EMR - Embedded Expectations Analysis - 2021 07 26
Emerson Electric Co. (EMR:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 24.0x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about their 2021 guidance, the impact of price/cost headwinds, and technology investments.However, management may have concerns about their guidance for the latter half of 2021, making critical technology investments, and the recovery of end markets such as commercial and professional tools. Additionally, they may lack confidence in their ability to offset the impact of Commercial & Residential price/cost headwinds and manage inventory. Moreover, management may be exaggerating the momentum in project-driven platforms, industrial market demand, and the improvement in traditional process industries in North America. Furthermore, they may have concerns about budgetary expansions, feed stages in Baltic and Golden Island, and newer projects in the funnel such as facility modernization and biofuels. Finally, management may be exaggerating their visibility in Europe.
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
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