Prospects For A "U-Shaped" Recovery Have Hit Emerson Hard

Emerson Electric (EMR) was already looking at a slowdown before Covid-19 swept around the world, but now the company is looking at a much sharper downturn as automation projects, particularly in petrochemicals, get pushed further. Management is doing what they’ve done in the past, using the downturn as an opportunity to streamline and take out costs, but the Street seems to really dislike the uncertainty as to Emerson’s recovery path in 2021 and beyond.

I don’t think Emerson will see a 2009-style recovery, but I do think many of these projects will eventually get done, and I think Emerson can benefit from other trends and drivers like increased automation in industries like food/beverage and healthcare/biopharma and increased digitalization of process industries. If Emerson can manage long-term growth of around 2%, these shares look priced to give investors a solid risk-adjusted return.

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Prospects For A "U-Shaped" Recovery Have Hit Emerson Hard