Sign in
EE

EMERSON ELECTRIC CO (EMR)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered modest top-line growth and strong profitability: Net sales $4.86B (+5% y/y), adjusted segment EBITA margin 27.5% (+130 bps y/y), and adjusted EPS $1.62 at the top end of guidance . EPS slightly beat Wall Street consensus, while revenue was a small miss versus estimates (see Estimates Context).
  • Orders momentum and backlog support 2026: underlying orders +6% in Q4; year-end backlog $7.4B; management guides FY26 net sales growth ~5.5%, underlying sales ~4%, and adjusted EPS $6.35–$6.55 .
  • Strategic/capital allocation catalysts: Board authorized up to 50M-share repurchase (in addition to ~20M remaining from 2020), FY26 plan to return $2.2B to shareholders ($1.0B buybacks, ~$1.2B dividends), and a 5% dividend per share increase to $0.555; Investor Day set for Nov 20 .
  • 2026 setup reflects software renewal accounting headwind (~$120M revenue; ~40 bps margin; ~$0.15 EPS), offset by continued operational margin expansion and strength in Test & Measurement and power/LNG/life sciences verticals .
  • Stock narrative likely driven by accelerating Test & Measurement share gains, power generation/nuclear wins (Ovation), and disciplined cash returns, tempered by Europe/China softness and renewal-related GAAP dynamics (see What Went Well/What Went Wrong) .

What Went Well and What Went Wrong

What Went Well

  • Margin and EPS execution: Q4 adjusted segment EBITA margin reached 27.5% (+130 bps y/y) and adjusted EPS hit $1.62 (top of guide), underscoring pricing/mix, software contribution, and synergy realization .
  • Test & Measurement re-acceleration and share gains: Q4 sales +13% reported (+12% underlying); management cited robust demand across semiconductor, aerospace & defense, and broad-based portfolio business; margins improved to 28.5% .
  • Power generation leadership and LNG wins: Ovation orders +18% in Q4 and +30% for the year; notable wins at Entergy (multiple facilities adding ~3.1 GW) and Woodside Louisiana LNG automation; strong multi-year outlook driven by data center power needs and grid modernization .

What Went Wrong

  • Regional softness persists: Europe and China demand remained muted, weighing on discrete automation and broader factory automation trends; automotive and packaging exposure in Europe/China remained headwinds .
  • Renewal accounting headwind in FY26: Control Systems & Software faces a ~$120M renewal-driven revenue headwind and ~40 bps adjusted margin drag in FY26 (non-cash timing under ASC 606), reducing near-term GAAP growth optics despite healthy ACV and cash flows .
  • Tariffs and FX pressures: While tariff exposure improved into 2H25, Q3 showed tariff/FX pressure on Intelligent Devices margins—management does not plan for a repeat FX pinch in Q4, but Europe remains weak and tariff dynamics can be fluid .

Financial Results

Consolidated Performance vs Estimates and Prior Periods

MetricQ2 2025Q3 2025Q4 2025
Net Sales ($USD Billions)$4.432 $4.553 $4.855
Adjusted Segment EBITA ($USD Billions)$1.240 $1.232 $1.271
Adjusted Segment EBITA Margin (%)28.0% 27.1% 26.2% (Adj. EBITA) / 27.5% (Adj. Total Segment EBITA)
GAAP EPS ($)$0.86 $1.03 $1.12
Adjusted EPS ($)$1.48 $1.52 $1.62
EPS Consensus Mean ($)*$1.4149$1.50964$1.61547
Revenue Consensus Mean ($USD Billions)*$4.383 [rounded from 4,383,443,780]$4.591 [rounded from 4,590,599,480]$4.897 [rounded from 4,896,885,960]

Values with asterisk retrieved from S&P Global.

Notes:

  • Q4 EPS modestly beat consensus ($1.62 vs $1.615*); revenue was slightly below consensus ($4.855B vs $4.897B*) . Values with asterisk retrieved from S&P Global.
  • Adjusted EBITA (company definition) and Adjusted Total Segment EBITA are both shown; Emerson reports both supplemental metrics .

