EMERSON ELECTRIC CO (EMR)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered mixed optics: adjusted EPS of $1.52 modestly beat consensus*, while revenue of $4.55B slightly missed; adjusted segment EBITA margin held at 27.1% as tariffs and FX weighed on Intelligent Devices, partly offset by strength in Software & Control . EPS beat: $1.52 vs $1.510*; Revenue miss: $4.553B vs $4.591B*.
• Guidance raised where it matters: FY25 adjusted EPS increased to ~$6.00 (from prior $5.90–$6.05 midpoint), and FCF raised to ~$3.2B; GAAP EPS now ~$4.08; Q4 adjusted EPS guided to $1.58–$1.62 and adj. segment EBITDA margin ~27% .
• Tariff overhang eased: annualized gross incremental tariff exposure cut to ~$210M (from ~$455M), with FY25 gross impact now ~$130M (vs $245M); pricing actions ($115M, 50 bps) reduced as surcharges were eased, trimming Q3 revenue but improving Q4 margins .
• End-market read-through: Process & Hybrid steady (LNG, power, life sciences), Discrete inflecting led by Test & Measurement; Americas +7% growth offset by Europe -7%; backlog grew to ~$7.6B with book-to-bill = 1.0 .
• Strategic narrative: AI-enabled offerings (Ovation AI Virtual Advisor, NI Nigel AI Advisor) and a TotalEnergies data fabric deployment underpin software-led growth and stickiness; management confidence reinforced by November investor day catalyst .

What Went Well and What Went Wrong

What Went Well

• Software-led profitability and mix: Software & Control delivered strong adjusted EBITA margins (32.6%) with AspenTech synergy realization; adjusted EPS grew 6% YoY to $1.52 despite revenue softness .
• Tariff exposure reduced; Q4 margins protected: Annualized gross incremental tariff impact cut to ~$210M; FY25 gross tariff impact now ~$130M; expected Q4 adjusted segment EBITDA ~27% as pricing offsets land fully .
• Product and AI momentum: Launch of AI-enabled Ovation Virtual Advisor in power and NI Nigel AI Advisor in test software; strategic collaboration with TotalEnergies to deploy AspenTech Inmation™ data fabric, enabling AI at scale .

What Went Wrong

• Top-line miss vs. consensus and surcharge easing: Net sales of $4.553B grew 4% YoY but came in below S&P Global consensus*, partly due to the decision to ease customer surcharges as tariff outlook improved .
• Regional softness in Europe: Europe revenue declined 7% YoY, offsetting Americas +7% and AMEA +2%, reflecting muted recovery in factory automation and bulk chemicals exposure .
• Segment pressure in Intelligent Devices: Adj. EBITDA margin fell sequentially due to tariffs and unexpected FX headwinds; management noted when excluding these, margins would have been up ~20 bps .

Financial Results

Headline Results vs Prior Year and Prior Quarter

¹Company tables show diluted EPS $1.04; press release highlights $1.03—difference reflects rounding/tables vs headline .

Q3 2025 Actuals vs S&P Global Consensus

Values retrieved from S&P Global.*

KPIs and Operating Metrics

Segment Sales and Growth (Q3)

Segment Profitability (Adjusted EBITA, Q3)

Guidance Changes

Why the changes: lower tariff exposure enabled easing of surcharges, trimming FY price contribution by ~50 bps and moderating sales, while margins/FCF improve as cost offsets land .

Earnings Call Themes & Trends

Management Commentary

• “We are taking pivotal steps to advance our industrial software capabilities, launching breakthrough innovations... accelerating adoption of our digital solutions.” — Lal Karsanbhai, CEO .
• “Our sales fell short of guidance driven primarily by [easing surcharges]; adjusted EPS $1.52 grew 6% YoY... free cash flow of $970M, 21.3% margin.” — Mike Baughman, CFO .
• “Annualized gross incremental tariff impact is now approximately $210M... FY gross impact ~$130M. We eased surcharges; ~50 bps less price... mitigations completely offset exposure.” — Management .
• “Ovation Virtual Advisor... integrated into Ovation 4.0... selected by Entergy for two 754 MW plants; Nigel AI Advisor launched for NI software.” — Management .

