In step with most of its competitors in the industrial automation market, Emerson Electric Co. today turned in another strong performance, reporting double-digit growth in sales and net earnings for its third quarter, ended June 30.
The St. Louis-based maker of industrial, power, and electrical instrumentation and controls recorded net sales of $5.9 billion, a 13% increase over the $5.2 billion reported in its third quarter of 2006. Of the double-digit growth, the company attributed 9% to organic sales growth, 3% to a favorable currency exchange rate, and 1% to sales of acquired products.
Net earnings for the third quarter jumped 18% to $574 million from the year-ago tally of $486 million. Earnings per share jumped 22% to $0.72, compared with $0.59 in the third quarter of 2006.
While four of the company's five business units experienced double-digit sales growth in the quarter, the high achiever once again was the Process Management group, which grew sales 19% year-over-year, reaping $269 million in earnings on revenue of $1.47 billion.
According to David Farr, Emerson's chairman, CEO, and president, the Process Management group is profiting from the company's investment in new technology, particularly wireless. The group booked several multimillion-dollar wireless technology orders this quarter. And the future outlook looks just as bright, Farr said.
"I see good momentum in the next two to three years as companies look at the benefits of being able to monitor emissions and manage the plant better," Farr said in a conference call with financial analysts today. As a result, the Process group is preparing to broaden its wireless portfolio with new products that will be unveiled over the next six months.
Next year is also expected to be good for some of the other business units on an upward swing. The Industrial Automation group, for example, grew sales by 13% this quarter to $1.09 billion from $968 million in the third quarter of 2006. Network Power sales were up 14% year-over-year to $1.32 billion, while Climate Technologies reported $1.04 billion in revenue this quarter, a 13% increase. Emerson's Appliance and Tools business was the only group reporting flat results, with sales increasing just 1% to $1.1 billion on soft demand in the consumer and housing markets.
Emerson's operating cash flow in the quarter was $899 million, a 45% increase from $620 million in the third quarter of 2006. In a prepared statement, Farr said he is focused on generating cash and return on capital in order to make internal growth investments and acquisitions. To that end, the full-year targets for operating and free cash flow have been increased to $2.8 billion and $2.1 billion, respectively, compared with earlier expectations of $2.7 billion and $2.0 billion.
In addition, Emerson increased its earnings per share and sales outlook for the full year. The company expects full-year earnings per share in the range of $2.58 to $2.63, up from the previous guidance of $2.50 to $2.60. In addition, underlying, or organic, sales growth is expected to be 6% to 7%, and reported sales growth is expected to be in the range of 10% to 12%, the company said.