Segment Sales and Margins (Quarterly)

SegmentQ3 2025 Sales ($MM)Q4 2025 Sales ($MM)Q/Q Growth (%)Q4 2025 Adjusted Segment EBITA Margin (%)
Final Control$1,116 $1,215 +8.9%27.6%
Measurement & Analytical$1,014 $1,152 +13.6%30.2%
Discrete Automation$649 $676 +4.2%22.9%
Safety & Productivity$346 $360 +4.0%24.3%
Control Systems & Software$1,083 $1,067 -1.5%27.3%
Test & Measurement$361 $408 +13.0%28.5%
Intelligent Devices (Total)$3,125 $3,403 +8.9%27.2%
Software & Control (Total)$1,444 $1,475 +2.1%27.6%
Total$4,553 $4,855 +6.6%—

KPIs and Cash Flow

KPIQ3 2025Q4 2025FY 2025
Underlying Orders Growth (%)+4% +6% +4%
Backlog ($USD Billions)$7.6 $7.4 (year-end) $7.4
Annual Contract Value (Software) ($USD Billions)$1.50 $1.56 (year-end) $1.56
Operating Cash Flow ($USD Billions)$1.062 $1.011 $3.676
Free Cash Flow ($USD Billions)$0.970 $0.843 $3.245

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY 2026—~5.5% New
Underlying Sales GrowthFY 2026—~4% New
Adjusted EPS ($)FY 2026—$6.35–$6.55 New
GAAP EPS ($)FY 2026—$4.73–$4.93 New
Adjusted Segment EBITDA Margin (%)FY 2026—~28% New
Tax Rate (%)FY 2026—21.5% New
Operating Cash Flow ($B)FY 2026—$4.0–$4.1 New
Free Cash Flow ($B)FY 2026—$3.5–$3.6 New
Share Repurchases ($B)FY 2026~$1.1B in FY25 ~$1.0B Lowered for FY26
Dividend per share ($)Q4 2025 declaration$0.5275 (Q3) $0.555 (+5%) Raised
Adjusted EPS ($)FY 2025~$6.00 (updated at Q3) Actual $6.00 Achieved
Q1 FY 2026 Adjusted EPS ($)Q1 FY 2026—~$1.40 New
Q1 FY 2026 Adjusted Segment EBITDA Margin (%)Q1 FY 2026—~27% New
Authorization to Repurchase SharesMulti-year60M authorization (20M remaining) Additional 50M authorized Expanded

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025, Q3 2025)Current Period (Q4 2025)Trend
AI/Technology initiativesLaunch of Ovation AI Virtual Advisor and Nigel AI/LabVIEW; strategic data fabric with TotalEnergies; accelerating ACV (Q3) Guardian Virtual Advisor for DeltaV; AspenTech Subsurface Intelligence; continued 10%+ ACV growth outlook Expanding AI footprint across control and software; deepening adoption
Supply chain/tariffsTariff exposure improved; eased surcharges impacting Q3 sales/margins; offset via pricing (Q3) Tariff headwind largely managed; renewal accounting headwind is focus for FY26 Tariff risk moderating; accounting dynamics shift focus
Power generation/nuclearOvation orders +40% in Q3; strong A&D and power visibility (Q3) Ovation orders +18% in Q4 and +30% for the year; Entergy wins; nuclear control content per plant ~$40M plus 10-year annuity Sustained high-teens growth outlook; robust multi-year funnel
LNGHealthy global LNG pipeline and bookings in Q3; ~$2B in funnel Continued wins; Woodside Louisiana LNG partnership; ~$350M of backlog tied to LNG; ~$2B in funnel Strong EPC-driven momentum
Regional trendsStrength in Americas/India/MEA; Europe down; China mixed (Q3) Americas/India/MEA strong; Europe/China soft; cautious FY26 plan (flat Europe/China) Persistent divergence; conservative planning
Discrete/Test & MeasurementT&M up 16% in Q3; broad-based recovery; legacy discrete muted (Q3) T&M +13% sales in Q4; margins 28.5%; continued share gains; legacy discrete still flattish in Europe/China Accelerating T&M; legacy discrete gradual
Regulatory/legal/macroOne Big Beautiful bill modestly favorable; tariff agreements improving approvals (Q3) No major new legal issues; Investor Day announced Macro/regulatory backdrop slightly favorable