Q&A Highlights

• Intelligent Devices margins: Sequential margin down due to tariffs and an unexpected FX pinch; excluding these, margins would have been up ~20 bps; tariffs largely hit Intelligent Devices, not Software & Control .
• Test & Measurement inflection: Broad-based recovery across segments and geographies; strength in A&D; early recovery in semis; China and Asia rebounding faster; expected high‑teens growth in Q4 .
• Process/Hybrid demand: Mid-single digit order growth supported by LNG, power, life sciences; bulk chemicals weak in Europe/China; specialty chemicals better; momentum expected into FY26 .
• Power vertical: Ovation orders +40%; growth sustainable in high‑teens over next 24 months; installs profitable with higher aftermarket margin; grid management ACV +26% .
• Orders outlook and margins: Underlying orders growth guided to 5%–7% in Q4; Q4 adj. segment EBITDA margin ~27% as tariff pricing offsets land fully .

Estimates Context

• Q3 2025: Adjusted EPS $1.52 vs. $1.510* consensus (beat); Revenue $4.553B vs. $4.591B* (miss); EBITDA $1.272B vs. $1.295B* (miss). Values retrieved from S&P Global.*
• FY 2025: Adjusted EPS guided ~$6.00 vs. $5.999* consensus; Revenue ~$18.016B vs. $18.064B* consensus . Values retrieved from S&P Global.*
• Forward look: Next quarter (Q1 2026) consensus* EPS ~$1.416; Revenue ~$4.36B; EBITDA ~$1.23B, suggesting normal seasonal step-down post Q4. Values retrieved from S&P Global.*

Key Takeaways for Investors

• Mix > volume: Despite a slight revenue miss, adj. EPS and margins held as Software & Control outperformed and tariff pressures abated; Q4 margin guide is solid (~27%) .
• Tariff relief is a real lever: Lower tariff exposure reduced the need for surcharges (weighing on Q3 sales) but should improve Q4–FY margin trajectory; expect cleaner price/cost dynamics ahead .
• Discrete turning: Test & Measurement is leading discrete recovery with high‑teens Q4 growth expected; Europe factory automation and bulk chemicals remain watch items .
• Power/LNG/Life Sciences multi‑year tailwinds: Ovation orders +40% and management sees high‑teens growth sustained; LNG and life sciences underpin mid‑single digit Process/Hybrid growth .
• AI/software narrative strengthening: Ovation AI and Nigel AI enhance attach and stickiness; TotalEnergies deal showcases enterprise data fabric deployments that can drive ACV growth .
• Cash returns intact: ~$2.3B in FY25 shareholder returns maintained; FCF raised to ~$3.2B offering support for buybacks/dividends even amid revenue normalization .
• Near-term trading: Stock likely reacts to revenue miss vs. EPS beat; focus should be on tariff relief, Q4 margin setup, and discrete acceleration. Medium-term, software-led growth and power/LNG exposure support multiple resilience .

Notes: 
- All company figures and qualitative commentary are from Emerson’s Q3 2025 press release (8‑K 2.02) and earnings call on Aug 6, 2025, plus prior Q1/Q2 2025 8‑Ks and relevant press releases **[32604_0000032604-25-000075_a2025q3release_ex991.htm:0]** **[32604_0000032604-25-000075_a2025q3release_ex991.htm:4]** **[32604_0000032604-25-000075_a2025q3release_ex991.htm:6]** **[32604_2058233_2]** **[32604_2058233_4]** **[32604_20250722NY33205:0]** **[32604_20250722NY34691:0]** **[32604_0000032604-25-000061_a2025q2release_ex991.htm:0]** **[32604_0000032604-25-000011_a2025q1release_ex991.htm:0]**. 
- *Values retrieved from S&P Global for consensus estimates.