Emerson Electric (EMR) Stock Analysis

by | Dividend Aristocrats, Dividend Champions, Dividend Kings

Emerson Electric Dividend

Sector: Industrials       Industry: Specialty Industrial Machinery

Emerson Electric (EMR) has paid a dividend since 1947 and increased its dividend for 64 consecutive years; qualifying the company as a Dividend King, Dividend Aristocrat, and Dividend Champion.

The company has a proven moat and and has shown an ability to adapt to long term changes in the industry.

Current Dividend Annualized: $2.06

 

Emerson Electric (EMR) Intrinsic Value – Margin of Safety Analysis            

(updated December 2021)

Normalized Diluted Earnings Per Share: $3.82
Cash Flow From Operations Per Share: $5.94
Free Cash Flow Per Share: $4.98

Estimated Intrinsic Value: $90

Target Buy Price Based on Required Margin of Safety =  $82
(Required Margin of Safety Based On Risk Stability Grade:

A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)

Target SELL Price Based on Estimated Intrinsic Value = $108
(Allow Overvaluation Adjusted by Risk Stability Grade:

A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)

 

Risk / Stability Grade:  A

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

 

Financial Risk Grade:  A

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a very low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

 

Business Quality Grade: B

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good and/or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor and requires thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report:  9/30/21

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AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – None
Treasure Trove Twelve – None
Global Dividend Balanced – None
Global Value – None
Global Value Aggressive – None
High Yield – None

Company Description

Sector: Industrials
Industry: Specialty Industrial Machinery

Emerson Electric is a multi-industrial conglomerate that operates under two business platforms: Automation Solutions and Commercial and Residential Solutions. The latter is further subdivided into two operating segments: climate technologies, which sells HVAC and refrigeration products and services, as well as tools and home products, which sells tools and compressors, among other products and services.

The company is a global leader in bringing technology and engineering together to provide innovative solutions for customers in a wide range of industrial, commercial and consumer markets around the world. Sales by geographic destination in 2019 were: the Americas, 55 percent; Europe, 17 percent; and Asia, Middle East & Africa, 28 percent.

SWOT Analysis

Strengths

Emerson has a long history of adapting to changing environments. Big changes have taken place the last few years; shedding business and focusing businesses that fit their two new platforms.

EMR has a strong global presence (more that 150 countries) with approximately one-half of EMR revenues coming from overseas. The company has a deep and varied product portfolio complemented by a stellar reputation and strong brand. It boasts a large “moat” in field instrument segments and asset management systems.

Weaknesses

High research and development costs. EMR’s large customers have high bargaining power.

Opportunities

New technologies and obsolescence of older customers plants provide opportunities for substantial growth in developed nations. Expansion into new frontier markets.

Threats

There is intense competition in some of EMR’s business segments, particularly industrial automation. In addition, as a truly global company, they are subject to economic (i.e. global pandemics) and political risks affiliated with foreign production facilities.

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Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.

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