Management Commentary

  • “Underlying orders grew 6% in the fourth quarter… Growth in test and measurement up 27%… adjusted segment ebitda margin of 27.5%… We delivered $1.62 adjusted earnings per share in the quarter at the top end of our guide.” — CEO Lal Karsanbhai .
  • “We plan to return approximately $2.2 billion of capital to shareholders, $1 billion in share repurchases and $1.2 billion in dividends, including a 5% dividend per share increase.” — CEO Lal Karsanbhai .
  • “The renewal dynamic reduces adjusted eps by approximately $0.15 and adjusted segment EBITDA margin by approximately 40 basis points [in FY26].” — CFO Mike Baughman .
  • “Ovation 4.0 has now been selected by Entergy to automate three more power generation facilities… Emerson will help ensure the delivery of safe and clean baseload power.” — CEO Lal Karsanbhai .
  • “We expect to deliver adjusted earnings per share of approximately $1.40 in the first quarter [FY26].” — CFO Mike Baughman .

Q&A Highlights

  • Software renewals accounting: Management explained multi-year term license renewals create GAAP timing effects (~$120M FY26 revenue headwind, reversing in FY27–FY28) with no free cash flow impact; ACV remains a better cash proxy .
  • Test & Measurement visibility: Strong momentum across semiconductor, aerospace & defense, and broad-based portfolio; confidence in high-single-digit growth FY26 and ongoing share gains .
  • Power/nuclear content economics: Full-scope nuclear reactor wins typically carry ~$40M of initial content plus >$40M over 10 years from MRO lifecycle services .
  • Regional tone: Europe and China remain muted (automotive, factory automation); North America/Asia driving strength; management plans conservatively (flat Europe/China in FY26) .
  • Margin cadence and tariffs: Q4 margins hold ~27% due to pricing/tariff offset; Q3 FX pinch not planned to repeat; FY26 margin expansion expected from price-cost and synergies .

Estimates Context

MetricQ2 2025Q3 2025Q4 2025
EPS Actual ($)$1.48 $1.52 $1.62
EPS Consensus Mean ($)*1.41491.509641.61547
Revenue Actual ($USD Billions)$4.432 $4.553 $4.855
Revenue Consensus Mean ($USD Billions)*4.3834.5914.897

Values with asterisk retrieved from S&P Global.

Implications:

  • Q4 EPS: slight beat; revenue: slight miss. Prior quarters delivered modest EPS beats and mixed revenue vs consensus, consistent with tariff/pricing dynamics and software mix commentary .

Key Takeaways for Investors

  • Operational quality intact: Emerson is delivering consistent margin expansion and hitting/raising adjusted EPS targets, supported by software mix and synergy realization; renewal timing is a transient GAAP headwind, not a cash issue .
  • Power/LNG/life sciences multi-year cycle: Ovation and grid software position Emerson to benefit from data center-driven power demand and grid modernization; backlog/funnel support sustained high-teens growth in power .
  • Test & Measurement momentum: Accelerating orders and margins suggest share gains and commercialization improvements; watch legacy discrete exposure in Europe/China for cadence .
  • Cash returns/capital allocation: FY26 plan to return ~$2.2B, dividend raised, and expanded repurchase authorization add support to equity narrative; net leverage targeted ~2.0x by YE26 .
  • Near-term trading setup: Expect FY26 H1 softness in Control Systems & Software GAAP revenue (renewals), offset by T&M growth and price-cost; focus on Q1 EPS ~ $1.40 and margin resilience (~27%) to validate guidance .
  • Medium-term thesis: Secular automation, software ACV compounding (>10%), and margin playbook underpin earnings and cash growth; regional weakness is a monitorable risk but diversified end-markets and backlog mitigate .
  • Upcoming catalyst: Nov 20 Investor Day to detail growth/margin and capital allocation; potential narrative reinforcement and model updates .