Emerson Reports First-Quarter 2007 Financial Results
Emerson announced net sales for the first quarter ended December 31, 2006 were $5.1 billion, an increase of 11% over the $4.5 billion reported in the same period last year. Net earnings for the first quarter increased 12% to $445 million, or $0.55 per share. This represents a 15% increase in earnings per share from the $0.48 earned in the same period last year. All per share amounts reflect the 2-for-1 stock split in the form of a stock dividend that was paid on December 11, 2006.
Underlying sales grew 4% in the quarter, which excludes the net impact of growth from acquisitions and divestitures (5%) and favorable exchange rates (2%). Underlying international sales increased 11%, including strong growth in Europe, Asia and Latin America. This quarter marked the first time that international sales were over 50% of total sales. As expected, underlying growth in the United States was down 2% driven primarily by weakness in the residential air-conditioning markets for the Climate Technologies segment, which experienced exceptionally strong growth last year as the industry converted to 13-SEER energy standards.
"Emerson’s first quarter demonstrates the strength of the global balance across our portfolio of businesses," said Emerson Chairman, Chief Executive Officer and President David N. Farr. "The company’s performance in the first quarter represents a solid start to what is expected to be another year of strong sales and earnings growth for Emerson."
Process Management delivered another quarter of strong sales and earnings performance. Reported sales grew by 11% which included an underlying sales increase of 6% and the favorable impact of currency translation (3%) and acquisitions (2%). Orders grew at a double digit rate in the quarter as strong capital spending in global energy markets continued to support the growth. The margin for this segment expanded by 170 basis points to 17.8% driven by leverage on the sales volume increase, benefits from new products and benefits from prior cost reduction activities.
Industrial Automation achieved sales growth of 16% in the quarter. Underlying sales growth was 11%, which excludes the favorable impact of currency translation (4%) and acquisitions, net of divestitures (1%). Growth was led by Europe and Asia, which saw underlying growth of 15% and 18%, respectively. The capital spending environment continued to drive growth in these markets. Also, global demand for both primary and back-up power generation capacity continued to drive strong growth for the power generating alternator business. The profit margin for this segment was 16.7%, an increase of 10 basis points from the prior year quarter.
Network Power sales grew 28% in the quarter, which included a favorable impact of 17% from acquisitions, net of divestitures, and 2% from currency translation. Growth remained strong in the core uninterruptible power supply (UPS), precision cooling and China power systems businesses which offset weakness in the North American telecom power business. The margin for this segment was 9.8% versus 11.5% in the prior year quarter driven primarily by dilution from acquisitions and deleverage on significantly lower sales volumes in the North American telecom business.