Wednesday, July 1, 2015

Seeking Alpha: Emerson Finally Looks Serious About Change

I wasn't very interested in Emerson Electric (NYSE:EMR) a year ago, as I thought management was dragging its feet in dealing with the problematic Network Power business and was overly optimistic regarding its capacity/capability to upgrade its Industrial Automation business all on its own. Coupled with a valuation that I thought was already giving a lot of credit to future improvements, I thought the shares weren't set up to outperform. Since that article, Emerson shares have fallen around 16% as the steep decline in oil prices has severely undermined the process automation industry and generalized weakness in industrial end-markets (especially in emerging markets) has led to weak IA demand.

Just the other day, though, Emerson management a set of strategic moves that many have long called for - the separation of the Network Power business and the sale of certain IA businesses (motors/drives and power gen), as well as the sale of the Storage business from the C&RS segment. There are still a lot of unknowns tied to this restructuring, and arguably the biggest is whether the company will reinvest the proceeds into strengthening its Process Automation and IA businesses through M&A. While I thought Emerson was worth around $55 to $60 before these moves, I believe these moves could possibly put $70 in play as a reasonable target down the line.

Read the full article here:
Emerson Finally Looks Serious About Change

No comments: