Writing about Emerson (EMR) in February, I said that while I thought the shares weren't all that cheap on an absolute basis, they still had some appeal as a "first among peers" pick within high-quality industrials and offered leverage to an eventual recovery in process end-markets. Since then, the shares have outperformed the S&P 500 and broader industrial sector, as well as Siemens (OTCPK:SIEGY), though haven't quite kept pace with ABB (ABB) or Rockwell (ROK) within the automation space.
My feelings haven't really changed that much. Discrete and hybrid automation markets are leading the recovery, but activity in process industries is picking up, and Emerson still has opportunities to grow its presence in more attractive markets like life sciences/biopharma. On top of that, I think there's meaningful portfolio transformation potential here. Valuation still isn't appealing on an absolute basis, but looking at what other industrials trade for, Emerson's better margins and returns (ROIC, ROA, ROTA), not to mention exposure to later-cycle markets, should merit at least a peer-level forward multiple.
Read more here:
Emerson Offers Portfolio Transformation And Leverage To Process Market Recoveries
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