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Emerson Electric
Not long after David Farr replaced longtime Chief Executive Charles Knight, Emerson broke its streak of 43 consecutive years of earnings increases. But the past few years have been much better for Farr. As the economy turned down in 2001 and 2002, orders waned for the St. Louis conglomerate’s products, which include a diverse mix of industrial equipment, power systems for the telecom industry, cooling components in air conditioners, and household appliances, among other things. Farr presided over a painful retrenchment, which involved scores of plant closings. But as the global economy bounced back, Emerson has enjoyed strong growth once again. Last year earnings jumped 30% as revenues increased 16%. Over the past three years, the company has doubled the pace of product launches. It has built a significant presence in China, where It does more than $1 billion in sales. And Emerson will be on the prowl for acquisitions. Management expects to spend $6 billion on deals in the next five years.
| Overall Grade | A- |
|
| Market Data | EMR | |
| Market Value (2/28/2007) |
$34.4 Billion |
|
| Profitability* | 24.6% | B+ |
| Sales Growth Rate** | 12.8% | B- |
| 12-Month Sales | $20.6 Billion |
|
| 12-Month Net Income | $1.9 Billion |
|
| Total Return | Past 12 Months7.7% | Past 36 Months48.1% |
| Economic Sector | Industrials | |
| Industry | Electrical Components & Equipment | |
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.
