EMR - Embedded Expectations Analysis - 2020 05 19
Emerson Electric Co. (EMR:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with an 18.6x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management may be concerned about their EPS, cost-cutting initiatives, and international operationsSpecifically, management may have concerns about the lack of economic growth, the length of coronavirus shutdowns, and the progress of facilities cost restructuring initiatives. Furthermore, they may lack confidence in their ability to maintain total orders growth, Asia Pacific growth, and execute their $425mn cost-cutting program. Moreover, they may be concerned about sluggish performance in Eastern Europe, Automation Solutions segment underperformance, and the progress of planned Chinese operations restarts. Finally, they may be concerned about the impact of coronavirus on earnings, and they may be exaggerating their ability to achieve EPS guidance and 80% to 85% net cash targets
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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