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EMERSON ELECTRIC CO (EMR)·Q2 2025 Earnings Summary

Executive Summary

  • EMR delivered a clean beat versus Street in Q2: adjusted EPS $1.48 vs S&P Global consensus $1.41, revenue $4.432B vs $4.383B, and EBITDA $1.237B vs $1.205B; margins again hit record levels with adjusted segment EBITA margin at 28.0% . Consensus values noted with S&P Global disclaimer below.*
  • Management raised the midpoint of adjusted FY EPS to $5.90–$6.05 and tightened the FY outlook; operating cash flow was updated to $3.5B–$3.6B and free cash flow to $3.1B–$3.2B, reflecting AspenTech buy‑in and strong execution .
  • Tariff exposure (~$245M gross in FY25) is expected to be fully mitigated via surcharges, pricing, and footprint reconfiguration; April orders accelerated to +7%, underpinning H2 growth confidence .
  • Strategic milestones: completion of AspenTech buy‑in (modestly accretive in FY25), decision to retain Safety & Productivity given industry‑leading margins/cash generation, and continued strength in LNG/power project funnel ($11.4B) .
  • Near‑term stock catalysts: sustained margin resilience, tariff mitigation clarity, accelerating orders in discrete/Test & Measurement, and AspenTech synergy/ACV momentum .

What Went Well and What Went Wrong

What Went Well

  • Record profitability: adjusted segment EBITA margin 28.0% (+200 bps YoY), gross margin 53.5%, and adjusted EPS $1.48 (+9% YoY), supported by price/cost, mix, and synergy realization .
  • Management quote: “We achieved another quarter of record gross profit and adjusted segment EBITA margins… adjusted earnings exceeding our expectations,” said CEO Lal Karsanbhai .
  • Commercial momentum and pipeline: trailing 3‑month underlying orders +4% in Q2; April orders +7%; large project funnel at $11.4B with ~$375M awards in Q2, supporting steady process/hybrid growth and nascent discrete recovery .

What Went Wrong

  • GAAP EPS declined to $0.86 (−9% YoY), pressured by acquisition/divestiture costs and transaction‑related taxes tied to AspenTech buy‑in .
  • Factory automation and automotive remained soft, especially in Europe and China; discrete underlying sales still −1% YoY despite sequential improvement .
  • China bulk chemicals continues to be weak; management is modeling muted expectations with improvement aided by power/marine and export EPC activity rather than broad‑based recovery .

Financial Results

Trend vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Net Sales ($USD Billions)$4.376 $4.175 $4.432
GAAP Diluted EPS ($USD)$0.95 $1.02 $0.86
Adjusted EPS ($USD)$1.36 $1.38 $1.48
Adjusted Segment EBITA ($USD Billions)$1.139 $1.169 $1.240
Adjusted Segment EBITA Margin (%)26.0% 28.0% 28.0%
Pretax Earnings Margin (%)16.3% 18.6% 14.2%
Operating Cash Flow ($USD Billions)$0.733 $0.777 $0.825
Free Cash Flow ($USD Billions)$0.651 $0.694 $0.738

Q2 2025 Results vs Wall Street Consensus (S&P Global)

MetricConsensus (Q2 2025)*Actual (Q2 2025)
Adjusted/Primary EPS ($USD)1.4149*$1.48
Revenue ($USD Billions)4.383*$4.432
EBITDA ($USD Billions)1.205*1.237 (Adjusted EBITA proxy)
  • EMR delivered broad beats: EPS (+$0.07), revenue (+$0.049B), EBITDA/EBITA (+$0.032B). Bolded beats are reflected in the narrative. Values retrieved from S&P Global.*

Segment Sales and Profitability (Q2 2025 vs Q2 2024)

SegmentQ2 2024 Sales ($MM)Q2 2025 Sales ($MM)Reported Growth (%)Underlying Growth (%)
Final Control$1,051 $1,073 2% 3%
Measurement & Analytical$1,013 $1,002 (1)% 0%
Discrete Automation$632 $615 (3)% (1)%
Safety & Productivity$365 $339 (7)% (6)%
Intelligent Devices (Total)$3,061 $3,029 (1)% 0%
Control Systems & Software$1,332 $1,421 7% 7%
Eliminations(17) (18) ——
SegmentQ2 2024 Adjusted EBITA ($MM)Q2 2025 Adjusted EBITA ($MM)Q2 2024 Adj. EBITA Margin (%)Q2 2025 Adj. EBITA Margin (%)
Final Control$274 $290 26.1% 27.0%
Measurement & Analytical287 279 28.3% 27.8%
Discrete Automation131 130 20.9% 21.2%
Safety & Productivity91 82 24.7% 24.3%
Intelligent Devices (Total)783 781 25.6% 25.8%
Control Systems & Software278 372 28.8% 35.0%
Test & Measurement78 87 21.4% 24.2%
Software and Control (segment aggregate)356 459 26.7% 32.3%

