Benzinga | Aug 4, 2021 01:00PM EDT

Emerson Electric Beats Q3 Earnings Estimate, Raises FY21 Outlook

* Emerson Electric Co. (NYSE:EMR) reported third-quarter sales growth of 20% year-over-year to $4.7 billion, beating the consensus of $4.57 billion. Underlying sales were up 15%.

* Sales by segments: Measurement & Analytical Instrumentation $781 million (+10.2% Y/Y), Valves, Actuators & Regulators $880 million (+4.5% Y/Y), Industrial Solutions $593 million (+26.4% Y/Y), Systems & Software $693 million (+21.8% Y/Y), Climate Technologies $1.27 billion (+30.7% Y/Y) and Tools & Home Products $489 million (+36.9% Y/Y).

* The revenue increase was driven by strength across commercial and residential markets and a sharp recovery in core North American process automation markets. By geography, the Americas grew 18%, Europe improved 13%, Asia, Middle East & Africa grew 11%, China increased 7%.

* The gross margin expanded by 90 bps to 42.2%. Adjusted EBIT Margin expanded by 310 bps to 18.4%.

* Adjusted EPS improved to $1.09 from $0.80 in 3Q20, beating the consensus of $0.97.

* Emerson Electric generated cash from operating activities $1.11 billion, compared to $842 million a year ago. Free cash flow of $977 million, resulting in FCF conversion of 154%.

* Backlog for Automation Solutions increased $200 million compared to the prior quarter to $5.5 billion. Commercial & Residential Solutions ended the quarter with a $1.1 billion backlog.

* FY21 Outlook: Emerson Electric expects net sales growth of 9%-10% (up from prior 6%-9%), with underlying sales growth of 5%-6% (prior 3%-6%).

* It expects GAAP EPS of $3.78-$3.80 (prior $3.55-$3.65), and Adjusted EPS of $4.06-$4.08 (prior $3.85-$3.95), versus the consensus of $3.94.

* It sees an Operating Cash Flow of $3.6 billion (prior ~$3.3 billion) with Free Cash Flow of $3.0 billion (previous ~$2.7 billion).

* It expects the operational, supply chain, and materials inflation environment to remain challenging through the remainder of the fiscal year.

* Price action: EMR shares are trading lower by 0.58% at $100.59 on the last check Wednesday.