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EMERSON ELECTRIC CO (EMR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record profitability: adjusted segment EBITA margin rose to 28.0% (+340 bps YoY), GAAP EPS was $1.02 and adjusted EPS $1.38, with free cash flow up 89% to $694m and operating cash flow up 75% to $777m .
  • Net sales grew modestly to $4.175B (+1% YoY) with underlying sales +2%, led by Process and Hybrid markets; gross profit margin reached a record 53.5% per management .
  • Guidance reiterated for FY25 (adjusted EPS $5.85–$6.05; FCF $3.2–$3.3B) and Q2 2025 (adjusted EPS $1.38–$1.42); management raised expected operating leverage for FY25 to “the 70s” from mid-40s previously .
  • Execution catalysts: price/cost, cost reductions, favorable mix including strong AspenTech quarter, and disciplined discretionary spend; book-to-bill >1 in Q1 and ~1 for FY25 per management .

What Went Well and What Went Wrong

  • What Went Well

    • “Record gross profit margin and adjusted segment EBITA margin” reflecting portfolio strength and operating system; adjusted EPS exceeded expectations at $1.38 and cash generation was strong .
    • Segments posted broad margin improvement: Intelligent Devices adjusted EBITA margin 26.1% (from 23.8%); Control Systems & Software 28.8% (from 23.1%); AspenTech 45.1% (from 33.6%) .
    • Project funnel health and wins across LNG, power, life sciences; management sees >$1B potential LNG orders over next few years and showcased Ovation strength in nuclear and combined-cycle power .

  • What Went Wrong

    • Topline growth remained modest (+1% reported, +2% underlying) with discrete automation sales down (reported -5%, underlying -4%) and Test & Measurement down (-6%) .
    • FX and mix tailwinds in Q1 unlikely to repeat; management guided that Q2 will see less AspenTech mix benefit and FX becomes a headwind in the back half .
    • China remained down mid-single digits with bulk chemicals weak and factory automation muted; automotive/EV depressed and discrete recovery modeled largely as a second-half phenomenon .

Financial Results

MetricQ1 2024Q1 2025YoY Change
Net Sales ($USD Billions)$4.117 $4.175 +1%
Pretax Earnings ($USD Millions)$175 $775 —
GAAP EPS ($)$0.29 $1.02 +252%
Adjusted EPS ($)$1.22 $1.38 +13%
Adjusted Segment EBITA ($USD Millions)$1,014 $1,169 —
Adjusted Segment EBITA Margin (%)24.6% 28.0% +340 bps
Operating Cash Flow ($USD Millions)$444 $777 +75%
Free Cash Flow ($USD Millions)$367 $694 +89%

Segment Sales and Growth

SegmentQ1 2024 Sales ($mm)Q1 2025 Sales ($mm)Reported GrowthUnderlying Growth
Final Control$940 $976 +4% +5%
Measurement & Analytical$947 $975 +3% +4%
Discrete Automation$613 $580 -5% -4%
Safety & Productivity$322 $312 -3% -3%
Intelligent Devices (Total)$2,822 $2,843 +1% +2%
Control Systems & Software$675 $690 +2% +3%
Test & Measurement$382 $359 -6% -5%
AspenTech$257 $303 +18% +18%
Software & Control (Total)$1,314 $1,352 +3% +4%
Eliminations($19) ($20) ——
Total$4,117 $4,175 +1% +2%

Segment Earnings (Adjusted EBITA) and Margins

SegmentQ1 2024 Adj. EBITA ($mm)Q1 2024 MarginQ1 2025 Adj. EBITA ($mm)Q1 2025 Margin
Final Control$223 23.6% $260 26.6%
Measurement & Analytical$258 27.3% $296 30.4%
Discrete Automation$116 18.9% $112 19.3%
Safety & Productivity$74 23.1% $73 23.8%
Intelligent Devices (Total)$671 23.8% $741 26.1%
Control Systems & Software$155 23.1% $200 28.8%
Test & Measurement$101 26.5% $91 25.5%
AspenTech$87 33.6% $137 45.1%
Software & Control (Total)$343 26.1% $428 31.6%

Geography Growth

RegionQ1 2025 Reported Sales Growth
Americas+3%
Europe-2%
Asia, Middle East & Africa+4%

KPIs

KPIQ1 2025Notes
Underlying Orders YoY+1% Excludes AspenTech
Book-to-Bill>1 (quarter) ~1 for full year
Share Repurchases~$1.0B completed in Q1 As guided
Dividend per Share$0.5275 (payable Mar 10, 2025) Record date Feb 14, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales Growth (reported)FY 2025~15% (FY24 actual context); FY25 guide not given for reported in Nov1.5%–3.5% New detail (reported)
Underlying Sales GrowthFY 20253%–5% 3%–5% Maintained
GAAP EPS ($)FY 2025—$4.42–$4.62 Provided
Adjusted EPS ($)FY 2025$5.85–$6.05 $5.85–$6.05 Maintained
Operating Cash Flow ($B)FY 2025—$3.6–$3.7 Provided
Free Cash Flow ($B)FY 2025$3.2–$3.3 $3.2–$3.3 Maintained
Amortization of Intangibles (EPS impact)FY 2025—~$1.21 Provided
Restructuring / Related Costs (EPS impact)FY 2025—~$0.14 Provided
Acquisition/Divestiture Fees (EPS impact)FY 2025—~$0.08 Provided
GAAP EPS ($)Q2 2025—$1.01–$1.05 Provided
Adjusted EPS ($)Q2 2025—$1.38–$1.42 Provided
Underlying Sales GrowthQ2 2025—1%–2% Provided
Operating LeverageFY 2025Mid-40s “In the 70s” Raised
Tax RateFY 2025~22% — (no change called out)Maintained (implicit)
Dividend per ShareCurrent—$0.5275 declared Provided

