ST. LOUIS — Emerson today reported results for its first quarter ended December 31, 2022 and updated its full year outlook for fiscal 2023, which are presented on a continuing operations basis.
- Net sales were $3.4 billion, up 7 percent from the year prior; underlying sales1 were up 6 percent
- Strong operational performance to start 2023 offset by foreign exchange and stock compensation headwinds
- GAAP EPS was $0.56; adjusted EPS2 was $0.78, including $0.09 unfavorable impact from stock compensation
- Completed $2 billion of share repurchase in the first quarter
- Updated 2023 full year net sales and GAAP EPS outlook; maintained underlying sales and adjusted EPS outlook despite stock compensation headwind
- Announced St. Louis selected as global headquarters
- Declared quarterly cash dividend of $0.52 per share of common stock payable March 10, 2023 to stockholders of record February 17, 2023
“Emerson continues to execute on the strategy we presented at our November 29th Investor Conference,” said Emerson President and Chief Executive Officer Lal Karsanbhai. “Continued strength in our end markets and operational excellence, enabled by our Emerson Management System, resulted in a great start to 2023. We delivered underlying sales growth of 6 percent and strong segment margin expansion with operational leverage above our targets. Continued operational performance gives us confidence to reiterate our 2023 underlying sales and adjusted EPS outlook, overcoming the impact of higher than expected stock compensation expense.”
“Emerson remains committed to disciplined capital allocation and shareholder return, completing $2 billion of share repurchase in the first quarter,” Karsanbhai continued. “We continue to actively pursue opportunities to deploy capital effectively, including our proposal to acquire National Instruments (NI) for $53 per share, a unique value creation opportunity for Emerson and NI shareholders.”
“Lastly, following a comprehensive review, we selected St. Louis, Missouri as our headquarters and are working to identify an appropriate location in the area,” Karsanbhai ended.
Underlying orders3 were up 5 percent. Net sales were up 7 percent for the quarter and underlying sales were up 6 percent. The Americas were up 13 percent, Europe was down 2 percent, and Asia, Middle East & Africa was flat.
Pretax margin was 12.5 percent for the quarter, down 1730 basis points. Adjusted segment EBITA margin4 was 22.7 percent, up 130 basis points.
Earnings per share were $0.56 for the quarter, down 55 percent. Earnings per share growth was impacted by a prior year gain of $0.60 related to our Vertiv subordinated interest. Adjusted earnings per share were $0.78, down 1 percent. The quarter was unfavorably impacted by $0.09 due to a 31 percent increase in the company stock price in the quarter and resulting impact on mark-to-market stock compensation plans.
Operating cash flow was $302 million for the quarter, down 20 percent, and free cash flow was $243 million, down 20 percent. Cash flow results reflected higher working capital versus prior year.
The Company’s 2023 continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies’ post-close results. The effect of Emerson’s 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows.
The following tables summarize the fiscal year 2023 guidance framework for continuing operations5. Full year net sales and GAAP EPS outlook have been updated. Underlying sales and adjusted EPS outlook remain unchanged despite stock compensation headwind. The 2023 outlook includes $2 billion returned to shareholders through share repurchases completed in the first quarter and approximately $1.2 billion of dividend payments. Guidance figures are approximate.