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
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