Earnings Call Themes & Trends

TopicQ3 2024 (Aug)Q4 2024 (Nov)Q1 2025 (Feb)Trend
Software-defined automation / OvationLaunched Ovation 4.0; integrate Aspen; AI-ready platform Emphasis on fully integrating AspenTech; enterprise ops platform vision Continued focus; segment profitability step-ups; Ovation users engagement Strengthening roadmap across portfolio
LNGHealthy pipeline; wins; external macro pauses in NA; continued globally Funnel +$200mm; strong LNG wins Potential >$1B orders next few years; moratorium lifted; CEDAR LNG win Acceleration as awards resume
Power generation & gridDouble-digit growth; renewable and grid projects Power as growth platform; U.S. power/data center demand Power reclassified as growth platform; Ovation automates ~20% global generation; nuclear wins (Sizewell C) Strong secular support (AI/data centers, nuclear renaissance)
Discrete & T&MWeak; recovery slower; T&M orders -11% Discrete orders turned positive; T&M backlog $400mm; recovery 2H FY25 Sequential orders growth; green shoots in semis; automotive/EV depressed Gradual 2H recovery; semis leading
ChinaBroad weakness; cautious Expect 2H recovery (low to mid-single growth) Down mid-single in Q1; hope to be flat FY25; focus on bulk chemicals Stabilizing; modest outlook
FX & mixGross margin records; favorable project mix Mid-40s leverage expected; copeland proceeds; debt costs Q1 EPS benefited ~$0.04 transactional FX last year not repeating; FX headwind later Tailwind fades; headwind in 2H
Tariffs/supply chain——Section 232/301: de minimis expected; prepared with price/surcharges; supply chain regionalization Risk managed; embedded in guide
AspenTechStrong quarter; GGM; synergies aiding margins Proposal to acquire remaining shares; seasonality; EPS neutral FY25 with synergies Tender progressing; AspenTech adjusted segment EBITA $137mm; NCI adjustments Integration path clear; strong margin contribution

Management Commentary

  • “Emerson began the fiscal year on a strong note, exceeding first quarter expectations for incremental operating margins and earnings per share with strong cash flow generation.” — Lal Karsanbhai .
  • “We reiterate our guide for underlying sales, earnings per share and cash flow… expected second half discrete recovery.” — Lal Karsanbhai .
  • “Gross profit margin was a record 53.5%… adjusted segment EBITDA margins of 28%, a 340 bps improvement… price/cost management, mix and benefits of cost reductions and synergy realization.” — Lal Karsanbhai .
  • “We are increasing our expectations for operating leverage for the year to the 70s from the mid-40s.” — Lal Karsanbhai .

Q&A Highlights

  • FX and EPS bridge: ~$0.04 EPS benefit tied to transactional FX losses last year not repeating; mix/ASPEN contribution and cost reductions drove incrementals .
  • Discrete/T&M recovery: Sequential orders growth in discrete; semis and portfolio business improving; automotive/EV still depressed; 2H recovery modeled .
  • China outlook: Down mid-single digits in Q1; plan assumes flat FY25; push in North America and Middle East to offset .
  • LNG pipeline: Moratorium lifting aids awards; consistent win rates globally; >$1B potential orders over next few years .
  • Book-to-bill: >1 in Q1; typical seasonality with >1 in first half, <1 in back half; ~1 for full year .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025 and Q2 2025 was unavailable due to data access limits at the time of request. Values retrieved from S&P Global were not accessible at this time.
  • Company reported adjusted EPS of $1.38 versus its guidance of $1.25–$1.30 for Q1 (from prior quarter guidance) and noted EPS exceeded expectations; forward Q2 adjusted EPS guided to $1.38–$1.42 .

Key Takeaways for Investors

  • Profitability execution remains the key driver: record gross and segment margins, with raised leverage expectations to the “70s” provide upside to earnings quality even on modest top-line growth .
  • Mix benefits and AspenTech strength were significant in Q1; expect some normalization in Q2 and a FX headwind later, tempering the extraordinary incrementals seen in Q1 .
  • Discrete/T&M recovery is a second-half story; semis green shoots are encouraging, but automotive/EV weakness persists—model sequential improvement with easier comps .
  • Secular project exposure (LNG, power—including nuclear and grid—life sciences) underpins visibility; management sees >$1B LNG orders over next few years and reclassified power as a growth platform .
  • Capital returns remain robust: ~$1B buybacks completed in Q1; dividend declared; FY25 plan targets ~100% of FCF returned via buybacks and dividends (per prior commentary) .
  • Watch AspenTech tender and Safety & Productivity strategic alternatives; neither included in FY25 guidance, but potential portfolio simplification and software integration could support long-term margin and valuation .
  • Near-term trading: Q2 may show normalization in mix and FX; medium-term thesis centers on margin durability, secular project cycle, and software-defined automation scaling across Ovation/DeltaV/AspenTech .