EMR - Embedded Expectations Analysis - 2020 01 30
Emerson Electric Co. (EMR:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 21.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about macro headwinds, free cash flow, and restructuring plansSpecifically, management is confident the Board has not approved their recent restructuring plans, and they may be concerned about a consumer shift from replacing to repairing units. Furthermore, they may be concerned about geopolitical uncertainty, potential green air policy changes in Asia, and weakness in their global end markets, particularly in Europe and Latin America. Finally, they may lack confidence in their ability to optimize cost structures and increase free cash flow, particularly in their commercial and residential solutions business.
Emerson Electric is a company that brings technology and engineering together to provide solutions for customers in a range of industrial, commercial and consumer markets around the world. The company 's segments are: Automation Solutions, which provides measurement and analytical instrumentation, valves, actuators and regulators, industrial solutions, and process control systems and solutions; Climate Technologies, which provides products and services for residential heating and cooling, commercial air conditioning, commercial and industrial refrigeration, and cold chain management; and Tools and Home Products, which provides tools for personnel and homeowners and appliance solutions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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