slowdown. If semiconductor demand remains strong in the second half, he said, the company could outperform that plan.

Emerson expects mid-single-digit sales growth in the Americas in 2027 and low-single-digit growth in Europe. It does not expect a recovery in China, where chemical and refining markets remain weak. The company also anticipates high-single-digit growth in the Middle East, assuming the conflict there does not escalate.

In response to analyst questions about why the sales outlook did not show a stronger acceleration despite rising orders and backlog, Karsanbhai pointed to concerns about Europe and China. Baughman also noted that some of the orders are longer dated.

Business group performance

Software and systems led fourth-quarter sales growth, rising 14% on an underlying basis. Its margin expanded 490 basis points to 32.3%. Intelligent devices sales grew 4%, while safety and productivity sales increased 2%.

For fiscal 2027, Emerson expects software and systems underlying sales growth of 7% to 8%, intelligent devices growth of 4%, and safety and productivity growth of 3% to 4%. The company also expects software annual contract value to grow approximately 10%, after rising 10.1% to $1.7 billion in 2026.

Krishnan said the 2027 plan assumes 2% price realization and that pricing should remain ahead of costs despite material inflation, including higher costs for some electronics and memory. Karsanbhai said Emerson achieved $100 million in AspenTech synergies and completed the integration two years ahead of its initial target.

About Emerson Electric (NYSE:EMR)

Emerson Electric Co NYSE: EMR is a global technology and engineering company that provides automation, control, and industrial technology solutions. Its offerings include measurement and analytical instruments, control systems, valves, regulators, software, and related services used to improve the safety, efficiency, and reliability of industrial operations.

The company serves customers across industries such as energy, chemicals, life sciences, food and beverage, manufacturing, and commercial and residential applications.

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