Emerson Reports Fourth Quarter and Full Year 2022 Results; Provides Initial 2023 Outlook

ST. LOUIS (Oct. 31, 2022) – Emerson (NYSE: EMR) today reported results for its fourth quarter and fiscal year ended September 30, 2022.

Fourth quarter net sales were up 8 percent and underlying sales were up 12 percent. The Americas were up 17 percent, Europe was up 3 percent, and Asia, Middle East & Africa was up 7 percent. China was up 9 percent. Full year net sales were up 8 percent and underlying sales were up 9 percent. The Americas were up 14 percent, Europe was up 2 percent, and Asia, Middle East & Africa was up 5 percent. China was up 7 percent.

Fourth quarter pretax margin of 16.9 percent was up 20 basis points. Adjusted EBITA margin³ was 23.3 percent, up 260 basis points. Full year pretax margin of 20.8 percent was up 480 basis points. Adjusted EBITA margin was 21.6 percent, up 180 basis points.

Fourth quarter earnings per share were $1.24, up 12 percent. Adjusted earnings per share were $1.53, up 16 percent. Full year earnings per share were $5.41, up 42 percent. Adjusted earnings per share were $5.25, up 16 percent.

Fourth quarter operating cash flow was $1.2 billion, up 42 percent, and free cash flow was $1.0 billion, up 63 percent. Full year operating cash flow was $2.9 billion, down 18 percent, and free cash flow was $2.4 billion, down 20 percent. Full year cash flow results reflected higher working capital due to increased sales and supply chain constraints throughout the year, and $153 million of tax payments on divestiture gains.

“Fiscal 2022 was a transformational year for Emerson. We made significant progress on our portfolio and culture transformation while maintaining our world-class operational execution,” said Emerson President and Chief Executive Officer Lal Karsanbhai. “Today's announcement to divest the Climate Technologies business is a critical milestone in positioning Emerson to be a global pure-play automation leader. We are energized by the growth and value creation opportunities enabled by our leading capabilities in intelligent devices, control systems and software.”

“Emerson closed out a strong 2022 with 9 percent growth in underlying sales and a 16 percent increase in adjusted earnings per share,” Karsanbhai continued. “Continued strength in automation demand and our robust backlog give us confidence in our 2023 sales guidance. Our operational execution will also lead to strong margins and cash flow conversion. Finally, I would like to thank our global employees for their hard work throughout 2022 and I look forward to future success as a global automation leader.”

Business Platform Results

Automation Solutions⁴ September trailing three-month underlying orders⁵ were up 6 percent and backlog of $5.8 billion was up 14 percent versus the prior year.

Fourth quarter net sales were up 7 percent, with underlying sales up 13 percent. The Americas were up 21 percent, Europe was flat and Asia, Middle East & Africa was up 10 percent. China was up 14 percent. Full year net sales were up 4 percent, with underlying sales up 7 percent. The Americas were up 14 percent, Europe was down 1 percent and Asia, Middle East & Africa was up 5 percent. China was up 11 percent.

Fourth quarter segment EBIT margin increased 290 basis points to 22.3 percent and adjusted segment EBITA⁶ margin increased 190 basis points to 24.6 percent. Full year segment EBIT margin increased 270 basis points to 20.0 percent and adjusted segment EBITA margin increased 190 basis points to 22.2 percent.

Commercial & Residential Solutions September trailing three-month underlying orders were up 7 percent and backlog of $1.2 billion was up 16 percent versus the prior year.

Fourth quarter net sales increased 2 percent, with underlying sales up 10 percent. The Americas were up 12 percent, Europe was up 12 percent and Asia, Middle East & Africa was down 2 percent. China was down 8 percent. Full year net sales increased 9 percent, with underlying sales up 13 percent. The Americas were up 15 percent, Europe was up 11 percent and Asia, Middle East & Africa was up 5 percent. China was down 7 percent.

Fourth quarter segment EBIT margin increased 230 basis points to 20.4 percent and adjusted segment EBITA margin increased 250 basis points to 21.9 percent. Full year segment EBIT margin decreased 60 basis points to 19.9 percent and adjusted segment EBITA margin decreased 70 basis points to 20.9 percent.

AspenTech⁷  fourth quarter net sales were $251 million. Segment EBIT margin was negative 15.2 percent, including $121 million of intangibles amortization, and adjusted segment EBITA margin was 32.9 percent. Full year net sales were $656 million. Segment EBIT margin was 1.9 percent and adjusted segment EBITA margin was 38.0 percent.

2023 Updated Outlook 

Following the announcement of its Climate Technologies divestiture, Emerson will report financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, beginning in 2023. The earnings from discontinued operations for 2023 are expected to be $10 billion to $11 billion, or $17 to $19 per share, including the net gains on 2023 divestitures.