KPIs

KPIQ2 2025
Underlying Orders Growth (%)4%
Book-to-Bill1.04
Backlog ($USD Billions)$7.5
Gross Profit Margin (%)53.5%
Price Contribution to Growth (ppt)~1.5
Operating Cash Flow ($USD Billions)$0.825
Free Cash Flow ($USD Billions)$0.738
Free Cash Flow Margin (%)~17%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY 20251.5%–3.5% ~4% Raised
Underlying Sales GrowthFY 20253%–5% ~4% Tightened to midpoint
Adjusted EPSFY 2025$5.85–$6.05 $5.90–$6.05 Midpoint raised
GAAP EPSFY 2025$4.42–$4.62 $4.05–$4.20 Lowered (transaction costs)
Operating Cash FlowFY 2025$3.6B–$3.7B $3.5B–$3.6B Lowered
Free Cash FlowFY 2025$3.2B–$3.3B $3.1B–$3.2B Lowered
Adjusted EPSQ3 2025—$1.48–$1.52 New
Net Sales GrowthQ3 2025—4.5%–5.5% New
Underlying Sales GrowthQ3 2025—3.5%–4.5% New
DividendsFY 2025~$1.2B ~$1.2B Maintained
Share RepurchasesFY 2025~$2.0B ~$1.1B (completed 1H) Lowered/Completed
FX AssumptionFY 2025~1.5 pts unfavorable ~flat Improved

Management also expects pricing actions tied to tariff mitigation to add ~1ppt to price in FY25 and completely offset gross tariff impacts in 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MitigationReady to implement pricing/surcharges; de minimis expected in China/Canada; regionalization strategy in place Gross impact ~$245M in FY25; targeted surcharges/pricing $190M and operational mitigation $55M to fully offset FY25, carryover to FY26 Improving clarity/mitigation
Discrete RecoveryGreen shoots in semis, portfolio business; softness in automotive/factory automation Discrete orders +3%; Test & Measurement orders +8%; expect high‑single‑digit H2 growth; factory automation still muted Gradual recovery
LNG/Power PipelineLNG wave larger than expected; power classified as growth platform; funnel $11.5B Funnel $11.4B; ~$375M awards; continued strength in LNG, power, life sciences; mid‑single‑digit process/hybrid growth Sustained strength
ChinaDown mid‑single digits; bulk chemicals weak; offset by power/export EPC Bulk chemicals weak; pockets in power/marine/export EPC; modeling muted recovery Cautious
Industrial Software / AspenTechACV +10%; plan to acquire remaining AZPN shares; synergy roadmap ACV +11%; Aspen buy‑in completed; modest FY25 EPS accretion; $100M synergies by 2028 Strengthening
Cost Actions / SynergiesCost reductions drove margins; NI/T&M synergies ahead Margin expansion from price‑cost, mix (AspenTech/T&M), and cost reductions; leverage ~180% in Q2 Durable margin model

Management Commentary

  • “Emerson delivered strong underlying orders… record gross profit and adjusted segment EBITA margins… confidence to update our 2025 outlook.” — Lal Karsanbhai .
  • “We have… completed the AspenTech buy‑in… modestly accretive to adjusted EPS in 2025… targeting $100M cost synergies by 2028.” — Lal Karsanbhai .
  • “Gross impact in 2025 is expected to be $245M… mitigating these impacts through targeted surcharges and pricing actions… production reconfiguration… [to] completely offset the tariff headwinds in the fiscal year.” — Ram Krishnan .
  • “Adjusted segment EBITDA margin… 28%, matching a record high… margin expansion driven by price‑cost, segment mix and cost reductions/synergy realization.” — Mike Baughman .

Q&A Highlights

  • Discrete end‑market color: Strength in Test & Measurement portfolio and aerospace/defense; semis recovering; automotive remains weak, factory automation muted; discrete orders +3% .
  • AspenTech outlook: Full control accelerates software‑defined automation roadmap; ACV to double‑digit growth; G&A/corporate cost harmonization driving accretion .
  • Tariff timing: Full FY25 offset expected; programs build momentum into FY26 .
  • China/macro watch items: Bulk chemical weakness persists; offsets from power/marine/export EPC; cautious outlook for factory automation and construction pockets .
  • Incrementals and leverage: First‑half leverage exceptionally high (~220% in H1); back‑half leverage lower due to tariffs/FX/mix; still ~60% for FY .

Estimates Context

  • Q2 beats vs S&P Global consensus: Adjusted EPS $1.48 vs $1.41; revenue $4.432B vs $4.383B; EBITDA/EBITA $1.237B vs $1.205B. Expect estimate revisions reflecting margin resilience, tariff mitigation clarity, and accelerating orders (April +7%) .
MetricConsensus (Q2 2025)*Actual (Q2 2025)
EPS ($USD)1.4149*$1.48
Revenue ($USD Billions)4.383*$4.432
EBITDA ($USD Billions)1.205*1.237 (Adj. EBITA)

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat and margin durability: Another quarter at 28% adjusted segment EBITA margin with strong price‑cost/mix; supports premium valuation narratives despite GAAP noise from transaction costs .
  • Tariffs appear manageable: Detailed mitigation plan fully offsets FY25 gross exposure (~$245M); reduces a key macro overhang .
  • Orders acceleration supports H2: April orders +7%, discrete turning positive, Test & Measurement orders +8%; sets up high‑single‑digit exit rate in discrete .
  • AspenTech catalyst: Buy‑in completed; modest FY25 accretion, $100M synergy target; strengthens software platform and enterprise automation strategy .
  • LNG/power secular tailwinds: $11.4B project funnel and ~$375M Q2 awards; sustained mid‑single‑digit process/hybrid growth visibility .
  • Watch areas: Factory automation and automotive (especially Europe/China) remain soft; China bulk chemicals weak—monitor for second‑half stabilization vs easier comps .
  • Cash returns intact: Dividend ~$1.2B maintained; repurchases $1.1B completed in H1; FY FCF $3.1B–$3.2B with ~17% margin .