Emerson Playing A Hot Hand

Emerson Electric (EMR) is a significant player in two of the strongest verticals within industrials today – process automation and HVAC. What makes Emerson’s better performance so far this year (up about 3% versus a sector that’s down about 2%) a little more interesting is that the company’s performance in the HVAC business hasn’t been all that impressive so far. Assuming that the Climate segment picks up later in 2018, Emerson should be looking at one of the better revenue growth and margin leverage outlooks within its peer group.

I can’t really say that Emerson is undervalued. Even with a more forgiving/aggressive EV/EBITDA methodology that rewards Emerson for its healthy margins, the shares look more or less fairly valued. That said, investors often pay for performance and pay up for growth and I’d be leery of assuming that just because Emerson looks a little pricey today it can’t continue to outperform if the results from the Automation business remain this strong and Climate picks up.

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Emerson Playing A Hot Hand