The Company's 2023 continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will include interest income from the $2.25 billion note receivable from Climate Technologies and reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies' post-close results. The Company will exclude the interest income from the note receivable from Climate Technologies and its share of Climate Technologies' operations in its calculation of 2023 adjusted earnings per share. Also excluded from adjusted earnings per share is the interest income on any undeployed net proceeds. The effect of Emerson's 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows.

The 2023 outlook assumes approximately $1.2 billion of dividend payments and approximately $2 billion to be returned to shareholders through share repurchases.

The following tables summarize 2022 financials for continuing operations⁸ and fiscal year 2023 guidance framework for continuing operations⁸. Guidance figures are approximate.

Notes:

¹ Underlying sales excludes the impact of currency translation, and acquisitions and divestitures completed through September 30, 2022 including Therm-O-Disc, heritage AspenTech and Emerson's businesses contributed to AspenTech.

² Adjusted EPS excludes restructuring, a gain on subordinated interest, first year purchase accounting, transaction and AspenTech pre-closing costs and charges, a gain from the Therm-O-Disc divestiture, write-offs associated with Emerson's announced Russia exit, investment-related gains, an AspenTech Micromine purchase price hedge and intangibles amortization expense.

³ Adjusted EBITA margin excludes restructuring, a gain on subordinated interest, first year purchase accounting, transaction and AspenTech pre-closing costs and charges, a gain from the Therm-O-Disc divestiture, write-offs associated with Emerson's announced Russia exit, investment-related gains, an AspenTech Micromine purchase price hedge and intangibles amortization expense.

⁴ Automation Solutions net sales, backlog, segment EBIT margin and adjusted segments EBITA margin does not include Emerson's businesses contributed to AspenTech, which have been reclassified to the AspenTech segment.

⁵ Trailing three-month underlying orders does not include Therm-O-Disc (divested and previously reported in Commercial & Residential Solutions) or Emerson's businesses contributed to AspenTech (previously reported in Automation Solutions).

⁶ Adjusted segment EBITA margin excludes restructuring and intangible amortization expense.

⁷ The AspenTech segment includes the full year results for Emerson's businesses contributed to AspenTech and the heritage AspenTech business as of May 16, 2022, the date upon which the Company acquired its majority equity ownership interest in AspenTech.

⁸ Following the announcement of its Climate Technologies divestiture, Emerson will report financial results for Climate Technologies, InSinkErator and Therm-O-Disc as discontinued operations for all periods presented, beginning in 2023. The earnings from discontinued operations for 2023 are expected to be $10 billion to $11 billion, or $17 to $19 per share, including the net gains on 2023 divestitures. The Company's 2023 continuing operations after the Climate Technologies divestiture (assumed to close March 31, 2023 for the purposes of guidance) will include interest income from the $2.25 billion note receivable from Climate Technologies and reflect the 45% common equity ownership in the income, or loss, of Climate Technologies. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the amount of its 45% share of Climate Technologies' post-close results. The Company will exclude the interest income from the note receivable from Climate Technologies and its share of Climate Technologies' operations in its calculation of 2023 adjusted earnings per share. Also excluded from adjusted earnings per share is the interest income on any undeployed net proceeds. The effect of Emerson's 45% share of Climate Technologies is expected to be immaterial to post-closing cash flows.

⁹ 2023 earnings per share guidance from continuing operations excludes any potential impact from the 45% common equity ownership in Climate Technologies' income or loss post-close. Emerson will not control Climate Technologies post-closing and is therefore unable to estimate the probable significance or impact on our earnings per share results from the 45% share of Climate Technologies' post-close results. Emerson will exclude its 45% share of Climate Technologies' post-close operations from the calculation of its 2023 adjusted earnings per share.

Upcoming Investor Events

Today, beginning at 7:00 a.m. Central Time / 8:00 a.m. Eastern Time, Emerson management will discuss the fourth quarter results, fiscal year results and its Climate Technologies divestiture during an investor conference call. Participants can access a live webcast available at www.emerson.com/en-us/investors at the time of the call. A replay of the call will be available for 90 days. Conference call slides will be posted in advance of the call on the company website.

Emerson will hold an in-person and virtual investor conference on Tuesday, Nov. 29 in New York City. A live webcast of the investor conference will begin at 8:00 a.m. Central Time / 9:00 a.m. Eastern Time. A link to register and attend the webcast is available at www.emerson.com/en-us/investors. The webcast will remain available for 90 days.  

Forward-Looking and Cautionary Statements

Statements in this press release that are not strictly historical may be “forward-looking” statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposed Climate Technologies transaction, the proposed sale of its InSinkErator food waste disposal business, the scope, duration and ultimate impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, as set forth in the Company's most recent Annual Report on Form 10-K and subsequent reports filed with the SEC. The outlook contained herein represents the Company's expectation for its consolidated results, other than as noted herein.